Week 3 Assignment - Introductions Until recently the...

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Introductions Until recently, the general view of corporation is that their primary purpose is to maximize shareholders value. This view is supported by most company laws in different countries which has given primacy to shareholders interest. The finance paradigm also reinforces this view. The shareholders are residual claimants. Shareholders bear most risk of the corporation and it is only fair that they are rewarded. The hypothesis also presupposes that other stakeholders made up of employees, creditors, suppliers, distributors, consumers, government, environment and community at large, are adequately compensated for their services/supplies or get fairly valued products/ services for the price they pay. Of late however, there is push for corporation to take much more seriously, its responsibility to stakeholders. The stakeholders are making demands on corporation to satisfy them as a mean to achieving corporations’ goal of shareholders wealth maximization. What Alternative Shareholders Wealth Maximization Exit The goal for shareholder wealth maximization can be better achieved if there is concurrence of shareholders’ and stakeholders’ goals. Shareholders wealth maximization should not be achieved at stakeholders’ expense. A constrained shareholder maximization view proposes that the Corporation's goal should include shareholder wealth maximization subject to the preservation of other stakeholders' wealth. Good Corporate governance practice should ensure equitably allocate the corporation’ wealth among its participants- shareholders and stakeholders. Corporations comprise of both shareholders and
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