Question

Can someone advise me on how to approach this question:

should managers exploit other stakeholders to pursue shareholder wealth maximization

what i have in mind is to approach it in the context of business ethics but is there any other angles I need to look into as well? How do I narrow down the scope to enable me to really answer this question

Answer 1

Answer: Shareholders are the owners of business organization, they are the one who have paid in the share capital of the company and if the company goes into worst situation they are the one who will be bearing losses there main objective is the growth of the company and wealth maximization and earning of profit.

Managers are the one who are appointed to see the day to day operation and run the business smoothly they are the one managing the business effectively.

What I personally feel is that as sole objective of shareholder is wealth maximization hence they should pursue the same on commercial perspective.

However as you mentioned ethics also comes to play because of which there has been specific requirement of Corporate social responsibility for the companies, which says one should earn profit without harming others or without doing frauds and stuff and with exploitation.

A similar example can be seen of Ratan Tata who is the owner of TATA industries, he is earning profit and maximizing wealth but ethically.

Therefore, one should see it through both perspective that is Ethically and commercially.