Question

What goals might be pursued by managers instead of maximization of shareholder wealth?

Answer 1

Answer:

Instead of seeking to maximize some objective (such as shareholder wealth), managers “satisfice, ” or seek acceptable levels of performance, while maximizing their own welfare. Maximization of their own personal welfare (or utility) may lead managers to be concerned with long-run survival (job security).

Explanation:

• Profit maximization is an inappropriate goal because it's short term in nature and focus more on what earnings are generated rather than value maximization which comply to shareholders wealth maximization. Wealth maximization overcomes all the limitations that profit maximization possesses.