CFS C1TX: What is the firm objectives

  1. Intro
  1. A common purpose
  1. The assumed objective for finance
  1. What is shareholder value
  1. Profit maximisation is not the same as shareholder wealth-maximisation
  1. corporate governance
  1. What happens if control over directors is weak?
  1. conclusion

a. concerns about the question what is the objective of the business

b. unless the we know the answer this question, we can't make sensible financial decision

Intro

a. Who gets any surplus?

ex

i. Shareholder supremacy

ii. workers's supremacy

iii. stakeholder approach

b. Variety of objectives

ex

i. achieving a target market share

ii. keeping employee agitation to a minimum

iii. survival

iv. creating an ever expanding empire

v. maximisation of profit

vi. maximisation of long-term shareholder wealth

ex

a. The practical reasons

b. The theoretical reasons

i. the risk bearers take the prize

ii. alternatives can be bad for all stakeholders (in the long run)

iii. rights of ownership

c. corporate social responsibility

d. motivation and obliquity

ex

a. prospects

b. risk

c. accounting problems

d. communication

e. additional capital

ex

a. annual general meeting

b. corporate governance regulations

c.There are various other (complementary) methods used to try to align the actions of senior management with the interests of shareholders, that is to achieve 'goal congruence':

  1. linking rewards to shareholders wealth improvement
  1. sackings
  1. selling shares and the takeover threat
  1. information flow