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Should the primary objective of management be to increase the wealth of shareholders and owners - Essay Example

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A business enterprise seeks to maximize profits through serving customers under the control of efficient management. Therefore, the objectives of management are the goals that delineate the definite scope and guide the direction of the efforts to be applied. …
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Should the primary objective of management be to increase the wealth of shareholders and owners
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"Should the primary objective of management be to increase the wealth of shareholders and owners"

Download file to see previous pages The objective of management is characterized by four concepts namely goal, scope, definiteness and direction. Managers view objectives as the business values that should be achieved. Therefore, the scope of these values must be well defined, in addition to inclusion of extra goals. Management objectives can be classified as primary, secondary, personal or social. The following paper is a critical debate on the question: Should the primary objective of management be to increase the wealth of shareholders and owners? Focus will be laid on the general objectives of management and the way in which they should be prioritized for maximum benefits.
Customer Satisfaction
Customer satisfaction is a principle performance estimate in business management (Decker and Learning, 2001). The primary objective of any business management should be focused upon customer satisfaction. This will provide the avenues required for profits that generate wealth of shareholders and owners. The management’s primary objectives should be related to customer satisfaction through the provision of saleable goods and services in the market. These goods should be reliable, have standard quality, competitive, reasonably priced, technologically produced and insufficient in quantity. The secondary objectives are those strategies that assist in achievement of primary objectives. Personal objectives purposes to benefit individuals in a business organization e.g. increasing the wealth of owners and shareholders. Social objectives maximizes the social gain of the community from an organization e.g. the social responsibilities of the organization to the community.
Customer satisfaction includes interaction with customers in an ethical environment. Most traditional business strategists view maximization of the shareholder and owner wealth as the fiduciary obligation of business managers (Shaw, 2009: 572). This view is related to the fact that most shareholders invest in the company on the understanding that the management will steer the company on the strategy of generating profits for them. The view was also presented in an era where most capitalist were obligated to manage their own business enterprises. The recent emergence of joint stock companies meant that the managerial control of corporations has technically been divorced from ownership. However, business theorists have failed to establish a mechanism that can harmonize the interests of managers and shareholders to prevent the former from enriching themselves at the expense of the latter. This is has been proven by the recent behavioural trends whereby the managers awards themselves luxurious pay and remuneration packages without any benefits to the shareholders. Managing Efficiency Efficiency is the guiding principle for any successful business. There is no business that has ever risen to top of the industry through slow, outdated and clunky management practices. In the current business environment, the management that only focuses on compliance to stockholder expectations while ignoring inefficiency does not succeed (Morris, Schindehutte and Allen, 2005: 726-735). The imperative issues that should be recognized include cost ...Download file to see next pagesRead More
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