Some one please help me on Stockholders and interests?

Question

Identify the various factors that can influence a company’s primary goal of maximizing shareholder wealth. What can a company do to encourage financial managers to act in both the company’s and stockholders’ best interests?

Answer 1

Here is my take on this.

Frankly, the company goals and the shareholder goals should be congruent to begin with. Everyone should want the company to succeed and make a profit. This will mean pay raises and promotions for the workers and higher dividends and stock prices for the shareholders.

In my humble opinion, what many businesses are lacking today is FOCUS. Meaning, you must produce the best possible product or service and make your customers happy.

I have recently worked for a business that USED to have that mentality, but they lost it. In recent years, it was like a competition; either the customer wins or the business wins. I don't believe that. It is possible that everyone wins; the customers, the business and the shareholder. Again, the focus needs to be on offering the very highest quality product or service at a reasonable price that also allows the business to make a reasonable profit.

Do NOT make cheap products. Do NOT give a lower level of service. Do NOT focus purely on sales. Do NOT focus purely on profits. Do NOT fight with customers.

Just look at Microsoft Corporation. Their products consist mainly of PC operating systems. When you stock to think about it, $100 is not a lot of money to pay for Window Vista Basic. For what you can achieve, it's a real value. So, they have uncovered the secret; they sell what consumers want, at a price that is affordable, and also reward employees for a job well done, while making a return to investors for risking their capital.