What Are a Shareholder's Objectives?

When founders create a business, they might do so to provide a particular good or service to a market in which they see a need. Ultimately, every business owner and corporate shareholder wants to make money. Identifying shareholder goals and objectives provides clarity and focus.

The primary shareholder objective for a corporation is to maximize the value of the corporation. Corporations exist to provide goods and services to generate revenue and net income. The net income gets passed to the shareholders via dividends and distributions or through the sale of a shareholder's stock back to the company or to another individual or entity. Expanding the corporation's geographical reach, business lines or products serves to increase revenues. Enacting measures that cut costs without impacting quality or service increases profitability. Both revenue growth and profitability serve to maximize the corporation’s value.

Another shareholder objective is to increase shareholder wealth. This is similar to increasing the company's value. In addition to increasing the revenues and profitability margins of the business, the objective of increasing shareholder wealth might also take the impact of taxes into consideration. A company that increases significantly in value can drive higher shareholder wealth by providing access to that value at a lower tax rate. This is why some "C" corporations do not pay dividends and why other corporations choose tax treatment as an "S" corporation.

In the U.S., many definitions of shareholder objectives focus solely on wealth and value creation. However, there is a rising interest in the social impact and goodwill a corporation makes in its community. Many successful small-business owners are leaders in their communities. Therefore, being a good corporate citizen by supporting charities or civic organizations and donating to beneficial causes might be a credible shareholder objective for a number of businesses.

A number of businesses tout customer satisfaction as their primary objective. From the shareholder perspective, this might be a secondary objective. Customer satisfaction is important to drive repeat business, referrals and testimonials to use in marketing and case studies for sales. Consequently, you can view customer satisfaction as key to increased revenues. Employee satisfaction is similar. High turnover and poor morale lead to increased personnel costs and low productivity. Both lead to higher expenses, which decrease profitability and, therefore, lower a corporation’s shareholder value.