Question

"To ensure investors are protected and the market integrity is always preserved, we will not hesitate to take offenders to court."

Justify the rationale of why shareholders interest must be safeguarded.

Answer 1

The underlying mission of any company or organization is to generate revenue/value for its shareholders. This involves making decisions to maximize the profits/revenue while maintaining an ethical approach towards various aspects of business. Now talking predominantly of investor shareholders, it becomes paramount to protect their interests as they are not directly involved in the day to day operations of the business. They are dependent on internal stakeholders/shareholders like employees, top management and board of directors for the operations. It needs to be understood here that each of these shareholders may have their own set of objectives and goals and hence might often deviate from the larger picture.

Any employee would want to maximize his/her own potential and compensation opportunities. Now this could often involve making decisions that are not always in the best interests of the organization. Company politics is a well known phenomenon where often decisions are made without keeping the larger interests in mind. At the top management level, sometimes they are so driven to maximize the revenues that they undertake unethical means to generate revenue or to save taxes. Satyam scam, Enron Scam are perfect examples where shareholder interest was compromised with.

Therefore, it becomes a huge responsibility for the top management to foster a work environment and culture where achieving true potential of employees aligns with that of the company/organization. This could be done by substantially compensating and incentivizing employees for their efficient and ethical work. The top management decision making should take into consideration the company brand value and ethics rather than be solely focusing on making profits. Also, this again makes it important that any offenders must be taken to court or penalized so that the investing shareholder interests are always safeguarded.