Why are there natural conflicts of interest in the agency relationship between manager and the absentee owner?

The agency relationship between an owner and manager produces a natural conflict of interest because of differences in the two parties' goals and because of the information asymmetry that exists between them. That is, the manager may well have different goals than the owner, and generally has more information about the "true" financial position and results of operations of the entity than the absentee owner does. If both parties seek to maximize their own self-interest, it is likely that the manager will not act in the best interest of the owner and may manipulate the information provided to the owner accordingly.