Maximization of Shareholder Wealth Essay

QuestionFirms often involve themselves in projects that do not result directly in profits, for example by sponsorship of sporting events of the opera or another(prenominal) entertainment. Do these projects contradict the finis of maximization of shareholder wealth? Why or why not?Answer move in programs that are socially responsible does not contradict the goal of maximization of shareholder wealth. Having a good reputation from your local alliance is very important for sustaining a business. Although it remains true that spending on social programs could cost a major business millions of dollars, it is the goodwill that is organise through that community that can offer an essential guarantee for the extension of that firm.For an example, if the Australian Company Energex stopped spending some of their money on alternative energy initiatives or programs, that can be seen as be environmentally concerned, some of Energexs customers could decide to do business with other energy companies who are engaging with programs that are seen as being more than socially responsible. Failing to engage in socially responsible programs, and so potentially losing many customers, goes against maximizing shareholder wealth.When all is said and done, in that respect is far more meaning to business and shareholder wealth than solely dollars and cents. An investment in the greater good of the human race pays dividends to the fellowship many more times than penny pinching.By participating in socially responsible programs, this can ensure that a company uphold a positive reputation and goodwill, which in turn creates loyalty from their customers which leads to a maximization of shareholder wealth. It is then imperative for businesses to invest in a few respectable social initiatives that may not always bring profits in order to sustain maximizing shareholder wealth.