Corporate Social Responsibility and Shareholder Value Maximization Essay

Corporate Social Responsibility and Shareholder Value Maximization - Essay Example Effective management of a company entails making realistic financial decisions, which are in line with the firm, or company’s goals. The choice to maximize company shareholders stocks remain an important role of firm managers and acts as an indicator of the level of advancement. The wealth possessed by the shareholders can be determined by analyzing the market price or value of the company’s common stock. Maximizing of shareholders wealth should be a long-term goal of the firm, which can be achieved by maximizing short-term earnings and reducing the expenditures. However, the management should be careful not to cut down too much on the expenditure since research and development are crucial in enabling firms develop novel products which contribute to increased wealth. This paper focuses on why the primary objective of management should be to increase the wealth of shareholders and owners. Increment of shareholders wealth portrays improved or good management in different areas, which include risk management, income management, developments, tax rates as well as in research. The move to increase shareholders wealth helps create a favorable working environment since it helps motivate the shareholders. However, firms that may choose to focus solely on increasing the shareholders wealth and disregard corporate social responsibility risk been scrutinized negatively especially by neighboring communities. Shareholders Value Shareholders are the persons who own or have bought shares in a corporation or firm. Shareholders have certain right in a firm since they are considered the owners of the firm. Being the owners of the firm, shareholders are concerned with the performance of the firm. Additionally they are involved in the firm’s decision-making process through voting process especially when important decisions are being made. Since the shareholders have invested financially in a firm, they require the employees to work towards increasing the wealt h of the firm (Bejou, 2011, 1-6; Van Beurden & Gossling, 2008, 407-414). One of the major roles of financial managers in a firm is to acquire funds for the firm and make use of the money to fund projects that will increase or maximize the value of the shareholders as well as firm owner’s wealth. Shareholders value can be defined as the value or wealth due to the management’s capability to maximize on earnings, share prices, as well as the dividends. It is calculated by considering the number of outstanding shares and their market price. The shareholders’ value can be decreased by factors such as issuing shares (Fontaine, Haarman and Schmid, 2006, Web). On the other hands, dividend payments tend to augment the shareholders’ value. All the decision made by the management has the potential of affecting the firm’s ability to increase the wealth or the firm’s cash flow is regarded as shareholder value. Increasing shareholders value entails making responsible decision on the investments to make and the appropriate time to invest. One of the main factors that threaten the shareholders’

Marine Finance and Insurance - Coursework 2 Essay

Marine Finance and Insurance - Coursework 2 - Essay Example Similarly, they also have come to cater to companies from other countries in the course of their business. Through it all, marine industry players have become subject to foreign exchange risks. They have engaged in deals that would involve gains or losses resulting from the fluctuations in the exchange rates of foreign currencies used. Thus, foreign exchange risk should be acknowledged in the marine industry as a reality that all companies should be prepared for. If managed well, foreign exchange fluctuations can even present opportunities for companies to earn more. Huge capital investments for boats or similar fixed assets purchased from a foreign supplier can turn out to be big mistakes for marine companies that transacted them in a currency whose equivalent conversion to the native currency takes a nosedive right the next day or even weeks after the purchase date. The same is true with having collected revenues in currencies whose values abruptly plummets. Indeed, such cases are not to be underestimated or overlooked. They can lead to material, negative impact on the profitability and financial soundness of any marine company. As a matter of fact, the dread of ending up as casualties of abrupt foreign exchange fluctuation has led businessmen and investors across all industries to adopt different mechanisms to mitigate such risk. Fear and risk-aversion naturally come with things that are unpredictable, uncontrollable or unfamiliar. Risk, then, is a subject that ought to be explored and studied. If risks will be capably viewed in the right perspective by decision-makers, then strategic opportunities for growth and development will not go wasted or deliberately missed out due to attempts to avoid them. Winning companies do not avoid having to face risks; they embrace risk-taking and then learn from it. It is important to create in the company a culture that welcomes risk-taking as part and parcel of excelling in the