Saturday, June 15, 2019

Corporate Goal of Maximizing Shareholder Value Essay - 1

Corporate Goal of Maximizing Shareholder Value - Essay ExampleEnhancing shareholder value cannot be strand so forthed beyond the limits that start breaching the fundamental requirements of corporate governance. Ireland (1996. pp289) established an empirical generalization that the legal existence of the company and the shareholders are entirely separate. Although acts like Sarbanes Oxley in the United States realize made the leadership of the organization (CEO or CFO) legally responsible for the accuracy in accounting statements, many countries around the world still insufficiency such acts. Moreover, the act does not make shareholders responsible always because in many companies the shareholders do not sign on accounting statements or fight the company operations. Sundaram and Inkpen (2004. pp353) argue that the shareholder value maximization should be considered after all the liabilities of the corporation has been finish including incentives of managers, contractual liabiliti es, payments of dividends, principal & interest payments to bondholders, supplier dues, wages, salaries, etc. The net value addition in shareholder wealthiness conducts to be taken care of after all such liabilities have been fulfilled that can be effectively managed through corporate governance. The shareholder wealth maximization and effective corporate governance are conflicting objectives and hence need to be managed by different individuals to reduce the risk of conflict of interest. The non-shareholding stakeholders should be engaged in corporate governance whereas the shareholders should be engaged in wealth maximization and both parties should have a congenial environment to resolve conflict situations. These roles should be normally fixed in support of the argument by Sundaram and Inkpen (2004. pp355) that the transition from non-shareholding stakeholders to shareholders is easy but vice versa is very difficult.

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