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Maximizing Shareholder Value

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Why might organizing to maximize shareholder value be the right foundation for organizations? More importantly, why not?

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Solution Summary

This solution discusses the pros/cons of organizing to maximize shareholder value. Includes references.

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Milton Friedman (2002) stated that corporations do not have a social responsibility and that social costs (e.g., environmental causes, philanthropy) negatively impact a corporation's stakeholders. Essentially, corporations should act in a manner that is best for their stakeholders. Businesses should focus on maximizing shareholder value, and stakeholders can then use their income to contribute to the causes of their choice. This is viewed as the right foundation by businesses since it allows them to focus on running a business, not determining social causes to support, or burdening shareholders with ...

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  • Ed.D, Boise State University
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