What Is the Main Goal of a Publicly-Owned Company?

by Neil Kokemuller Google

The main goal of virtually every publicly-owned company has always been to maximize shareholder value by generating as much profit as possible. However, many companies have begun to balance this primary objective with other social and environmental goals that help appease stakeholders and help produce those profits.

Shareholder Value

Maximizing shareholder value means essentially the same thing within a publicly-owned corporation as a sole proprietor operating a business on his own with a goal of making as much income as possible. Shareholders are part owners in a public corporation, and they invest in the company to make money on growth in share price and/or dividends. Company leaders must generally satisfy shareholder desire for profits to maintain and grow share price and company value.

Corporate Social Responsibility

While arguing against making profits as the primary goal of a publicly-owned company is difficult, pointing out that many public companies now balance that objective with renewed emphasis on social objectives is fair. Corporate social responsibility (CSR) has evolved significantly in the early 21st century. In the mid-20th century, CSR meant making money for shareholders. It now means balancing profits with social obligations to customers, communities, partners and employees, along with meeting environmental expectations.

Coinciding Goals

Though some public companies have social and environmental commitments within their missions and corporate governance standards, social objectives typically align with the objective of making money. The change is that companies generally recognize that the backlash from the public and consumer watch groups for failing to comply with informal social and environmental expectations can have negative effects on profitability. Thus, many public companies have made profits and social responsibilities mutually important goals.

Stakeholder Goals

The point of CSR is that shareholders are not the only stakeholder interested in a public company's well-being. Customers want to buy from ethical and honest companies. Communities want to feel like companies care about the people from whom they derive income. Employees want to feel valued by the companies they work for. Business partners want to work with companies that have similar ethical values and vision. Each of these stakeholder goals generally shares the focus of company boards and leaders with shareholder profits. Without care for these core stakeholders, long-term profits could be in jeopardy.

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