What are the mechanisms to ensure that managers act in the best interest of the shareholders?

To ensure that managers act in the best interest of shareholders, companies often implement performance-based compensation schemes, such as stock options or bonuses tied to financial metrics. Additionally, corporate governance structures, including a strong board of directors and independent audit committees, help oversee managerial decisions and hold them accountable. Shareholder activism, where investors voice their concerns or push for changes, also serves as a mechanism to align managerial actions with shareholder interests. Lastly, regular financial reporting and transparency promote accountability and enable shareholders to monitor management performance.