Corporate Goal of Maximizing Shareholder Value Essay - 1

Corporate Goal of Maximizing Shareholder note value - Essay ExampleEnhancing shareholder value cannot be stretched beyond the limits that start breaching the fundamental requirements of corporate governance. Ireland (1996. pp289) established an empirical generalization that the legal existence of the company and the shareholders are entirely separate. Although acts like Sarbanes Oxley in the linked States fox made the leadership of the organization (CEO or CFO) legally responsible for the accuracy in accounting statements, many countries around the world still lack such acts. Moreover, the act does not pose shareholders responsible always because in many companies the shareholders do not sign on accounting statements or manage the company operations. Sundaram and Inkpen (2004. pp353) argue that the shareholder value maximization should be considered after all the liabilities of the skunk has been fulfilled including incentives of managers, contractual liabilities, payments of dividends, principal & interest payments to bondholders, supplier dues, wages, salaries, etc. The net value addition in shareholder wealth needs to be taken care of after all such liabilities have been fulfilled that can be utilely managed through corporate governance. The shareholder wealth maximization and effective corporate governance are conflicting objectives and hence need to be managed by different individuals to subject the risk of conflict of interest. The non-shareholding stakeholders should be engaged in corporate governance whereas the shareholders should be engaged in wealth maximization and both parties should have a congenial environment to resolve conflict situations. These roles should be normally fixed in support of the argument by Sundaram and Inkpen (2004. pp355) that the transition from non-shareholding stakeholders to shareholders is easy but wrong-doing versa is very difficult.