Reasons why one might expect managers to act in shareholders' interest.

• It a legal duty for a manager to function in shareholders' interest.
• Managers would react in shareholders' interest to avoid being dismissed by the Board of Directors who are elected by the shareholders.
• Failure of the managers to act in shareholders' interest may result in shareholders selling own shares hence lowering firms' stock. This leads to a change in the firm's top management and the board of directors