do you expect the goal of shareholder wealth maximization conflict with efficiency wage theory? Explain your...

do you expect the goal of shareholder wealth maximization conflict with efficiency wage theory? Explain your answer.

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The basic premise of efficiency wage theory is that increasing wage shall lead to an increased productivity.Increased wage shall lead to staff retention and increased efficiency thereby benefiting the firm. Therefore we can say that shareholder wealth maximization does not conflict with efficiency wage theory as it benefits the firm in the longer run. In a short run it may seem so but the benefits are greater as the firm does not have to lose its production and sales due to searching for a lower wage emplyee. Also the employe who is alreasy working in a company knpws its functioning better anc can provide a greater productivity than a newer employee.

The other reasonsfor the same that benefit the firm as well as shareholder are:

A employees with a higher wage will work at an effort level which involves no shirking.
If workers receive a higher pay, they may just feel more loyalty towards the company and be willing to work harder and with more determination.
It shall lead to low cost of supervision.
If a firm pays above the market clearing level, it will attract a better quality worker who will feel they can get the relatively better-paid job.

jeff jeffy answered 1 year ago

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