The shareholder wealth maximization is the purpose of any firm; the creation of value for the owner in other words; in the case of a public firm, this is translated into value for the shareholders;therefore the ultimate goal is to create value and/or maximize value for them. Do the previously stated mean that a firm will do everything that it takes in order to achieve the goal of maximizingwealth to the shareholder?
The SWM (Shareholder Wealth Maximization) maintains its priority position status as a firm’s main goal; however, in parallel, some currents that look after the socialresponsibility of the firms have aroused as a means to satisfy other constituencies’ demands or claims; Treynor (1981) states that “These constituencies include employees, customers, suppliers, debtholders andstockholders. In this framework, SWM would require management to pursue practices which are consistent with the legal and ethical standards associated with the business at hand, for all the relevantconstituencies, not just shareholders.” Both positions are perfectly compatible for when a firm is socially responsible, it can find new ways to generate wealth and along with it, to benefitshareholders as well as stakeholders. In the face of the precise objective of the shareholders is accepted as objective considering the remaining constituencies as means or restrictions of the decidingprocess.
The detractors of the idea of a firm’s primary goal is the maximization of shareholder wealth base their position in that the creation of value is that of a short term value; the detractors statethat that a managers striving for value creation, take decisions that maximize value in the short term with terrible consequences in the long term. I think that what is intended, at least in themajority of the firms is the creation of value in the long term. Jack Welch, whom is regarded as the father of the shareholder value, famous for transforming General Electric into a very profitable firm...
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