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TRUE or FALSE:
Managers recognize that being socially responsible is not inconsistent with maximizing shareholder value.
Step by step
Solved in 2 steps
- what does it mean to say that managers should maximize shareholders wealth subject to ethical constraints?Is maximizing shareholder value inconsistent with being socially responsible?Explain.What does it mean to say that managers should maximize shareholders' wealth "subject to ethical constraints"? What ethical considerations might factor into decisions that result in lower cash flow and stock price effects than they might have otherwise been valued?
- Which of the following does not help align managerial and shareholder incentives? Question options: a) Market for Corporate Control b) Product Market Competition c) Antitrust Law d) Corporate Law e) Markets for DirectorsWhat do you see as some of the possible problems if shareholder value is seen as a strategy (and not an outcome)?How to encourage the managers to act in a way which is consistent with the objective of maximization of shareholder wealth?
- If management’s goal is to maximize shareholderwealth, should it focus on the regular IRR or theMIRR? Explain your answer.It has been argued that shareholder wealth maximization is not a realistic normative goal for the firm, given the social responsibility activities that the firm is “expected” to engage in (such as contributing to the arts, education, etc.). Explain why these social responsibility activities are not necessarily inconsistent with shareholder wealth maximization.Why might one expect managers to act in shareholders' interests? Give some reasons.
- Which of the following statements is CORRECT? Select one: a. Conflict of interest between shareholders and managers is not possible. b. By definition, the agency problem can only take place in corporations but not in proprietorships and partnerships. c. Conflict of interest between shareholders and bondholders is not possible. d. Managers always work to maximize the long-run value, and therefore the price, of their company stocks. This is exactly what shareholders desire.How do the shareholders of an organization can encourage its manager to act in a way which is consistent with the objective of maximization of shareholders' wealth?How are conflicts between the shareholders and the management created? Which of the following is most accurate? a. They have either different political or religious beliefs. b. They have different views on how to manage people. The shareholders want a more liberal approach while the management wants micromanaging. c. The management would want to undertake higher risk projects in anticipation of higher returns because management compensation and bonuses are partly tied to financial performance, while shareholders may want to limit risks and invest instead in projects with lower risk. d. None of the choices are correct.
