The principle of finance that "reputation matters" sometimes is harmed by the different objectives of owners and managers.

Question

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Owners and managers may have different goals and priorities, with owners often focused on maximizing profits and managers focused on maintaining their status and job security. In some cases, managers may make short-term decisions that harm the company's reputation in order to meet financial goals, which can ultimately hurt the company in the long run.

The Principle of Finance That "Reputation Matters" Sometimes Is Harmed