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> Why would #7 happen if shareholders get wiped out? Surely, people on the board and other C suite executives are big enough shareholders that they would care i
by mcny 4y ago
> Why would #7 happen if shareholders get wiped out? Surely, people on the board and other C suite executives are big enough shareholders that they would care if their equity went to zero.
I remember reading about something called principal agent problem here in HN… I think almost ten years ago. It changed my life. I spend a lot of time thinking about it. Once you look it up, it is difficult to not see everything in life with this lens.
Basically, the shareholders are not in control. Management is. And the management class has a special interest to protect “their own”.
- deleted 4y ago[deleted]
- greenyoda 4y ago> I remember reading about something called principal agent problem... A summary of the problem: The principal–agent problem refers to the conflict in interests and priorities that arises when one person or entity (the "agent") takes actions on behalf of another person or entity (the "principal"). The problem worsens when there is a greater discrepancy of interests and information between the principal and agent, as well as when the principal lacks the means to punish the agent. The deviation from the principal's interest by the agent is called "agency costs". From: https://en.wikipedia.org/wiki/Principal%E2%80%93agent_problem https://en.wikipedia.org/wiki/Principal%E2%80%93agent_proble... See also: https://www.investopedia.com/terms/p/principal-agent-problem.asp https://www.investopedia.com/terms/p/principal-agent-problem...