Research Paper: Corporate Governance Shareholder Wealth Maximization Approach

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Corporate Governance

Shareholder Wealth Maximization approach and Stakeholder Capitalism are both models applied to maximize the wealth of shareholders. Managing the wealth of shareholders is the prime goal of management within the American business world while stakeholder capitalism is common across European and Japanese markets. The SWM approach argues that the stock market is universally efficient such that the management's performance is reflected from the rapid movement of stock prices. The SCM approach is not founded on the presumption that the equity markets carry out their duties efficiently. In this model, the efficiency of the stock market does not matter. This is because the financial goals of a firm are not entirely share-focused as other stakeholders (Tricker, 2012) control them.

This article offers all the relevant details about my topic by focusing on Shareholder Wealth Maximization approach and Stakeholder Capitalism Models. Looking at the SCM, this article supports my topic by citing that long-term shareholders dominate interests controlling the corporate strategy to the investor's transient portfolio. This article supports my idea that the SCM approach determines other groups linked to a corporation and that the stakeholders have an upper hand in the legal administration of the corporation (Calder, 2008). The principal goal of the SWM is to enhance the wealth of shareholders through the payment dividends and increment of stock prices. Unlike SWM, SCM seeks to capitalize the return of shareholders through the capital and dividend gains. While SCM describes risk as qualitative sense, SWM describes risk as universal.

In the SCM, the article argues that businesses must focus on all supporters that have the potential of affecting the firm. Board members and managers of corporations play crucial roles in decision making that suit numerous inconsistent and competing constituent interests. Nevertheless, stakeholders have different interests and demands. While customers are pursuing lower prices, expensive services and quality products, employees want high level working conditions, high wages, and fringe benefits like pensions and medical benefits (Moffett, Stonehill & Eiteman, 2012). On the other… [END OF PREVIEW]

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Corporate Governance Shareholder Wealth Maximization Approach.  (2013, July 23).  Retrieved October 24, 2019, from https://www.essaytown.com/subjects/paper/corporate-governance-shareholder-wealth/8448904

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"Corporate Governance Shareholder Wealth Maximization Approach."  Essaytown.com.  July 23, 2013.  Accessed October 24, 2019.
https://www.essaytown.com/subjects/paper/corporate-governance-shareholder-wealth/8448904.