The world of business is large, complex, continuously shifting and evolving. Therefore, the intentions of business decision makers are not always known.While the last decade has witnessed many unethical business practices, Japanese Language Translation investors must have faith in the ability of business leaders to make ethical decisions that improve the price of common stock. It’s important to note that the price of stock isn’t the only factor that decision makers consider when making a decision. Often many factors are involved that may include the benefits to society, to employees and even to one’s self. Still, for the reasons set forth in the following sections, stock price maximization should be the most important goal of most corporations.
As an ownership and control function, Arabic Language Translation stockholders are tasked with electing management team members to lead the corporation. As the management team is controlled by stockholders, their very existence is based on their ability to conform with the wishes of stockholders..
But because there are many different owners of stock that don’t always share the same beliefs, the actions of managers can’t please everyone all of the time. Unfortunately, this can sometimes complicate the decisions of managers who are sometimes asked to make decisions that won’t improve the value of the company’s stock. If we all take a moment, we can probably think of stories covered by the media about how executive made decisions that didn’t maximize revenue to exchange for better employee benefit programs, charitable contributions and even attractive executive salaries.
It’s for examples like these that we say that it is extremely difficult to determine how and when managers are acting on behalf of their own best interests instead of those of stockholders. That’s why it is so difficult for a Russian Translation stockholder to determine if certain programs really benefit the value of the stock or are just wasteful. The benefit of the corporate structure though is that decision makers must act in accordance to the wishes of stockholders or risk being fired and possibly ridiculed in the business press. If they depart from this goal, they run the risk of being removed from their jobs through a hostile takeover or a proxy fight.
A hostile takeover allows a suitor to bypass a target company’s management unwilling to agree to a merger or takeover. A takeover is considered “hostile” if the target company’s board rejects the offer, but the bidder continues to pursue it, or the bidder makes the offer without informing the target company’s board beforehand. Both a hostile takeover and a proxy fight are facilitated by low stock prices, so for the sake of self-preservation, management will try to keep its stock value as high as possible.
Today, some additional criteria is often evaluated when making corporate decisions. For instance, the world now must evaluate how much importance should be placed on such things as corporate goodwill. For instance, how much emphasis should a corporation place on employee benefits and giving back to their communities in lieu of greater stock prices and profitability?
The world expects corporations to be good citizens, provide a safe work atmosphere, and not poison the environment and to pay their employees a reasonable salary. On the other hand, these actions have costs that often have no direct impact on the value of the company’s stock or the benefits received by stockholders. But making socially responsible investments might also make a company more vulnerable to competition that didn’t make the same investments. This is because the costs will need to be shifted to higher prices or lower earnings.
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This post was written by admin on March 14, 2010
