Failure of Shareholder Value Essay Example | Topics and Well Written Essays - 2000 words - 1

Failure of Shareholder Value - Essay Example The present research has identified that despite its perceived role in stimulating business growth, shareholder value remains contentious in out-of-business quarters. Whereas the corporate executives’ penchant for maximizing the share price lacks any historical or legal basis, the refusal of shareholder value in a business organization may as well spell the end of the company’s operations. Regardless of the reasoning, Cole, Sturgess, and Brown have argued that there is no empirical evidence linking corporate focus on shareholder value to an improvement of the status of the economy and or the society. Shareholder value is said to have begun in the second half of the 20th century as an imperative control for managerial  excesses, but over the history, it has turned into a skewed, self-interested doctrine preferred by economists, finance managers, and over-paid corporate managers. According to Roth the supremacy of shareholder value has not yet been codified in law as th e most important priority of the corporate world. In most markets, business organizations can be established for any legitimate purpose. In fact, there is no corporate charter that supports the need to maximize profits or share value. Equally missing in law is the need for executives and company directors to be indebted to shareholders under special conditions. The executives owe a fiduciary responsibility to the business organization, which is an amalgamation of different stakeholders. The only exception is that shareholders are legally entitled to the corporation’s residual value upon the organization’s fulfillment of its other duties. Notably, company directors still have sweeping powers over the residual value, provided they are not channeling the money to their own pockets.