Role of the Financial Manager
Evaluate the role of the financial manager in maximizing shareholder value within today's financial markets. Compare the financial manager's viewpoint with the viewpoint of an employee or stockholder with regard to maximizing share value.
Over the past several years, the role of the financial manager has come under increased scrutiny due to the numerous scandals around the misappropriation of funds and falsification of financial records in Corporate America. Passage of the Sarbanes-Oxley Act of 2002 emphasized the public and governmental distrust of corporations and their managers and now requires that all public companies have their Chief Executive Officers and Chief Financial Officers certify financial reports and can hold corporate officers criminally liable if such reports are found to be false.
The goal of every for-profit organization is to create consistent, profitable growth for the company and a return to the investor that is consistently greater than that available elsewhere with a comparable level of risk. Financial managers need to be conscious that all investments made by an organization should increase shareholder value, otherwise the money is better spent elsewhere. (Raghavan, 2002)
The Financial Manager
The financial manager's job is to identify the right businesses, strategies and investments that consistently grow the company's profitability over time. At first blush this sounds simple, but there are several factors that make achieving this goal difficult.
For example, every business has many stakeholders. The shareholders, the employees, the customers and the managers are just a few - and for a business to be successful, it must satisfy all of its stakeholders.
Shareholders essentially own the company and presumably their number one goal is to make money when the company stock price rises. Their perspective emphasizes profitability over responsibility and primarily believes that an organization's success is measured by such things as share price, dividends and profit. As the fictional Gordon Gekko said in Wall Street (1987), "The point is, ladies and gentlemen: Greed, for lack of a better word, is good." ...
1100 word paper discussing the role of the financial manager.