Shareholder Wealth Maximization Long-term value maximization can conflict with short-term value maximization as a result of compensation systems focused on quarterly or near-term results. Short-term actions taken by management that are destructive over the long-term have been labeled impatient capitalism. This point of debate is often referred to a firm's investment horizon (how long it takes for a firm's actions,investments and operations to result in earnings). Copyright 2007 Pearson Addison-Wesley.All rights reserved. 1-11
Copyright © 2007 Pearson Addison-Wesley. All rights reserved. 1-11 Shareholder Wealth Maximization • Long-term value maximization can conflict with short-term value maximization as a result of compensation systems focused on quarterly or near-term results. • Short-term actions taken by management that are destructive over the long-term have been labeled impatient capitalism. • This point of debate is often referred to a firm’s investment horizon (how long it takes for a firm’s actions, investments and operations to result in earnings)
Shareholder Wealth Maximization In contrast to impatient capitalism is patient capitalism. This focuses on long-term SWM. Many investors,such as Warren Buffet, have focused on mainstream firms that grow slowly and steadily,rather than latching on to high-growth but risky sectors. Copyright 2007 Pearson Addison-Wesley.All rights reserved. 1-12
Copyright © 2007 Pearson Addison-Wesley. All rights reserved. 1-12 Shareholder Wealth Maximization • In contrast to impatient capitalism is patient capitalism. • This focuses on long-term SWM. • Many investors, such as Warren Buffet, have focused on mainstream firms that grow slowly and steadily, rather than latching on to high-growth but risky sectors
Stakeholder Capitalism Model In the non-Anglo-American markets,controlling shareholders also strive to maximize long-term returns to equity. However,they are more constrained by other powerful stakeholders. In particular,labor unions are more powerful than in the Anglo-American markets. In addition,Governments interfere more in the marketplace to protect important stakeholder groups,such as local communities,the environment and employment Copyright 2007 Pearson Addison-Wesley.All rights reserved. 1-13
Copyright © 2007 Pearson Addison-Wesley. All rights reserved. 1-13 Stakeholder Capitalism Model • In the non-Anglo-American markets, controlling shareholders also strive to maximize long-term returns to equity. • However, they are more constrained by other powerful stakeholders. • In particular, labor unions are more powerful than in the Anglo-American markets. • In addition, Governments interfere more in the marketplace to protect important stakeholder groups, such as local communities, the environment and employment