Question

“The goal of maximizing shareholders’ wealth conflicts with other goals, such as product safety or environmental protection." Do you agree with this statement? Think of some specific scenarios to illustrate your arguments and justify your stance.

Answer 1

No, i really don't agree with the statement that "The goal of maximizing shareholders' wealth conflict with other goals, such as product safety or environmental protection". Playing with goals and product safety only can attract short term increase in the wealth and in long term it will take even the principle investment as well. Any fraud happened was because of deviation from product safety to decrease the product cost to increase profit. But we all know the final result, finish of product and even some cases whole firm.

We can take any example to support this. Lets take example of Apple, we all are aware that iphones are costly as compare to other brands and they have only few products (latest one) in their portfolio but still their shareholders wealth is increasing. They are clear about their goal and product which attracts the customers. Customer data protection, product safety features are the reason customers go for iphones. Many competitions came and gone but they still cash rich because of their goals, product safety and environment protection. Customers sentiments are also attached with environment and there is direct imapct on sales with environment protection actions taken by the company.

So, I am not agree with the statement. To maximise the wealth one must comply the environment protection regulations, product safety.