Do firms really act or should solely act to further shareholders welfare?
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Do firms really act or should solely act to further shareholders welfare?
Firms may follow or have to follow several other aims. Business firms seek out to achieve a high rate of growth, enjoy a considerable market share, achieve product and technological leadership, encourage employee welfare, additionally customer satisfaction, support education and research, progress community life, and solve other collective problems.
Some of these aims, may course be in consonance with the aim of shareholders affluence maximization. For a quick growth rate, leading market position, and a higher customer satisfaction may lead to increasing income for equity shareholders.
Even efforts toward solving societal problems may further the attention of shareholders in the long run by improving the image of the firm and intensification its relationship with the environment .
When these other goals seem to clash with the aim of maximizing the wealth of equity shareholders, it is helpful to know the cost of pursuing these goals.
The transaction has to be understood .It should be valued that the maximization of wealth of equity shareholders composes the principal assurance for efficient allocation of resources in the economy and hence is to be regarded as the goal from the economical point of view.
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