Answer to Question #182065 in Management for Philip

Question

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

Answer 1

Managerial Goals instead of Maximizing Shareholder Wealth

Managers are often in charge of everything because management involves setting goals, overseeing personnel and executing strategies. As the desire of managers entails maximizing shareholder need value, the short and long-term impact of their decisions requires them to understand basic management goals for the business.  

Instead of maximizing shareholder wealth, managers can seek to increase performance levels as a goal. As effective performance is important to any business, it helps in aligning resources, employees and systems so that they can meet the strategic organization objectives. This goal can be achieved through implementing performance measurement systems which help to keep track of the business’s progress and gives vital information the starting point of target-setting. Managers therefore can frequently monitor their teams and regularly engage them in discussing how to meet their targets which is essential for progress. Once performance management goals are defined, managers increase employee engagement and motivation and increased revenue growth while maximizing their own interests and ensuring job security.

Another goal a manager can pursue instead of maximizing stakeholder wealth is ensuring personal interests do not conflict with business decisions. While conflict of interests might arise in organizations with competitive professional obligations, a manager needs to ensure that the company’s policies are applied in all situations. In managing conflict of interest, the goal can be achieved by creating a culture of trust and ethics which clearly sends a message on how to handle the problem making every employee aware. This culture involves establishing adequate policies and putting them into context to help employees understand them better.