3 discussion responses with references for each

3 responses with references

Originalinfo: discuss the topic of maximizing shareholder wealth. This topic has beenresearched and studied for many years, with mixed results. For example, IrvingFisher, a prominent American economist, argued that maximizing shareholders’wealth should be management’s primary goal (Cardao-Pito, 2016). Conversely,Sollars and Tuluca (2016) suggested that shareholders should only be rewardedwith returns that are “commensurate with the risk they take” (p.203).Watch thisvideo on SocialResponsibility Perspective: The Stakeholder and Shareholder Approach (AlanisBusiness Academy, 2014). After viewing the video, briefly share your thoughtsabout shareholder wealth maximization. Then, explain the advantages anddisadvantages of wealth maximization from the perspective of a company’s chieffinancial officer. Include the effect on company stakeholders, both internal(managers, employees) and external (suppliers, shareholders).1.In the video, Friedman was stronglyagainst practicing social responsibility (Alanis Business Academy, 2014). Basedon his assessment, shareholders are the true owners of the corporation, despitenot being there to make the day-to-day decisions, which are left up to theboard members. This model emphasizes maximizing the shareholder’s profit aboveall else, and instead of a corporation practicing social responsibility anddonating some of the profits to charity, it creates more money for theshareholder to donate on an individual level. Thestakeholder model, a greater emphasis is placed on where the profits ultimatelygo once earned (Carlson, 2022). The stakeholder model is more concerned withpublic perception of the company, in hopes that they can reach a largercustomer base by having a positive social image (Alanis, 2014). shareholder vsstakeholder approach is a top that should be closely examined by a CFO.Ibelieve that wealth maximization should take precedence over all else in acompany. By maximizing shareholder profit, I believe it makes the company morevaluable and attracts new investors and keeps share prices and valuations high.Depending on the company, I don’t believe public perception regarding socialresponsibility (i.e. what a company ultimately does with their money) is nearlyas big a deal as some businesses make it out to be. However, I do see the otherperspective where companies want to have a strong public image, hoping toattract more customers and maximize revenue that way.2. Incorporate finance, the subject of maximizing shareholder wealth is still up fordiscussion. Irving Fisher’s claim that this objective should be management’stop priority is consistent with conventional wisdom, stressing the significanceof giving shareholder interests top priority when making decisions(Cardao-Pito, 2017). On the other hand, Sollars and Tuluca (2018) offer acompelling counterargument, arguing in favor of rewards that are proportionateto the risk assumed by shareholders. This contradiction captures a more generaldebate in the area.A crucialcomponent—the consideration of stakeholders other than shareholders in businessdecision-making—was addressed in the Alanis Business Academy film (2014) on thestakeholder and shareholder approach. Maximizing shareholder wealth can attractinvestors and increase stock value, but it sometimes ignores the largerecosystem of stakeholders.From a ChiefFinancial Officer’s (CFO) perspective, wealth maximization has inherentbenefits. It gives financial initiatives a concrete, measurable goal thatmatches investor expectations and boosts market confidence. But this strategycould unintentionally encourage short-termism, jeopardizing sustainability overthe long run and disregarding the interests of other stakeholders.An internalpursuit of shareholder wealth may put managers and staff under excessivepressure to fulfill strict financial targets, which could have a negativeimpact on organizational culture. Suppliers might face more pressure fromoutside sources to reduce costs, which could strain their relationships andhave an impact on their own viability.Inconclusion, while shareholder wealth maximization is a fundamental tenet incorporate finance, a balanced approach that considers the interests of diversestakeholders is indispensable for sustainable and ethical business practices. Ilook forward to our discussions in this course.3. Priorto watching the video, my initial thoughts on shareholder wealth maximizationare that it should be the primary goal of a business, granted that the businessdoes not cut corners in meeting its other obligations. For example, acompany who is only concerned with maximizing shareholder wealth but does notconsider maximizing customer satisfaction will not have a sustainable businessmodel for very long. This also applies to employee satisfaction,complying with laws and regulations, as well as several other factors that arebuilt into a successful business. Afterwatching the video, it seems like my above comments are in direct agreementwith the stakeholder model discussed in Social ResponsibilityPerspective: The Stakeholder and Shareholder Approach (AlanisBusiness Academy, 2014). Profitability is, of course, the main goal ofmost if not all corporations, but that does not mean other goals, obligations,and ethical concerns should fall to the wayside. Shareholder wealthmaximization has both benefits and drawbacks to consider from the perspectiveof the chief financial officer. As discussed in the video, corporateofficers are appointed to optimize business potential, and, in the eyes of theshareholders, that means make as much money as possible. The key benefithere would be that the maximization of shareholder wealth makes theshareholders happy, thereby securing the corporate officers’ position at thecompany. However, without consideration towards the factors referencedabove, as well as in the video, the business’s reputation, profitability, andexistence can take a turn for the worse in the pursuit of profit.Especially in the era that we live in today, social responsibilities are at theforefront of many peoples’ minds, meaning that the corporate officers have alot more on their plate to balance than solely profitability. A businessonly concerned with profit can have an impact on the company’s stakeholdersoutside of their actual shareholders. It is important for a company toensure the satisfaction of their employees and suppliers so that the companydoes not experience major turnover in the way they do business. Forexample, withholding a raise/bonus from a key employee who deserves one mayimprove the company’s profitability, but it also exposes the company to therisk of losing that key individual. In terms of a company’s suppliers,holding out on satisfying an account payable until the very end can show strongcash positions, but may irritate the supplier and lead the supplier to not wantto do business with the company anymore.Being acorporate officer is no easy task, and I think it is safe to say that mostcompanies nowadays subscribe to the stakeholder method of conductingbusiness. Corporate officers have a lot of decisions and considerationson the day-to-day basis, and at the end of the day must make profitabledecisions for their shareholders, while maintaining a strong reputation withtheir other stakeholders.