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so corporate governance answers the basic question in economics how do we allocate scarce resources to the most effective uses Adam Smith talks about two kinds of people what he calls principles people who have all the money more money than ideas and agents people who have all the ideas more ideas than money people who undertake activities the purpose of govern and therefore the purpose of boards of directors in a corporation is to be the intermediary between the two to figure out how to allocate how to best allocate the money the resources the capital that belong to the principles to the best activities the activities that will contribute the most value to society
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