I’m taking a 5 minute break from studying to point out something that I think is wrong with our culture of capitalism. At school this summer, the one course I’m taking is Finance. In reading my text, I came across the definition of financial management and its one goal.
“The goal of financial management is to maximize the current value per share of existing stock”
(I should also point out that the book mentions that most CEO’s have a background in Financial management.)
I think that all too often in Corporations, the stock value is often the most important aspect of the company to the senior executives, and it often leads to “business decisions” that affect employees in the corporation, customers and other human beings in the world. Examples are laying off employees, polluting the environment, loss of jobs to offshore outsourcing and just general ignorance toward doing the “right thing”.
When choosing which company I wanted to work for recently, one of my major deciding factors was how the employees are treated and what sort of morals and integrity the company possesses. The company I chose to work for is definitely a pioneer in treating their employees well and having high integrity. If you focus on what I call “doing the right thing”, the profits will come later. If profits are the one thing on a company’s mind, they may achieve those profits, but it’s always at a cost. Companies will sacrifice their employees, the environment or their customers to simply raise their stock value.
In the short term, “doing the right thing” might not put cash into the shareholders’ wallet, but in the long term a company will prevail, and people will take notice.
*Note: As I continued reading my text, I came across this interesting disclaimer: “Our goal does not imply that the financial manager should take illegal or unethical actions in the hope of increasing the value of the equity in the firm. What we mean is that the financial manager best serves the owners of the business by identifying opportunities that add to the firm because they are desired and valued in the free marketplace.