EBK CONTEMPORARY FINANCIAL MANAGEMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN: 9781337514835
Author: MOYER
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 1, Problem 5QTD
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To discuss: The reasons of social responsibility activities are not inconsistent with the wealth maximization of shareholders.

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It has been argued that shareholder wealth maximization is not a realistic normative goal for the firm, given the social responsibility activities that the firm is “expected” to engage in (such as contributing to the arts, education, etc.). Explain why these social responsibility activities are not necessarily inconsistent with shareholder wealth maximization.
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Firms must provide the right incentives if they are to get -Select-shareholderscreditorsmanagersItem 1   to focus on long-run value maximization. Conflicts exist between managers and stockholders and between stockholders (represented by managers) and -Select-employeesdebtholderscustomersItem 2 . Managers' personal goals may compete with shareholder wealth maximization. However, managers can be motivated to act in their stockholders' best interests through (1) reasonable -Select-vacationcompensationperquisiteItem 3   packages, (2) firing of underperforming managers, and (3) the threat of hostile takeovers. If a firm's stock is undervalued, corporate raiders will see it as a bargain and will attempt to capture the firm in a hostile takeover.-Select-StockholdersBondholdersItem 4   generally receive fixed payments regardless of how well the firm does, while -Select-stockholdersbondholdersItem 5   earn higher returns when the firm's earnings are higher. Investments in -Select-riskysafeItem…
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What is Corporate social responsibility (#CSR) ?; Author: Servier International;https://www.youtube.com/watch?v=1bpf_sHebLI;License: Standard Youtube License