Separation of ownership

Separation of ownership refers to the situation where the individuals who own a company (shareholders) are different from those who manage its daily operations (managers or executives). Shareholders invest money and expect the company to generate profits, but they rely on managers to make decisions and run the business. This division can sometimes lead to conflicts of interest, as managers might prioritize personal benefits over shareholders' goals. Clear governance structures and oversight are important to ensure that managerial actions align with the interests of the owners.