scholarly journals Shareholder Wealth Maximization and Social Welfare: A Utilitarian Critique

2013 ◽  
Vol 23 (2) ◽  
pp. 207-238 ◽  
Author(s):  
Thomas M. Jones ◽  
Will Felps
Keyword(s):  
Social Welfare ◽  
Shareholder Wealth ◽  
Shareholder Primacy ◽  
Wealth Maximization ◽  
Welfare Maximization ◽  
Social Welfare Maximization ◽  
Current State ◽  
Corporate Objective ◽  
Logical Sequence ◽  
Shareholder Wealth Maximization

ABSTRACT:Many scholars and managers endorse the idea that the primary purpose of the firm is to make money for its owners. This shareholder wealth maximization objective is justified on the grounds that it maximizes social welfare. In this article, the first of a two-part set, we argue that, although this shareholder primacy model may have been appropriate in an earlier era, it no longer is, given our current state of economic and social affairs. To make our case, we employ a utilitarian moral standard and examine the apparent logical sequence behind the link between shareholder wealth maximization and social welfare. Upon close empirical and conceptual scrutiny, we find that utilitarian criteria do not support the shareholder model; that is, shareholder wealth maximization is only weakly linked to social welfare maximization. In view of the dubious validity of this sequential argument, we outline some of the features of a superior corporate objective—a variant of normative stakeholder theory. In the second article, we will advance and defend our preferred alternative and then discuss some institutional arrangements under which it could be implemented.

Stakeholder Happiness Enhancement: A Neo-Utilitarian Objective for the Modern Corporation

2013 ◽  
Vol 23 (3) ◽  
pp. 349-379 ◽  
Author(s):  
Thomas M. Jones ◽  
Will Felps
Keyword(s):  
Social Welfare ◽  
Shareholder Wealth ◽  
Wealth Maximization ◽  
Stakeholder Interests ◽  
Modern Corporation ◽  
Corporate Objective ◽  
Sequential Logic ◽  
Shareholder Wealth Maximization ◽  
Specific Alternative ◽  
Refined Version

ABSTRACT:Employing utilitarian criteria, Jones and Felps, in “Shareholder Wealth Maximization and Social Welfare: A Utilitarian Critique” (Business Ethics Quarterly 23[2]: 207–38), examined the sequential logic leading from shareholder wealth maximization to maximal social welfare and uncovered several serious empirical and conceptual shortcomings. After rendering shareholder wealth maximization seriously compromised as an objective for corporate operations, they provided a set of criteria regarding what a replacement corporate objective would look like, but do not offer a specific alternative. In this article, we draw on neo-utilitarian thought to advance a refined version of normative stakeholder theory that we believe addresses a major remaining criticism of extant versions, their lack of specificity. More particularly, we provide a single-valued objective function for the corporation—stakeholder happiness enhancement—that would allow managers to make principled choices between/among policy options when stakeholder interests conflict.

scholarly journals Shareholder Wealth Maximization Under Leveraged Buyouts

2011 ◽  
Vol 4 (2) ◽  
pp. 48
Author(s):  
William J. Bertin ◽  
Khalil M. Torabzadeh
Keyword(s):  
Shareholder Wealth ◽  
Leveraged Buyouts ◽  
Excess Returns ◽  
Leveraged Buyout ◽  
Wealth Maximization ◽  
Shareholder Wealth Maximization ◽  
The Impact

This paper examines the possible excess returns to stockholders arising from leveraged buyout transactions in an effort to determine whether or not such transactions are consistent with shareholder wealth maximization. In addition, the excess returns generated through leveraged buyouts are compared to those associated with typical, non-leveraged acquisitions. The implications of these comparisons are discussed with a special emphasis on the impact of leveraged buyouts upon investors wealth. The major finding of this study is that shareholder wealth is increased, but not necessarily maximized, under leveraged buyouts.

scholarly journals Game-Theory Modeling for Social Welfare Maximization in Smart Grids

Energies ◽  
2018 ◽  
Vol 11 (9) ◽  
pp. 2315 ◽  
Author(s):  
Yu Hwang ◽  
Issac Sim ◽  
Young Sun ◽  
Heung-Jae Lee ◽  
Jin Kim
Keyword(s):  
Power Generation ◽  
Social Welfare ◽  
Smart Grids ◽  
Stackelberg Game ◽  
Evolutionary Game ◽  
Profit Maximization ◽  
Additional Parameter ◽  
Welfare Maximization ◽  
Social Welfare Maximization ◽  
Energy Strategies

In this paper, we study the Stackelberg game-based evolutionary game with two players, generators and energy users (EUs), for monetary profit maximization in real-time price (RTP) demand response (DR) systems. We propose two energy strategies, generator’s best-pricing and power-generation strategy and demand’s best electricity-usage strategy, which maximize the profit of generators and EUs, respectively, rather than maximizing the conventional unified profit of the generator and EUs. As a win–win strategy to reach the social-welfare maximization, the generators acquire the optimal power consumption calculated by the EUs, and the EUs obtain the optimal electricity price calculated by the generators to update their own energy parameters to achieve profit maximization over time, whenever the generators and the EUs execute their energy strategy in the proposed Stackelberg game structure. In the problem formulation, we newly formulate a generator profit function containing the additional parameter of the electricity usage of EUs to reflect the influence by the parameter. The simulation results show that the proposed energy strategies can effectively improve the profit of the generators to 45% compared to the beseline scheme, and reduce the electricity charge of the EUs by 15.6% on average. Furthermore, we confirmed the proposed algorithm can contribute to stabilization of power generation and peak-to-average ratio (PAR) reduction, which is one of the goals of DR.

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