The main problem of a company establishing shareholder value creation as its primary performance goal is:
A)Shareholder value maximization is appropriate only for financial service companies
B)Pursuing shareholder value inevitably leads to unethical behavior by senior managers
C)Focusing on shareholder value does not necessarily encourage managers to concentrate on the actions and activities that create the profits that are the source of shareholder value
D)Pursuing shareholder value is likely to be detrimental to employee morale and customer satisfaction

Question

Quizplus · Accepted Answer

Focusing solely on shareholder value may lead managers to ignore important factors such as employee satisfaction, customer relationships, and long-term sustainability, which are crucial for creating and maintaining profitability. In addition, measuring success solely on the basis of shareholder value can encourage short-term thinking and unethical behavior, such as manipulating financial reports or engaging in exploitative practices. Therefore, it is important for companies to balance shareholder value creation with broader considerations that support long-term success and societal well-being.

The Main Problem of a Company Establishing Shareholder Value Creation