Ascertaining the Corporate Objective: An Entity Maximisation and Sustainability Model
36 Pages Posted: 22 Aug 2008
Public companies play crucial roles in today's world, and it has been acknowledged that ascertaining the objective of such companies is a critical issue. However, there remains great uncertainty as to what that objective should be. This article examines the two predominant theories of the corporate objective, namely the shareholder primacy and stakeholder theories. This is followed by an explanation of and the case for a new model, the entity maximisation and sustainability model. This model focuses on the company as a separate legal entity and maintains that the objective of the company is to maximise the wealth of the entity as an entity and, at the same time, to ensure that the company is sustained financially.
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