Explore BrainMass

Primary Function of Companies: Shareholder wealth & profit?

This content was STOLEN from BrainMass.com - View the original, and get the already-completed solution here!

Word count of 150 for each question.

1. Values such as trust, spirituality, social consciousness, sustainability, environmental protectionism, social responsibility, etc.), hypothesize the importance of two of these values as far as adding value to customers and society.

2. Synthesize three examples of how an organizational leader can contribute to society through his or her leadership role in their organization.

3. Some experts say that the focus of trustees and senior leaders in "for-profit companies" should be on creating shareholder wealth and maximizing profitability. Other experts say the company must serve a higher purpose and make a contribution to society. Provide two arguments for both sides of this argument with support from research.

© BrainMass Inc. brainmass.com October 25, 2018, 7:56 am ad1c9bdddf

Solution Preview

1. Trust and social responsibility are important components as far as adding value to customers and society. Trust is crucial in that customers must depend upon an organization to do what it says and act in an honorable fashion. Consumers are exchanging their resources with the understanding of getting a certain value from the deal. Organizations that are not dependable (thus lack trust) would not likely be able to continue to stay in business. Trust is a fundamental point of every relationship, and without it there is less value in the relationship with customers.

Social responsibility is also critical. Consumers expect companies to act in a manner that follows our socially acceptable norms. Some companies, like Starbucks, use social responsibility as a way to market to consumers, touting responsibly grown and fair trade coffee, for instance. This serves as a way to lure customers in. Conversely, however, companies operating in ways that are viewed socially irresponsible, such as BP during the Gulf Oil Spill, face the recrimination of customers and suffer loss of business. Both trust and social responsibility serve as part of the product offerings companies offer, surrounding the company's other products and services, to add value to the total offer.

2. An organizational leader can contribute to society through his or her leadership role in their organization in many ways. This can be seen in their ...

Solution Summary

This solution discusses the important of trust and social responsibility for adding value to customers and society. It also shows how a organizational leader can contribute to society through his leadership in an organization, and it argues both for and against for profit companies creating shareholder wealth and maximizing profitability as their primary function. Examples and APA formatted references are included.

See Also This Related BrainMass Solution

Profit and Shareholder Wealth Comparison

Please see attachment.

Profit and Shareholder Wealth Comparison Paper
General Electric Corporation and Tyco International are both classified as "conglomerates" (having many diversified business lines). General Electric has pursued a conservative growth strategy by focusing on being the number one or number two in each industry where it competes.
Tyco has pursued very aggressive sales and earnings growth strategy through rapid, multiple acquisitions.
1) General Electric www.ge.com
2) Tyco International www.tyco.com
b) From each company's web site, and/or web based financial services sites (e.g.: finance.yahoo.com, moneycentral.msn.com, annualreports.com, sec.gov) locate the following information:
1) Common shareholders' equity (total equity less any preferred stock equity)
2) Market Capitalization (total common stock shares outstanding times latest stock price)
3) Net profit margins for each company for the past 5 years.
c) Prepare a 700-1,050-word paper in which you answer the following:
1) Divide each company's market capitalization by that company's shareholders' equity. This market-to-book ratio provides one measure of shareholder wealth created by each company. Include your calculations in the assignment.
2) Based on these market-to-book ratios, which company's strategy has provided greater shareholder wealth creation?
3) Calculate the average net profit margin for each company for the five years worth of data obtained. Include your calculations in the assignment. Based on these average net profit margins, which company has done a better job of maximizing profits?
4) Did the company achieving the greatest profit maximization also achieve the greatest stockholder wealth maximization? If not, which strategy was more beneficial to the shareholders?
5) Which company's strategy has presented greater risk to the shareholders' investment?
6) Have the investors assuming that greater risk been rewarded with greater investment

View Full Posting Details