Maximizing Shareholder Wealth Essay

The goal of a firm and a financial manager should involve maximizing the wealth of a firm’s shareholders through achieving the highest possible value for the firm (Block 13). It is a vital task to oversee properly as a financial manager, and while the manager cannot directly control the firm’s stock price, it can act consistently with the desires of the shareholder. Accounting, financial and other irregularities can erode consumer confidence that says the system will operate in the best interests of shareholders, taxpayers and other constituents (Hintzen 2003). Therefore, ethical practices must be upheld to convey confidence to your clients.

Your clients care about two major topics when hiring you: what is their return going to be, and is it going to occur when promised. Current stock prices as well as future expectations of value are controlled by the economic environment, but are difficult to forecast. In addition, expectations of stockholders are constantly varying depending on the economic climate. For instance, during the economic boom of . com businesses, people had high expectations of their money spent because of similar stocks. However, many companies had very high stock prices, with no real earnings yet, which distorted to economic health of some companies (Block 14).

As related to business firms, social responsibility concerns such things as protecting the consumer, paying fair wages to employees, maintaining fair hiring practices, supporting education, and becoming actively involved in environmental issues like clean air and water. Many people feel that a firm has no choice but to act in socially responsible ways; they argue that shareholder wealth and, perhaps, the corporations very existence depends upon its being socially responsible. However, the criteria for social responsibility are not clearly defined, making formulation of a consistent objective function difficult (Dent 2005).

As Christians, our social responsibility is defined through the Bible, and through it we should have perspective on what is right and wrong. While our job is to make money for our company and client, we must do so according to our beliefs, and what we know in our heart to be right, which God shows us. Philippians 1:9-10 (ESV) says, it is my prayer that your love may abound more and more, with knowledge and all discernment, so that you may approve what is excellent, and so be pure and blameless for the day of Christ.

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