Question

• Can the goal of maximizing the value of the company's stock conflict with other goals, such as avoiding unethical or illegal behavior? What about issues related to customer and employee safety, the environment and the overall good of society? Are these goals secondary to stock performance?
• Finally, discuss an example when you saw a business decision made that was good for increasing stock value (or the value of the business) but was not good for other goals the business had.

Answer 1

• It is true that the goal of maximizing the stock value can often conflict with the other goals such as avoiding unethical behavior. It is often seen that companies in order to raise their profits they go focus on cost reduction or often taking up projects which pollute the environment. One example is chemical producing companies often dump their waste in the river without segregating the waste and polluting the river. Often companies in order to reduce their cost of production they outsource these jobs to emerging economies where child labor are employed. Companies often bribe politicians or government officials to get their projects approved. There are definitely some areas where maximizing the value of company can occur with the unethical practices. It is often seen that companies in order to boost the profits and reduce cost, employees are often asked to work overtime and not paid sufficient for that, the working environment is often not conducive to the health of the employee. The projects they take up often damage the environment so much that it becomes difficult to reverse the situation. These goals should not be secondary to the goal of maximizing value of the stock because if the company wants to grow sustainably in the long term then it has to consider taking into account the effects it is having on all the stakeholders, employees, government, Civil society and the environment. Many sports shoes manufacturing companies often outsource some of their task to the emerging markets to reduce the cost and these jobs are often done by minors and children who are employed in horrible conditions. They are able to reduce their direct cost for the product and benefit in terms of profit as well as rise in stock price but when these things come in light of media this often creates a negative image of the company which often boasts of creating high value for the society.