stock PriceMaximization and Social Welfare

The primary goal of the corporation is to maximize shareholder's wealth. But there is correlation between social welfare and stock price maximization, due to the following reasons.

1. To a large extent, the owners of stock are society:Seventy five years ago this was not true, because most stock ownership was concentrated in the hands of a relatively small segment of society,comprised of the wealthiest individuals. Since, then has been explosive growth in pension funds, life insurance companies and mutual funds.Most people with a retirement plan have an indirect ownership interest in stock. Thus most members of society now have an important stake in the stock market,either directly or indirectly. Therefore, when a manager takes actions to maximize the stock price, this potentially improves the qualities of life for millions of ordinary people.
   
2. Consumer's benefit : stock price maximization requires efficient, low cost business that produces high quality goods and service at the lowest possible cost. This means that companies must develop products and services that consumers want and need.
3. Employee benefit:If the company is able to increase stock prices also grow and add more employees .thus benefiting society.