Shareholders mostly own huge firms and corporations. Shareholders are members who own a certain percentage of a firm in the form of shares. Through the shares they hold, shareholders own a corporation, which is why it is imperative to maximize shareholder wealth through the goals set by an organization. Firms also have a responsibility to the society regarding corporate citizenship, ethics and shareholder wealth, which is achieved from a partnership with communities and maintenance of social good.
The goals set by organizations have a role to play in maximizing shareholder wealth as they implore the board of directors to make all major decisions based on the interests of shareholders (Sharfman, 2015). As such, shareholders play a significant role in critical decision making since they are considered a priority in corporate decisions (Sharfman, 2015). Focusing on the maximization of shareholder wealth leads an organization towards significant profits, as influenced by the shares held.
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Moreover, organizational goals shift the focus towards shareholder wealth maximization, hence accounting for the risks and rewards involved in business operations (Sharfman, 2015). Firms tend to be cautious concerning risks and rewards as they pose significant effects on the share price index, which in turn affects shareholders. Focusing on shareholder wealth maximization leads to the evaluation of risks and rewards, hence informing decisions made in the best interest of the shareholders.
Organizations also have a responsibility to society, which includes partnering with the societies in which they operate. Such partnerships lead to the involvement of members of the community, hence gaining local insights into the needs of the nation, which in turn promote business operations (Sison, 2009). Furthermore, organizations have the responsibility of maintaining a code of ethics and social good as they depend on the communities to achieve success (Sison, 2009). Thus, they have a responsibility of engaging in social good by making ethical decisions both in their business operations and corporate social responsibility.
In conclusion, shareholders play a significant role in an organization’s decision-making process. Shareholder wealth maximization is achieved through the goals set by a frim, which also accounts for risks and rewards present in business operations. More so, a firm’s responsibility to the society in which they operate involves partnering with the local community to gain local insights and also make ethical decisions for the wellbeing of the society.
References
Sharfman, B. (2015). Shareholder Wealth Maximization and Its Implementation under Corporate Law. Florida Law Review , 389 (1).
Sison, A. (2009). From CSR to Corporate Citizenship: Anglo-American and Continental European Perspectives. Journal of Business Ethics , 89 (3), 235-246.
