Essay Examples on Stockton Sixth Form College

CEOs of all companies have a role to maximise their shareholder’s Wealth

CEOs of all companies have a role to maximise their shareholder’s wealth Goedhart and Wessels 2010 and hence satisfy their needs They work towards this goal by evaluating their company s performance via various perspectives resource based theory perspective Cho and Pucik 2005 shareholder theory perspective Hillman and Dalziel 2003 or stakeholder perspective Friedman and Miles 2002 Harrison and wicks 2013 But now the dual theory which includes stakeholder and shareholder theory has become more popular amongst masses as it includes both financial and non financial information Jackson 2011 1 Financial performance measures involves looking at the company's profit EVA EPS 2 Non financial performance measures involves taking in consideration other factors as well like market efficiency share leadership customer satisfaction Transition from Traditional to Modern Financial Measures Rappaport s research in the 1970s along with Black et 2010 reveal that even though the earnings of Standard Poor s 400 companies fell dramatically during the 1970’s their ROEs actually rose through increased levels of asset turnover and gearing Hence a higher ROE may still lead to wealth destruction which is not in line with the economic principles of shareholder value creation

1 pages | 364 words