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
1 Introduction
2 Discussion
2.1 Shareholder wealth maximisation
2.2 Profit maximisation
2.3 Sales maximisation
2.4 Social Responsibility
2.5 Survival
3 Conclusion
Objective and Thematic Focus
This paper examines the fundamental corporate goals a Chief Executive must balance to ensure successful company development, using easyJet plc as a practical case study to evaluate the priority of these objectives.
- Theoretical analysis of five core corporate objectives
- Evaluation of shareholder wealth vs. profit and sales maximization
- Examination of social responsibility and corporate survival
- Practical application of management theory to low-cost airline operations
Excerpt from the book
2.1 Shareholder wealth maximisation
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). Van Horne et al. (2005) support that only through consideration of various stakeholders the final goal of wealth maximisation can be reached.
Summary of Chapters
1 Introduction: Introduces the role of the Chief Executive and sets the scope for evaluating corporate objectives within the context of easyJet plc.
2 Discussion: Provides a detailed analysis of five primary business objectives: shareholder wealth, profit, sales, social responsibility, and survival.
3 Conclusion: Synthesizes the findings, arguing that while objectives are interdependent, shareholder wealth remains the primary priority followed by sales and profit growth.
Keywords
Corporate Chief Executive, Shareholder Wealth Maximisation, Profit Maximisation, Sales Maximisation, Social Responsibility, Survival, easyJet plc, Strategic Management, Corporate Governance, Financial Returns, Stakeholder Interests, Business Objectives.
Frequently Asked Questions
What is the core subject of this paper?
The paper explores the diverse and often competing goals that a corporate Chief Executive must pursue, focusing on how these goals are prioritized within a business structure.
What are the primary thematic areas covered?
The text covers shareholder wealth maximisation, profit and sales maximisation, corporate social responsibility, and the necessity of business survival.
What is the primary objective of this research?
The goal is to determine the hierarchy of objectives for a Chief Executive, using the theory of firm performance applied to the specific business model of easyJet.
Which scientific methodology is employed?
The work utilizes a theoretical literature review combined with a practical case study analysis, referencing financial reports and management theory.
What does the main body of the text discuss?
The main body examines the definitions, theoretical underpinnings, and practical implications of five key business goals, including specific performance data from easyJet.
How are the keywords defined?
The keywords highlight the intersection of financial management, strategic leadership, and the specific operational context of the airline industry.
How does easyJet specifically approach shareholder wealth?
EasyJet prioritizes shareholder wealth by focusing on returns on equity and reinvesting profits into fleet expansion rather than immediate dividend payouts.
Why is social responsibility considered a subordinate goal in this text?
While social responsibility is deemed important for long-term viability and ethical standards, the text argues it is secondary to the primary financial obligations to the owners of the company.
- Quote paper
- Janine Paul (Author), 2007, Which Goal should be followed by a Corporate Executive?, Munich, GRIN Verlag, https://www.grin.com/document/92274
