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Profit maximization, maximization of shareholder wealth?

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Why is profit maximization, by itself, an inappropriate goal? What is meant by the goal of maximization of shareholder wealth?

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Profit maximization by itself is not appropriate because the goal could overtake other aspects of the company which are important. also other elements of the company could be sacrificed if the company only cares about profit.

For example the company could try to reduce costs by buying cheaper goods. The value and quality of the goods produced would be then reduced, rendering customers unsatisfied. ...

Solution Summary

Why is profit maximization, by itself, an inappropriate goal? What is meant by the goal of maximization of shareholder wealth?

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