The problem with the separation of ownership from control is that

The problem with the separation of ownership from control is that

• the managing partner of a firm may not always behave in the way that other managers would if they were the managing partners.

• the owners of firms may not always know the best way to run a firm, yet they are the ones who elect the managers of the firm.

• the owner in a proprietorship may not always act in the profit-maximizing fashion because he or she may not have the experience or expertise that professional managers have.

• the managers of the firm can make decisions that reduce the wealth of the owners while not reducing their own wealth.