Assessing the Goals of Sports Products Inc

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ASSESSING THE GOAL OF SPORTS PRODUCTS, INC. [Student name] [Instructor name] DATE ASSESSING THE GOAL OF SPORTS PRODUCTS, INC. a. What should the management of Sports Products, Inc. pursue as its overriding goal? Why? The businesses that focus only on gaining profits that are then divided among top executives, do not survive for long. The businesses like Sports Products should have broader goals like maximizing shareholder's wealth and not just the wealth of managers. This leads to more production of goods and the managers as well as employees and other shareholders get benefits. The shareholder wealth is maximized by focusing on the share prices so that the shares are traded at higher prices and the shareholders can benefit from capital gains. The managers may be tempted only to focus on the profits and not share price but if such a behavior is sustained, the employees that are shareholders too, may lose interest in working with dedication for the company. Hence the company should make its goal to maximize shareholder's wealth and not just focus on profits that are proportionally distributed among managers. Besides this the company can also include social concerns in its goals. It should try to preserve not only its gains but also the environmental resources it is using. b. Does the firm appear to have an agency problem? Explain. Yes the company has an apparent agency problem that is sensed from the conversation between Loren and Dale. Agency problem is a conflict
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