Shareholder maximization means maximizing shareholder wealth at any cost by paying dividends and/or causing the stock price to increase and keeping shareholders as top priority when reviewing upcoming decisions and plans.
A CFO of an organization has to have long term plans and strategies for increasing the success of the organization, this means they have to incorporate not only shareholder maximization in their decision making but also the state of the economy, employee factors and environmental factors. The advantage to shareholder maximization to a CFO is that as the shareholders wealth is maximized so is the success of the company.
The company cannot increase shareholder wealth without also increasing revenue or innovating new ways to increase revenue and decrease expenses.
The disadvantage to maximizing shareholder wealth may be that the company attempts to use money saving strategies such as using low quality products or hiring less experienced employees who can be paid less.
These strategies may hurt the reputation of the company even if the shareholder wealth is being increased, these are issues that a CFO has to keep in mind as they make decisions.
Questions
What shareholder maximization means to you and what advantages of shareholder maximization from the perspective of the CFO of an organization.