Final answer:
Managers in large corporations are incentivized to maximize share value through direct financial interests such as stock options, fiduciary duty to shareholders, and compensation packages tied to performance targets. Additionally, a high share price contributes to the prestige and professional reputation of the management team.
Step-by-step explanation:
Managers in large corporations have several incentives to maximize share value. One of the primary reasons is that they often hold a stake in the company through stock options or ownership, meaning that their personal wealth is directly linked to the company's success. This alignment of interests provides a financial incentive to focus on strategies that will increase the company's stock price.
Additionally, managers in these corporations are entrusted with the fiduciary duty to act in the best interest of their shareholders. The principle of shareholder primacy dictates that managers ought to prioritize the financial returns of shareholders, often measured by the value of the company's shares. Failure to do so could lead to lawsuits and reputational harm. Besides, many executive compensation packages include bonuses and performance incentives tied to specific targets, such as earnings per share or the company's market capitalization, which incentivizes managers to work towards boosting share value.
Beyond these financial incentives, there is also a significant amount of prestige and professional reputation associated with leading a high-performing company. A robust share price is often seen as an indicator of a company's success and the effectiveness of its management team, potentially opening up more career opportunities for individual managers.