Final answer:
A public company with wide ownership is more likely to focus on shareholder wealth maximization due to the oversight of a board of directors elected to represent the interests of a broad group of shareholders. In contrast, closely held corporations may make decisions favoring controlling shareholders. The rate of return and corporate decisions are central to understanding how these public companies operate.
Step-by-step explanation:
A corporation with wide ownership and no owners directly involved in the firm's management is generally more likely to be a shareholder wealth maximizer. This is because the board of directors of a public company is elected by a broad group of shareholders to represent their interests. These directors are tasked with overseeing the company's management and ensuring that the actions taken by the executives are aligned with the goal of maximizing shareholder wealth. On the other hand, in closely held corporations, the shareholders are often involved in the management, which can sometimes lead to decisions that favor the interests of the controlling shareholders over those of the minority shareholders or the long-term health of the company.
A public company obtains money from the sale of its stock during an initial public offering (IPO) or subsequent offerings, with expectations set for a certain rate of return. This rate of return is a promise to the investors for the risk they take by investing in the company's stock. The company's decisions, including those related to shareholder wealth maximization, are made by the hired executives and overseen by the board of directors, ensuring the alignment with shareholder interests.