Maximization of Shareholder Wealth - Assignment Example

Maximizing Shareholder Wealth al Affiliation) Shareholder wealth maximization is the process, which raises the current net value of a shareholder or business capital gains with a goal of attaining the highest possible returns. This strategy usually involves the making of financial investment decisions, which are sound, to take into consideration the risk factors that may compromise the anticipated benefits (Halbert & Ingulli, 1990). This process is the underlying objective of all corporate activity.

Shareholder wealth maximization is a long-term financial goal, which is comprehensive and reflects on the investor confidence, which is measured in a corporation’s stock face value. The ethical principles on the other hand are presented by most texts on business ethics to function independently and usually contrary to the financial objectives like maximizing the value of common stock. This is evident in most corporations where there exists a tension between the ethical and the financial ideals.

For instance, Halbert and Ingulli (1990) highlight the disparity between ethics and maximization of shareholder wealth by the description of a study, which involved around two thousand MBA students. Beginning as relative idealists, they reported the desire of creating quality goods and services, to be able to serve the customers and at the same time give back to the local communities they belonged. By the graduation time, they were rather much oriented to maximizing the shareholders’ values.

This disparity is also observed as the conflict of philosophies, which is there between any serious treatment of ethics and wealth maximizing. Maximization of shareholder wealth is strategies, which will ensure highest possible returns. This may even involve the strategies of laying off some of the organization’s employees to achieve this. Some activities, which are good for the society, may compromise the strategy and may be ignored in this process. The customer and the environment may also not be considered in this process that much since; the customer may not be completely comfortable with the process.

ReferenceHalbert, T., & Ingulli, E. (1990). Law and ethics in the business environment. St. Paul, MN: West Pub. Co.