Management and Shareholder Wealth - Example

Running Head: MANAGEMENT AND SHAREHOLDER WEALTH Management and Shareholder Wealth Insert Name Insert Institution Management and Shareholder Wealth Introduction Management with regard to shareholders and owners has become significant and broadly applied. The practice of this makes one be termed as an effective manager. The management should consider the stakeholders, their response concerning the company activities and even regulations on the stakeholders for efficiency. In order to understand the sole responsibilities of a company the following need checking: The goals of the management and stakeholders considering the existing company plans The goals of management considering the stability and maintenance of the company not liquidation The appropriate actions for the company’s success; the social responsibilities of the company within their particular society The management guidelines with operational activities and influence of the social entities surrounding the company The regulative objective for all companies should actually be the shareholders company value satisfaction. The implementation of this objective ensures that the interest of the company owners gets factored in appropriately. At times, this objective results into loss of jobs as the stakeholders act to benefit their economical interest. Consideration of owners and shareholders within a company is essential for any firm that wants to achieve economical success. Companies need to be able to make fast and accurate decisions all the time, the decisions include; ones between the company’s profits and market share maintenance (McTaggart and Kontes, 1993). Preference on this objective is high compared to others such as global dominance as it ensures the maintenance of shareholders’ most value. It also leads to positive response as it gives a company an upper hand i.e. common goals, high performance, fast implementation, and economical stability, in both decisions making and learning. The objective also initiates other benefits such as increased labor and capital resources enabling expanded returns for the shareholders and owners. Company social responsibility in profits (wealth/returns) and shareholders Companies actually have a social responsibility not limited to its owners. As much as companies tend to major on profit making, social responsibility is essential just like the nonprofit entities. This ensures that profits, ethics, vision, and compassion of a company work together to achieve economic growth for all parties involved (Bejou, 1-6). Management in companies should know that company social and financial performances are significantly related. However, many factors that affect this relationship. They include risk, consumers’ satisfaction, and management quality, amount of investment, business environment, company ownership, and shareholding among others. Although the relationship is still not clear, it remains essential for a company (Beurden and Gossling, 407-422). Their quantification and analysis should among the strategies of a company’s shareholder and consumer satisfaction. The concepts of company profit making and ethics remain contetitional in the society. Company ethic and profits are tow important entities of a company and need to be set clear. For example, in the society there are entities such as families, relatives and strangers, which act together but have clear distinctions. Considering other example like war, this entities act against each. On the contrary, in business togetherness of all these entities is essential for success. Business break through depends on the ability of a company’s management to identify products that satisfy comsumers. Company economic growth is directly proportional to the work force and directly affects returns. The work force consists of different people with different social background that need to work in unity to the advantage of the company and its owners. Company operations different for others entail respect and interest o diverse parties. For instance, nations that have fought against each other rarely have business interactions (Cosans, 309-399). Actually, if the consequences of war were the end negation for what is valued in ethics then business would be the antithesis. In an environment where the unity in diversity is conducted by private business, a company’s high returns are just a social way ensuring it contains the resources required to meet the consumer needs, while giving back to the workers, shareholders, and owners for their efforts. Company social responsibility Not many companies prefer their social responsibility to the shareholder requirements without incorporating a business situation except for the private companies. According to some companies in the U.K., there should be a balance and stability in the company’s consumers, suppliers, workers, and shareholders sectors. This brings the fact that at times managers need to put the interest of owners at secondary, although this fact has no much acceptance by managers mainly in public companies. However, a few managers decide to practice it with regard to the management action beliefs on the social sector. Ultimately, if the decisions are based on proper assessment of social entities interest, then this situation may also be concerning the company’s long term goals, though there is little certainty. Most companies have realized that this situation of social responsibility to be involving, especially considering the company’s image and external factors from the prevailing business environment (Smith, 2003). For some companies, social responsibility may be inevitable and it shows assumption on strategic importance. However, it not clears whether this is specific to such companies or a prior alert of the external factors likely to be experienced. The entire rationality towards the development of action towards social responsibility must be analyzed in relation to the susceptibilities and opportunities of a certain company. This analysis helps in the clarification of these responsibilities enabling the formation of plan and decisions concerning the responsibilities. However, challenges of creating and implementing the plan are experienced, especially stakeholder involvement and amount of social performance. Situations may arise where the management is questioned with regard to a social responsibility plan acting as a drawback. The questionings can be important if the responsibility take a central place in the plan and times the challenges lead to the undercut of important businesses situations discussed previously. Some of this situation of social responsibility may not consider shareholders therefore; economic incentives and common actions should be included. The involvement of various parties in facing these challenges because of the incentives that is not enough. However, it is not obvious that the parties will cooperate and the company management should be aware of this fact (Smith, 2003). Broad view of a social responsibility by managerial staff has been sketched to improve strength of activities carried out for social benefits. Profit maximization is a priority to managers as shareholders seek to achieve the same. Moral and social obligations of the company to the public are important in building the company’s public image. Business managers tend to overlook the obligations the company has to the public and focus more on the shareholders needs for profits. Employees, other firms, consumers and society are neglected in the assumption of maintaining stakeholders’ profits. The above-mentioned individuals play a vital role in the company’s daily activities. Business ethics has been taught in business institutions as a foundation to give students a knowhow on how to handle firms in the future. Although, Marxists can object the relevance of business ethics, in the current business world ethics are inevitable. Business ethics help to remove impartiality of management towards all parties in a firm whether internal or external (Shaw, 565-576). Increased profits and social performance There are many facts one can derive from theoretical sketches in this paper. Firms prefer to operate in a strange manner in defense against combined social and political environment. Focus has been put to increase social output contrary to combined socio-political environment focus. Social focus is more superior to socio-political type in the context that it benefits both the firm and the society. Management of businesses has taken a different direction recently. The management force has shifted from the most known which benefits stockholders to that which benefits stakeholders. The net effect of the change is an increased social output and in some cases lowers firm’s social profits. Social output of the business will increase under the strategic case. Incentives help in the motivation of the firm thereby leading to improved social output as well as social performance. Many studies and reality on the ground has it that managerial staffs are more responsive to stakeholder management and social responsibility. Corporate altruism on the hand limits the production of social goods while strategic case is more to production of the same. In some cases the social output in the strategic case maybe low compared to altruistic one, the overall effect of social responsibility will be high (Husted and Salazar, 2006). focus of the corporate altruism lowers social output and puts less efforts on a social strategy. Studies ought to be directed towards strategic approach, as profit is the main goal of any firm. Benefits of strategic case to the corporate social responsibility are viable; hence, the need to do more research .movement of strategic responsibility investment to a similar level as corporate investments will benefit both the firm and the society at large. On the job, training has been common over the years but the benefits are not observable as it is taken lightly. The firm looses in such cases as the overall productivity is reduced and the investment cannot be measured in terms of profits. Research and development are areas that can bring benefits to the firm in the long rung run. Although there are many problems in responsibility investments, the problem remains unless a critical look is undertaken. Strategic responsibility investments are uncertain similar to those in research as the benefits are only expected but there is no surety. The decision making involved here leads to changes in the business benefits and costs expected which may not be the case in reality. Companies consist of social responsibility portfolios of different kinds. It would beneficial for companies to quantify increase in profits and social performance. In this, there is an assumption that the company still functions in accordance to the legal regulations (Husted and Salazar, 2006). Altruistic decisions may change the benefits and costs in ways that surpass the changes in decision-making. Thus, this view is important as a means of understanding many other business cases with special cases accommodated. The actions concerning company social responsibility are not flexible because they require the consideration of the business market condition, the competition status e.g. through imitation and innovation. The diverse views that companies have on social investment show that their social responsibility would focus on financial performance on the business situation discussed above. Research is still going on concerning social performance of companies not limited to is achievement only but also to its contribution to increased returns. Ways of measuring the social costs and benefits should also be considered as they contribute directly to the interest of shareholders. Actually, rather than viewing social responsibility as a strategic platform for the company, the entire company responsibilities should be viewed with specificity on shareholders and the consumers as well. The effectiveness of both can be attained through innovation of the company towards its appropriate market without sidelining shareholder value. The common attainment of these goals can be through the strategic social responsibility management and consequently contribute to the business and society (Husted and Salazar, 2006). Innovation and business development Milton Friedman suggested that a high return is the major reason why people decide to conduct business. On the contrary, currently, businesses also include creativity in their strategies in tackling the market. This ensures high economic and social development within the company. Without good returns for a particular company, decreased competitive advantage and overtaking by other companies may occur. Shareholdrs and owners also benefit from the innovation for high returns e.g. the new products of innovation. This makes it important for management in companies not to be monopolized in returns only as innovation is keen interest of the owners. It promotes growth and exposes the company to a wider audience. The owners will appreciate the fact that their company is contributing to the improvement of the society’s welfare hence a good reputation for them and a wider market. Presently, the result of innovation are widely significant according to the many research conducted. It has led to high production that is important to shareholder as it reciprocates to the profits. The market share for companies increases due to the innovative products that can be consumed by all regardless of the financial status. Innovations based on disruption provide high quality, affordable and reliable products, and services to the wide consumer base (Ahlstrom, 2010). Economic development has resulted in worldwide enhancements in the per capita input and living standards for a long time. A large number of people in growing economies e.g. Brazil, China, India just to name a few are moving to middle class from poverty. Environmental strain on this issue brings out a different opinion, as to whether the economies will support the ever growing number of people shifting to the middle class. Lately there have been controversies over the rising cost of crude oil and a never increasing energy demand. The shift to middle class will put strain unto the energy sector, as carbon and other greenhouse gases emissions will rise. Energy consumption rises as the population increases and rigidity in changing to renewable energy sources. The problem experienced in the current Rio 2020 summit, where talks on reduction of carbon emission hit a snag. Industrialization cannot be achieved without energy hence the need to look for an alternative and mitigate effects on the environment. There are many arguments on environmental concern and global warming; this has a negative impact on firms’ growth as many countries have started restricting firms’ emissions hence also growth. Innovations are the main contributors of business growth; sustainable energy source is a result of such. Some countries do not directly link economic growth to restriction and regulations they impart on businesses. Consumers will be affected in the long run as any cost the firm incurs will be forwarded to consumers (Ahlstrom, 2010). There are many ways that governments restrict businesses from growing. One of them is tax; tax is imposed on firms to reduce emissions. The task to reduce global warming is not as easy as it looks too many but it will take many years to counter it probably a hundred years. Growth is a main agenda to any firm and unsustainability has proven to be an obstacle. Firms are looking for initiatives and ideas that will promote reduction in emissions and enhance growth as well. In the context costs of mitigation needs weighing against those of reduction in global warming’s recent study by UN on environment suggest that temperature could rise by 3 degree Celsius in the next 100 years. Economic growth is hampered by taxation and strict regulations imposed by many governments, 1 percent reduction is the expected figure. Mitigation strategy is more profitable in that the annual economic growth is expected to be 2.8 percent compared to 1.8 percent, which can be achieved through taxation and strict regulations (Ahlstrom, 2010). Difficult decisions have to be made on carbon emission and innovations and creativity in business is the only solution to this problem. Firms need to invest more on innovations, creativity and research as it will be profitable to them in the end. According to economists, the world can live with gradual warming climate over the next hundred years and be sixteen times richer. This will promote new and better ways to combat global warming, as the research will involve emissions .the next generations will have to keep the current trend in reduction of global warming and devise new ways to deal with the same. In any case, development of new and innovative ways will be the ultimate goal for economic growth to be achieved. Wide range of products can be brought to the market through such radical changers thereby benefiting the shareholders and the society. Conclusion Company ethics (social responsibility) is important in any case. Unlike in the ancient times, companies presently consider their ethic oriented activities depending on the market and attainment of high profits. The traditional ways are not applicable in the world today therefore, business ethics is crucial for effectiveness. Management based on values exceeds just the overall performance measurements. The approach entails restructured goals, human resource, and the operational processes. It is all about company-oriented changes. Although this type of management can increase company value, it is not a guarantee for high performance. In actual sense, companies effectively utilize diverse ways to attain similar goals (Starovic, Cooper and Davis, 2004). Many studies have shown that the relationship between company objectives and practices are based on identification and mix method of application. This is regardless of whether they prefer shareholder based objectives to consumer based ones and vice versa. Regardless of whichever method of performance quantification a company uses or even choice of the value-based management, underlying guidelines remain fundamental. This management begins at the point that there is a cost on the equity capital and that a company profits are realized only after consideration of shareholder and consumer needs. Capital is always ease to acquire but at a cost. The management based value put the company owners as the core of decision making enabling more protection of investor from the misunderstandings that might arise between company owners and the management (Starovic, Cooper and Davis, 2004). Therefore, an effective management cannot only be achieved through concentration on shareholders but through a total values based management that considers; the shareholders, owners and consumers collectively. High company profits and consequent return for parties within it does not entail a one sided type of management but an all round management. 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