Normally, a manager&#39;s salary does not vary depending on his efforts for the best interests of the owners, which is to maximize the value of invested capital. Therefore, managers have no incentive to try to achieve this goal. Whether the company&#39;s stock price increases or decreases does not affect the amount paid to him. This problem is often referred to as &ldquo;psychological dependence&rdquo;.<br />The more serious problem is the conflict of interests between the principal and the executor. The manager of a company can pursue his own goals. He may implement perks that are costly to the company, such as installing luxury amenities or spending excessively. He will seek bonuses based on sales volume rather than the optimal selling price for the company. He can pursue large projects to expand his power, even if those projects are unprofitable or too risky. These goals do not increase, and may even decrease, the value of equity in the market.