"Company law's central dilemma has been the separation of ownership and control in companies." Comment.

Company law's central dilemma has been the separation of ownership and control in companies. Shareholders, being owners of the company, should ideally play a crucial role in governing the company. However, it is not practically possible for each shareholder to participate in the decision making process on a day to day basis. Further, the shareholders generally lack the knowledge and professional skills that are required to manage a company. Hence, they elect a board of directors to govern the company and take strategic decisions. The shareholders vest control of the business in the board of directors, who in turn, appoint management specialists to run the business and return the profits of the business back to the owner shareholders. The directors have a fiduciary responsibility to the shareholders (principal) of their organisation. Companies allow for the separation in the roles of ownership and management. It is not necessary that owners need to be managers and vice versa. Owners and managers may have differing views on various issues in the company. For instance, managers may pursue growth rather than maximize share value, whereas shareholders may prefer high leverage because it increases share values.