The objective to maximize shareholder wealth holds

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Unformatted text preview: e owners with property rights, and in that managers as stewards are obliged to look out for owners’ interests. Many times, doing what is right is consistent with maximizing the stock price, but what if integrity causes a company to lose a contract or causes analysts to reduce the rating of the stock from “buy” to “sell”? The objective to maximize shareholder wealth holds, but company officers must do so within ethical constraints. Those constraints occasionally limit the alternative actions from which managers may choose. Some critics have mistakenly assumed that the objective of maximizing shareholder wealth is somehow the cause of unethical behavior, ignoring the fact that any business goal might be cited as a factor pressuring individuals to be unethical. U.S. business professionals have tended to operate from within a strong moral framework based on early-childhood moral development that takes place in families and religious institutions. This does not prevent all ethical lapses, obviously. But it is not surprising that chief financial officers declare that the number-1 personal attribute that finance grads need is ethics—which they rank above interpersonal skills, communication skills, decision-making ability, and computer skills. H-P is aware of this need and has institutionalized it in the company’s culture and policies. Clearly, considering such questions before taking an action can help to ensure its ethical viability. Specifically, Cooke suggests that the impact of a proposed decision should be evaluated from a number of perspectives before it is finalized: 1. Are the rights of any stakeholder being violated? 2. Does the firm have any overriding duties to any stakeholder? 3. Will the decision benefit any stakeholder to the detriment of another stakeholder? 4. If there is detriment to any stakeholder, how should this be remedied, if at all? 5. What is the relationship between stockholders and other stakeholders? Today, more and more firms are di...
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This document was uploaded on 01/19/2014.

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