Owners’ Versus Managers’ Objectives: This section presents a very important idea called the principal/agent problem.  The problem arises in situations in which ownership is separated from control.  If the owners of the firm (shareholders) are not actively involved in managing the firm, then the manager (agent) hired to do so may pursue their own objectives that may be at odds with firm profit maximization.  It is worth taking the time at the outset to make sure that this potential conflict is clearly understood since all of the possible solutions discussed later in the section amount to either giving the owners a higher degree of involvement and control or giving managers at least a small ownership stake in the firm.  All of these solutions aim to close the gap between ownership and control of the firm.