Question

Maximizing shareholder value is the sole responsibility of corporate management . Discuss the pros and cons of this statement . What is your opinion?

Minimum 300 words

Answer 1

No matter our understanding of the topic of maximizing the shareholder value, it remains a relevant factor for any business to adhere to. This is partially due to the factor that the shareholders often are the stakeholder of the business itself while some hold considerable sway in the business as well as the fact that keeping shareholders happy increases the continuity and the likelihood of growth in the business cavity of the company. It has its pros when we consider the fact that maximizing the wealth for the shareholders increases the working capital of the company itself, it brings in new sponsors, new opportunities as well as gives the business a sound strategy to follow in order to remain profitable no matter the constitution of the economy. While this approach is necessary, focusing too much attention towards it can create its own set of problems. First Of all, if a business focuses all its attention towards the shareholders, either the employees of the customer seems to suffer, which can be considered as being as relevant a factor for the continuity of the business as shareholder happiness, considering that such practices would create unhappiness in the customers, it can create unsustainable business practices which need to be undertaken in order to maintain the functionality of the company. While there is a need to look at the short-term gains, long-term goals and competence of the company suffer as a result.

It drops the brand's value in the eyes of the customer, hurt the employee motivation, morale and performance as well as creates political instability internally as well as externally. It even hurts the ethical outlook of the company when they indulge in practices such as outsourcing as well as layoffs in order to achieve their scope and targets.