A corporate chief executive encompasses the final responsibility for a successful company development. “He sets the objectives for the business and specifies strategies for their achievement” (Lines, 1978:3). Further key tasks are listed in Appendix A. In this unique role he is also responsible for the funding of the business (Lines, 1978). Since 1st December 2007 Andrew Harrison is the chief executive of easyJet (easyJet plc, 2007). He defines the organisational structure to lead staff towards defined goals (Mullins, 1999). easy Jets organisation structure is a flat management structure. A comparison of flat and tall management structures is given in Appendix B.
Being under the pressure of different interest groups the question arises which interest should be given priority? Easy Jet postulates “creating real wealth for all stakeholders“ (Bournemouth University, 2004: 22). This assignment demonstrates the theory and understanding of the five objectives. Discussing their importance and priorities, a link is given to easyJet plc. Wealth in this context means “the market value of ordinary shares.” This value states the future potential return for a shareholder’s investment in relation to the risk taken over a certain time period (Atrill, 2000: 5). They can benefit from the company in form of dividends and/or through increases in the share value from the point of buying (Neale & McElroy, 2004). “Shareholder will weigh the returns from each investment against the potential risk involved” (Atrill, 2000:7). Banks are seen as safe but usually bring lower return on investment (Atrill, 2007).
The common opinion of authors is that shareholder wealth maximisation is the answer to the question raised in the introduction. It is “…the driving force behind […] strategic and operational decisions” (Atrill & McLaney 2006: 352). Other objectives are seen as subordinate (Watson & Head, 2007: 8). Neale & McElroy (2004:10) see it as a company’s responsibility to maximising returns for shareholders as they are the owner. Moreover, globalisation created competition for funds of shareholders. Therefore the focus has to be on their interests to reach their financial support (Atrill & McLaney 2006). However, this objective seems to follow only the interest of one stakeholder “…perhaps at the expense of the others” (McLaney 2004:18).
Table of Contents
- Introduction
- Discussion
- Shareholder wealth maximisation
- Profit maximisation
- Sales maximisation
- Social Responsibility
- Survival
- Conclusion
- References
- Bibliography
- Appendices
Objectives and Key Themes
This assignment explores the various objectives that a corporate chief executive may prioritize, focusing on the case of easyJet. It examines the theoretical frameworks of these objectives and analyzes how easyJet's strategies align with them.
- Shareholder wealth maximisation as a key objective
- Profit maximisation as an alternative objective
- The relationship between different business objectives and stakeholder interests
- The role of organizational structure and strategy in achieving business goals
- The importance of considering risk and time dimensions in financial decision making
Chapter Summaries
- Introduction: This chapter introduces the role of a corporate chief executive and discusses the different objectives that they may pursue. It also introduces easyJet as a case study and highlights the importance of understanding stakeholder interests.
- Shareholder Wealth Maximisation: This chapter defines shareholder wealth maximisation as the primary objective of a company and explores its theoretical foundations. It examines how easyJet's strategy aligns with this objective and provides evidence of its commitment to maximizing shareholder wealth.
- Profit Maximisation: This chapter discusses profit maximisation as an alternative objective to shareholder wealth maximisation. It compares and contrasts the two objectives and explores their implications for financial decision making. It also examines the relationship between profit maximisation and shareholder wealth.
Keywords
The key terms and concepts explored in this assignment include: corporate chief executive, shareholder wealth maximisation, profit maximisation, stakeholder interests, strategic decision making, organizational structure, easyJet, financial performance, return on equity, share price, and risk management.
- Quote paper
- Janine Paul (Author), 2007, Which Goal should be followed by a Corporate Executive?, Munich, GRIN Verlag, https://www.grin.com/document/92274
