Answer to Question #181983 in Management for cephas

Question

What goals might be pursued by managers instead of maximization of shareholder wealth?

Answer 1

Instead of seeking to maximize shareholder wealth, managers “satisfice, ” or seek acceptable levels of performance, while maximizing their own welfare. Maximization of their own personal welfare (or utility) may lead managers to be concerned with long-run survival (job security).

Profit Maximization

Why are business firms not seeking profit rather than an increase in share price? One reason is that profit maximization does not take the concepts of risk and reward into account as shareholder maximization does. The goal of profit maximization is, at best, a short-term goal of financial management.