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Managers have always been known to lead and direct an organization or a company by deploying and manipulating of resources i.e. the human, capital, natural, intellectual and intangible. Shareholders on the other hand are the one who holds one or more shares of stock in a joint-stock company. The actual power of the shareholders tends to be very limited though it seems that they are the owners of the companies. They don't have any right to check the book of accounts.

Conflict of interest happens when both parties want to maximize each benefit. The shareholders want to see higher profits as more dividends can be yield from it whilst the managers are more interested in higher revenue because it means more expenses can be made that are beneficial to them. Managers may wish to hold more cash and receive more perks like having a personal jet that would be the expenses of the company and this may reduce the profit. Both managers and shareholders have different attitude towards risk too in which the shareholders may want to invest in many companies so that they are holding less risk if one company might go into liquidation and so the shareholders financial security are not threatened. The manager's financial security on the other hand relies on what happen to companies that employ them which therefore consequent them to not favor the shareholders of investing the companies' fund in risky investment. Conflict between both can also arise when there is takeover bid to the company. This therefore will lead the managers to the loose their job whilst the shareholders will normally gain from this takeover since they will receive above normal gain from the share price.

There are a few mechanisms that might align the interests of both parties. The first mechanism would be the profit related pay. This means that the managers' earnings are paid with accordance to the level of profit. The managers will then try hard to meet the targeted profit so that they can be rewarded more. Besides, the managers should also be rewarded with shares by inviting them to subscribe the shares at lower price when public companies go to public. The managers with shares in the companies will go for projects that would raise the share value of the business and also profitable projects that would give the managers more dividends since they are having investment in the company as well. The third mechanism would be direct intervention by the shareholders in company. The shareholders may actively checking

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