Companies have to make profits but it is easier said than done. In this contemporary world, both companies and societies are connected, therefore the success of both is dependent on mutual support. Business is interlinked with a lot of stakeholders. In order words, a company has a lot of responsibilities towards society. Now the question is that what is the impact of these social responsibilities on the success of the company? Companies that take into account their stakeholders will get huge benefits. As making profit is everyone’s priority, stakeholders have to agree what their financial manager will think of. Let us know about the ‘Stakeholders Agree On The Same Goal For The Financial Manager’.
Stakeholders
These days, the stakeholders as well as the companies work together to provide maximum benefit to the company. The organizations aim to create an environment that promotes ethical behaviors. In this regard, building healthy relationships are the bedrock of corporate profit-making and sustainability in today’s world. So, companies having multiple stakeholders earn more profit as compared to those who have less. As per recent research, the reputation of a company is dependent on making trusting relationships with suppliers and community members.
So, continue reading this article if you want to know the reasons that compel the stakeholders to agree on the same goals as that of a financial manager.
Reasons why Stakeholders Agree On The Same Goal Of The FM
To get Stabilise cash flows
Earning profit holds paramount importance for businesses. The moment the firm chooses its productive assets; it starts to raise money to stimulate its growth. In this regard, taking good financial decisions is very important for the firm. As the managers gain and manage their finances, they take pragmatic decision to support their productive assets. After the company buys the assets, the financial managers try to make the product at the lowest possible price without compromising on quality. This benefits the company. So, here the stakeholders agree on the goal of the financial manager.
To gain huge returns
The main goal of the financial manager is to work hard enough so that they can get the highest value for the assets of the company. If the company is publically owned, then it means maintaining the highest profit per stock in the company. Therefore, the general profit the company earns, the higher the shares of the stockholders in it. In this regard, financial managers make sure that the company gets maximum returns so that it can benefit the shareholders.
To promote growth of the company
The financial manager intents to enhance the value of the company over time. They do this by formulating a plan and then implementing it accordingly. So, those shareholders, that have an interest in the profit of the company, have to agree with all the financial policies of the manager. As self-interest becomes their best interest that they can’t ignore.
To maximize profit
If the company wants to maximize its profit, then it involves exploring new areas of interest, having a competitor, or delivering new services. This can also involve discussions with the shareholders so that they can invest more in the new plans of the company. So, when a company decides to increase its shareholders, each of them will try to become part of that, provided of course if the profits are high. So, inorder to secure their interest, they have to agree with the goals of managers.
To minimize cost
When the manager examines the spending of the company, the manager finds new ways with the help of which they can minimize the cost of doing business. This can be done in manufacturing and distribution costs as well. They then communicate with their team members and shareholders to share their perspectives. The lower the cost of production, the greater the benefit the company and shareholders get.
To avoid bankruptcy
The financial manager tries to save the company from bankruptcy. This means that the company continues to carry out its operations without taking any loans. Gaining profit means sharing it equally among the members. This will ultimately benefit everyone who has a share in the company.
To Impart positive social impact
Social impact is the effect the company has on the community and the world at large. For instance, a leader may opt to use recycled bags only. So when the manager keeps into consider the nature as well, they get the maximum customers. So, all the people such as customers, employees, leaders, or investors have an interest in the social impact. None of them would like to compromise their reputation.
To prioritize employee happiness
Happiness means showing concern for the employee. Most people cherish working at a workplace where they can feel people safe. So, the satisfaction of the employees is the top priority of many shareholders and financial managers as this leads to fruitful results and stronger business because happier workers give their best to increase the value of the company. This will benefit both shareholders as well as financial managers.
To give health and safety
Yet another common concern of the employees is the health and safety of the environment in which they are working. They want to work in a place where there are little to no chances of injury. Moreover, it is in the interest of the customers too. In short, the happier the customers, the more returns for the financial managers and the stakeholders.
To provides Job security
When employees look for jobs, they want job security first, even their families want this too. So, if a business makes those strategies that indirectly impact the job security of the employees, then it can’t long run as the workers continue to leave the spaces. Business leaders also look for the same. They want a healthy environment for themselves as well as the company. So, the interests of the stakeholders are dependent on the job security of the employees.
Conclusion
Gone are those days when considering the interest of the public was the top most priorities of the companies. Nowadays, Stakeholders agree on the same goal for the financial manager because they hold paramount importance in maintaining the financial health of the company. While identifying the stakeholders is important, their point of interest is getting the same as that of financial managers. As the well-being of the company is dependent on multiple factors, the satisfaction of all the players is significant. That is why shareholders and managers share similar goals now.
Frequently asked questions
1. What is the main responsibility of the financial manager?
The main task of the financial manager is to give maximum profit to the shareholder which is the stock price in the case of public companies and the market value of the equity of the owner in terms of private companies.
2. Are managers and shareholders always have the same goal?
Yes, because the goals of the managers and the shareholders are the same. They may not always align but in the corporate world, getting maximum profit has become the top priority for everyone. Now they both have the same goals.
3. Are shareholders and managers the same?
Shareholders are those who have bested interests in the company. They get the benefit not only from the stock price appreciation but also from the dividend payments of the company. On the contrary, managers work on the behalf of the shareholders and manage the company on regular basis.
