Discuss and evaluate the statement "Maximizing shareholder wealth should be the goal of all financial managers, regardless of the effect on the quality of the product, customer service, and employee and supplier relations." by explaining why you do or don't agree with this statement and providing at least 3 points supporting the argument.

Answer:

The view that financial managers should goal to increase shareholder wealth is known as shareholder-wealth-maximization principle. Although this principle is subject to scrutiny or argument, there is rationale behind the need to put it as primary goal by financial managers. 

Step-by-step explanation

The need to maximize shareholder wealth should be the goal of all financial managers, as supported by the following points:

1. Shareholder wealth maximization is a long-term objective of the firm to increase the value of shares in the market.

This is why focus must be emphasized here rather than in profit maximization - the one which focuses on short-term objective of earning profits in a short period of time.

2. To lessen the probability that financial managers will pursue their own objectives.
 Managers act as shareholders' agents. If focus is on profit maximization, incentive conflict may arise. One way of increasing profit is increasing sales or revenue. However, to do that, motivation must be enough to push managers in the targets set, which include incentives or commissions. And this favors the managers more. It is shareholder wealth maximization that prevents incentive conflicts.

3. Risk management

Wealth maximization considers risks and uncertainty common in the business model of the firm, which is not considered in profit maximization.