Principal–agent theory involves the search for a payment system which aligns the interests of the principal and the agent such that the agent will exert maximum effort on behalf of the principal. In the case of the employment relationship, the firm is the principal and the employees are the agents and there is no inherent reason why the interests of these two groups should coincide. The objective of the firm might be to maximize profits, but employees will only benefit from profit maximisation if they are also shareholders in the company. The majority of employees are not shareholders and therefore their objectives might be quite different. Furthermore, given the difficulties involved in defining output and then allocating it to individual employees, why should the employees exert maximum effort on behalf of the firm? Effort cannot usually be observed and measured so there is an incentive to shirk.