concerned with taking decisions in three key areas which are financing, investing and dividend policy. Watson and Head also mentioned, shareholders wealth maximisation as the primary objective of the firm and at the same time the existence of other stakeholder groups such as creditors, employees, customers and community are also affected when adapting to a corporate goal. "However the firm may adopt one or several objectives in short term whilst it's pursued the objective of shareholders wealth maximisation in long term"(Basely and Brigham; Essentials of Managerial Finance). Therefore it is essential to be considered the other possible objectives in short term as well as long term simultaneously.
Reviewing one of the main objectives of profit maximisation, a classic article of Milton Friedman in the New York Times magazine 1970"The social Responsibility of Business is to Increase its profits" (Poitras, Geoffrey 1994). Considering classical views of Friedman (1970), Grant (1991), and Danley(1991), Geoffrey analysed the connection between shareholders wealth maximisation and profit maximisation, as an foundation for establishing an ethical analysis for shareholders wealth maximisation. However, Friedman had a moderate view later relating to the concept of profit maximisation towards social responsibilities. (Pradip N Khandwalla, Management paradigms beyond profit maximisation 2004)
While there were similarities between these two objectives, Solomon; 1963, chp.2 highlighted the inconsistencies in his classic article (Poitras, Geoffrey 1994). Considering the above views from different authors, Geoffrey's suggestion was "Even though there are significant consistencies between these two goals, the goal of profit maximisation has designed for the traditional microeconomic environment and for the firms which do not have the conflict of ownership and control. It is also assumed that it's applied for the environment where there was no uncertainty and no stock issues"( Poitras, Geoffrey, 1994).
According to Keown, Martin and Petty, 2008; Lasher 2008; Ross Westerfield, and Jordan; 2008, "Managers are encouraged to maximise its current stock prices by the shareholder theory, therefore the criticisms are understandable". This approach determines the existence of agency problem towards incentive schemes, as incentives are rewarded with the continuous growth of share price and leads to an unethical behaviour of managers, towards manipulating the firms current stock prices (Daniel, Heck & Shaffer).
CONFLICT OF OWNERSHIP AND CONTROL
The conflict of ownership and control was first identified by Adam Smith (RBS Review 1937) and he suggested that the Director cannot protect the other peoples' money with the same way that he protects his money (Tony & Howell; Shareholder ship model versus Stakeholder ship model). It's also mentioned in Tony and Howell's article, that the separation of ownership and control make a significant influence for corporate behaviour and it's deeply discussed by Berle and Means (1932). But La Porta et al. (1999) argued against Berle and Means, and he suggested "it's different from the large corporations, because the shareholders of large corporations involved in corporate governance actively where managers are unaccountable" (Tony and Howell; shareholder ship model versus Stakeholder ship model).
