p.4 [....] Agency Theory. Principal-agent theory stemmed from the work of Berle and Means (1932), who addressed the problem of how the divorce of ownership from the management of large-scale enterprises exposed serious incentive problems. The question revolved around how shareholders could be assured that professional executives, who owned little if any of the equity of the firms they ran, would safeguard the interests of the owners. Principal-agent theory assumes that economic actors are self-interested and have imperfect information. The challenge centres upon how ex ante (before the fact) contracts can be devised to ensure that agents (managers), who possess superior