When company ownership is diffuse, Multiple Choice a "free rider" problem encourages shareholder activism. most shareholders will have a strong enough incentive to incur the costs of monitoring management. a "free rider" problem discourages shareholder activism and few shareholders have a strong enough incentive to incur the costs of monitoring management. the large number of shareholders ensures strong monitoring of managerial behavior because with a large enough group, there's almost always someone who will to incur the costs of monitoring management.