A successful business is a business that could earn more and high profit continuously from its operation. Well, I think this is such a conventional aim or objective of a business where a firm or company might want to focus on profit maximization The Board of Directors may set out the aims or objectives as the guidance for management teams to be aware of. In a company, the financial management is the crucial division for the company to survive in the long term of the business. Therefore, the financial manager is playing a big role in the firms' organisation such as to make a decision om company's investment, advising about allocation of funds and so on.
However, do they realize that they need to consider about their shareholder too?Shareholders are also important because without them especially the investors, the firm or company could not run the business probably regarding insufficient of capital or finance. The shareholders also has rights in a company, if they are happy with the management and performance of the company, they perhaps will stay in, otherwise the company will lose its shareholders. In other words, if possible, avoid the term managerialism which this term will separate the ownership and its control where the management team might pursue objectives attractive to them but do not give benefits to the shareholders. So, management also has to bear in mind on how to create the shareholder value in order to retain their shareholders.
For instance, the Sunway Berhad which is situated in Malaysia, they bought a new land located in Johor Bahru on 23rd January 2013 in order to generate an estimated gross of development. This acquisition is to contribute positively to the company's future earnings and to improve the shareholder value. From this, I could tell that the company is not just making a development and future earnings but also concerned about their shareholder value. Maybe I can illustrate some example the rationale of creating the shareholder value i.e. shareholders are the owner of the company and they have rights on it. If a bankruptcy occurs, they can bear the risk with their wealth such as high dividend paid or rewards or returns.Though, profit maximisation shoul not be ignored because the profit maximisation can be as the alternative aim for a company. For instance, when the company gain more profit, obviously the shareholders' value also tend to be high.
But, how to maintain this aim which focus on shareholder wealth maximisation in a firm? Before that, the management team in Sunway Berhad might need the 3 elements that are finance, strategy and organisational capabilities in which those have to stick together if they want to generate the shareholder wealth maximisation in a consistent manner . According to Alfred Rappaport's article that I have read, there are several ways that Sunway Berhad might develop in order to maintain of generating shareholder value continuously which includes, they have made a strategic decision that probably maximize the expected future value, provide the investors with value relevant information, and make acquisitions that maximise expected value.
