What does it mean to say that managers should maximize shareholder wealth “subject to ethical constraints”? What ethical considerations might enter into decisions that result in cash flow and stock price effects that are less than they might otherwise have been?
DQ1 Response Guidelines
When you respond to DQ1, make sure you respond to it in two parts, as there are two questions included in this DQ, and please be specific in your responses to each part of the two parts of the DQ.
Getting Us Started
It may not seem so important or relevant, but managers often:
-know the future (especially budgets, business plans, business strategies, the date of the release for new products, the status of important litigation, just to name a few important items….);
-managers, often time, have a vested interested in the performance of the firm, in the form of short-term items (for example: bonuses); and long-term items (such as ownership of shares of stock in the firm or stock options, which the manager can exercise in the future, especially if they are in ‘the money’ and can provide the manager with a profit on sale).
So, I hope at this point that you understand that the ethical constraints faced by managers is becoming and more and more clear………..it is not so simple, not so easy, but the manager has to pick which road they will travel on, and if ethics come into question, the ramifications of not doing the right thing.