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There are many potential goals of a corporation, such as: minimize costs, maximize sales, maximize employment,...

There are many potential goals of a corporation, such as: minimize costs, maximize sales, maximize employment, maximize earnings,

maximize shareholder wealth, maximize dividend payments, etc. Which one is the best for the long-term health of the company and society?

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Answer #1

The major goal of a firm is to maximize shareholders wealth. In order to maximize shareholders wealth, a firm has to increase the revenue along with cost cutting. This process will help the firm to increase the expected profits in long run. Increasing expected profits will increase the dividend which in turn increases the share price as share price is the discounted value of expected future dividends. In this way, the firm will be able to stand in future can compete in the market.

Thus, the best goal for the long term health of the company and society is maximize shareholders wealth.

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