Maximization of Shareholder Wealth Essay

QuestionFirms often withdraw themselves in projects that do non solution directly in profits, for example by sponsorship of sporting events of the opera or an early(a)(prenominal) entertainment. Do these projects contradict the goal of maximation of sh beholder wealth? Why or why not?Answer alive(p) in programs that are socially prudent does not contradict the goal of maximization of stockholder wealth. Having a uncorrupted account from your local community is very all-important(a) for sustaining a business. Although it remains true that expenditure on social programs could cost a major business millions of dollars, it is the goodwill that is create through that community that can extend an essential guarantee for the continuation of that firm.For an example, if the Australian Company Energex stopped spending about of their money on alternative nix initiatives or programs, that can be seen as being environmentally concerned, some of Energexs customers could decide to d o business with other energy companies who are engaging with programs that are seen as being more socially responsible for(p). Failing to engage in socially responsible programs, thus potentially losing some(prenominal) customers, goes against maximizing shareholder wealth.When all is verbalise and done, there is far more means to business and shareholder wealth than sightly dollars and cents. An investment in the greater good of the human race pays dividends to the conjunction many an(prenominal) more times than penny pinching.By participating in socially responsible programs, this can ensure that a company keep a positive account and goodwill, which in turn creates loyalty from their customers which leads to a maximization of shareholder wealth. It is then exigent for businesses to invest in a fewer respectable social initiatives that may not always generate profits in order to sustain maximizing shareholder wealth.