23:10 | Author: sang pencari ilmu
If a firm athempts to maximize its fundamental. Stock price, is this good or bad for society? In general, its good. Aside from such illegal actions as fraudulent a accounting, exploiting monopoly power, violoting safety codes, and failing to meet environmental standards, the same actions that maximize fundamental stock prices also benefit society. Here are some of the reasons:
- To a large extent, the owner of stock are society. Seventy- five years ago this was not true, because most stock ownership was concentrated in the hands of a relatively small segment of society, comprised of the wealthiest individuals.
- Consumer benefit. Stock price maximization requires efficient, low- cost businesses that produce high-quality goods and services at the lowest possible cost. This means that companies must develop product and sevices that consumers want and need, which leads to new technology and new product. Also, companies that maximize their stock price must generate growth in sales by creating value for customers in the form of efficient and courteous services adequate stocks of merchandise, and well- located business establishedments. People, increase product prices and gouge the public. In a reasonably competive economics, which we have, price are constrained by competition and consumer resistance.
- Employees benefit. There are cases in which a stock increase when a company announces a plan to lay off employees, but viewed overtime this is the exception rather than the rule. In general, companies that successeful increase stock prices also grow and add more employees, thus benefiting society.
One of fortune magazine's key criteria in determining their list of most admired companies is a companies is a company's ability to attract, develop and retain talented people. Their results consistenly show high correlations among a company's being admired, its ability to satify employees and its creation of value for shareholders. Employees find that it is both fun and financially rewarding to work for successful companies. Thus, successful companies get the cream of the employee crop, and skilled, motivation employees are one of the keys to corporate success.
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