Question

Present the pros and cons of shareholder value creation as the goal of a firm.

Answer 1

Pros of shareholder value creation of the firm-

A .It will be helping in satisfaction of the shareholders because shareholders are the ultimate owners of the company

B. it will also be meaning that there would be increased compensation for the employees and employee will be synchronising their goals with the goals of the organisation

C. There would be less conflicts and lesser agency problems

D. It can lead to higher creation of profit also.

Cons of shareholder value creation-

A. It can lead to short term approach of company and it will not be helpful in long term sustainability

B. It will undermine the interest of other stakeholders in the firn

C. it will also lead to taking of unnecessary risk and this can blow up the entire company.

D. This is a highly narrow approach because this is a short sighted approach