Question: Differing Goals of Management: Shareholder Wealth Maximization Model vs. Stakeholder Capitalism Model
1. Labor Unions. In Germany and Scandinavia, among others, labor unions have representation on boards of directors or supervisory boards. How might such union representation be viewed under the shareholder wealth maximization model compared to the stakeholder capitalism model?
2. Interlocking Directorates. In an interlocking directorate, members of the board of directors of one firm also sit on the board of directors of other firms. How would interlocking directorates be viewed by the shareholder wealth maximization model compared to the stakeholder capitalism model?
3. Leveraged Buyouts. A leveraged buyout is a financial strategy in which a group of investors gains voting control of a firm and then liquidates its assets in order to repay the loans used to purchase the firm's shares. How would leveraged buyouts be viewed under the two models?
4. High Leverage. How would a high degree of leverage (debt/assets) be viewed under the two models?
5. Conglomerates. Conglomerates are firms that have diversified into unrelated fields. How would a policy of conglomeration be viewed under the two models?
6. Risk. How is risk defined under the two models?
7. Stock Options. How would stock options granted to a firm's management and employees be viewed under the two models?