maximizing shareholder value - aim of business

maximizing shareholder value - aim of business

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Sir,
i m the student of ACCA and i m working on an asignment i search a lot but i cant find good stuff on this topic
is the maximizing of shareholder value is the sole purpose of business or their are some other thing too which are important for business such as its Goodwill,quality of product,its reputationand etc
the scenario given to us is:"Some of the world's leading brands manufacture products in outsourced factories in developing countries. When stories of adverse working conditions have been uncovered, reputations were damaged and financial consequences resulted. Better working conditions are not only desirable, they can also lead to long-term profit and shareholder value."
so sir let me advice that what a management should do to cope with such situation and how it manage it, and again gain its reputation.
sir tell me in detail i m axiously waiting for your repley u r my only consideration

ali naqvi

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By dicklloyd
23rd Jun 2005 00:20

Aim of A Business
As someone who has my own business and also works "in it" and "on it" as a director and shareholder, I can tell you that, as ever, it depends - on the business, its shareholders or owners, its other stakeholders, maybe its employees or its customers, .... there are a whole host of possible viewpoints here.

Most businesses will have a Business Plan (or at least they SHOULD!!) and the Business Plan should be the one major source of information in terms of specifying the aims of the business.

However, be careful - as sometimes Busines Plans are written for the sole purpose of raising capital and in these situations they may focus on financials, repayment of loans, return on investments, etc. at the expense of a more rounded viewpoint (the "broader picture").

The classical "aim of a business" is to maximise returns for shareholders - but in my view there should be many other considerations as well (or even, in the case of, say, a Charity, instead).

Different stakeholders in the business may have different aims themselves, and generally the successful businesses will be the ones in which the individuals' aims are "congruent" with the overall aims of the business. In these circumstances, individual decision makers will tend to make decisions that pull the business in the right (and same) direction as other individuals who are also decision makers.

Hope this helps.

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