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Insider Ownership and "Skin in the Game": Why It Matters for Business Quality

Business Analysis • Beginner Investing • 7 min

This is a different question from tracking individual insider trades: how much of the company do the people running it actually own? This brings us to the "principal-agent problem." Professional managers, or agents, are hired to run the company. They don’t always act in the best interest of shareholders, or principals. Their personal incentives can clash with what maximizes long-term shareholder value. A manager…

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