Question

Which will lead to increasing shareholder value! Achieving those goals is done by the people in an organization, which is the second common characteristic of an organization. An organization's people make decisions and engage in work activities to make the desired goals a reality.

a) Achieving goals has no impact on shareholder value.
b) People in an organization are not involved in decision-making.
c) Achieving goals is the first common characteristic of an organization.
d) Achieving goals by organizational people contributes to increasing shareholder value.

Answer 1

Achieving organizational goals contributes to the increase of shareholder value by enhancing profitability and thus, the returns of the shareholders.

Step-by-step explanation:

Achieving goals set by an organization directly contributes to increasing shareholder value. The assertion by Milton Friedman that a company is owned by shareholders who deserve the maximum return on their investment underpins the importance of achieving corporate goals for enhancing shareholder wealth. Shareholders, owning a piece of the corporation, are distinct from stakeholders, who encompass a broader category of individuals affected by business operations, including employees, customers, and the community at large.

Public companies, with stocks available for purchase by financial investors, operate with the interests of shareholders in mind. They employ a board of directors elected by shareholders to oversee the management of the firm, and it is the executives' responsibility to make decisions that best serve the interests of shareholders, aligning with the concept of shareholder primacy. However, stakeholder theory suggests that corporations should balance the interests of all parties involved, not just focus solely on shareholders.

Corporate goals are typically set to achieve strategic and financial success, and the role of the organization's people is crucial in decision-making and carrying out the work necessary to reach these objectives. By efficiently pursuing these goals, the organization can become more profitable, which, in return, yields greater dividends and increases stock prices, thus enhancing shareholder value.