An empirical investigation of the goals of listed firms on the Johannesburg Stock Exchange

Bosch, Johan K.; Du Plessis, Alwyn P. A icle An empi ical in es iga ion o he goals o lis ed i ms on he Johannesbu g S ock Exchange Sou h A ican Jou nal o Business Managemen P o ided in Coope a ion wi h: Uni e si y o S ellenbosch Business School (USB), Bell ille, Sou h A ica Sugges ed Ci a ion: Bosch, Johan K.; Du Plessis, Alwyn P. (1982) : An empi ical in es iga ion o he goals o lis ed i ms on he Johannesbu g S ock Exchange, Sou h A ican Jou nal o Business Managemen , ISSN 2078-5976, A ican Online Scien i ic In o ma ion Sys ems (AOSIS), Cape Town, Vol. 13, Iss. 2, pp. 76-88, h ps://doi.o g/10.4102/sajbm. 13i2.1177 This Ve sion is a ailable a : h ps://hdl.handle.ne /10419/217797 S anda d-Nu zungsbedingungen: Die Dokumen e au EconS o dü en zu eigenen wissenscha lichen Zwecken und zum P i a geb auch gespeiche und kopie we den. Sie dü en die Dokumen e nich ü ö en liche ode komme zielle Zwecke e iel äl igen, ö en lich auss ellen, ö en lich zugänglich machen, e eiben ode ande wei ig nu zen. So e n die Ve asse die Dokumen e un e Open-Con en -Lizenzen (insbesonde e CC-Lizenzen) zu Ve ügung ges ell haben soll en, gel en abweichend on diesen Nu zungsbedingungen die in de do genann en Lizenz gewäh en Nu zungs ech e. Te ms o use: Documen s in EconS o may be sa ed and copied o you pe sonal and schola ly pu poses. You a e no o copy documen s o public o comme cial pu poses, o exhibi he documen s publicly, o make hem publicly a ailable on he in e ne , o o dis ibu e o o he wise use he documen s in public. I he documen s ha e been made a ailable unde an Open Con en Licence (especially C ea i e Commons Licences), you may exe cise u he usage igh s as speci ied in he indica ed licence. h ps://c ea i ecommons.o g/licenses/by/4.0/ An empi ical in es iga ion o he goals o lis ed i ms on he Johannesbu g S ock Exchange Johan K Bosch Depa men o Business Economics, Uni e si y o Po Elizabe h Alwyn P. du Plessis Po Elizabe h Technikon In economics and inance i is o en assumed ha i ms me e- ly seek he maximiza ion o sha eholde weal h. In o de o es his hypo hesis an empi ical in es iga ion on he goal s uc u e o i ms lis ed on he Johannesbu g S ock Exchange was pe o med wi h special e e ence o he ela i e impo - ance o he concep o sha eholde weal h maximiza ion and social esponsibili y o he i m. The esponses indica ed ha he weal h maximiza ion hypo hesis es ed in his su ey appea s o be applicable o he i ms which pa icipa ed, albei no always in e ms o all he possible pa ame e s o he weal h maximiza ion hypo hesis. S. A . J. Bus. Mgm . 1982, 13: 76-88 In die ekonomie asook in die inansiele eo ie wo d dikwels aan aa da onde nemings slegs op die maksime ing an aandeelhoue swel aa ge ig is. Om hie die hipo ese e oe s is 'n empi iese onde soek an die doels uk uu an geno ee de onde nemings op die Johannesbu gse E ek e- beu s ui ge oe . Spesiale aandag is gegee aan die ela iewe belang ikheid an die beg ippe an maksime ing an aandeelhoue swel aa , asook aan die maa skaplike e an - woo delikheid an onde nemings. Die esul a e an hie die onde soek be es ig die hipo ese an die maksime ing an aandeelhoue swel aa i die deel- nemende onde nemings, alhoewel nie al yd in e me an al die moon like pa ame e s an die e mo!nsmaksime ingshipo ese nie. S.·A . Tydsk . Bed y sl. 1982, 13: 76-88 Financial suppon o he empi ical su ey g an ed by he Human Sciences Resea ch Council. ldess ai ed and conclusions made a e hose o he au ho s and no o he Human Sciences Resea ch Council. D . l,l, llolCII• Depa men o Business Ec:onC 111ic:s, Uni e si y o Pon Elizabe h P ,0, Box. 1600, Pon Elizabe h 6000, Republic o Sou h A ica ' D . A.P. da P1e1111 ~u y-di ec o (Humani ies), Pon Elizabe h Technikon, P i a e Bag 6011, Pon Elizabe h 6000, Republic o Sou h A ica "To whom co espondence should be add essed a-i ed Au111111981; accep ed Feb ua y 1982 Much has been said and w i en on how i ms ough o ac , on whe he o no i ms ha e a social esponsibili y, and which objec i es he i ms ough o pu sue, bu e y li le has been said and li le in o ma ion gi en on how i ms ac ually do ac in p ac ice. 1•2 The ques ion o how manage s, pa icula ly p o es- sional manage s in con ol o p i a e i ms, manage hei i ms and which p ima y goals hey pu sue, is o unda- men al impo ance o hose who each in he economic sciences and mo e speci ically business economics, as well as o o he pa ies who a e in e es ed in business as such. In economics and inance, as well as in ce ain o he disciplines, i is o en assumed ha i ms me ely seek he maximiza ion o sha eholde s' weal h. In inance ex - books s a emen s like he ollowing a e qui e common: 'We adop in his book he concep ha he i m should maximize s ockholde weal h. This, in u n, implies ha he i m should maximize i s cu en s ock p ice, ... '3• P- 12 'In his book, we assume ha he objec i e o he i m is o maximize i s alue o i s sha eholde s. Value is ep esen ed by he ma ke p ice o he Company's common s ock, ... '4• pp.7 ~s 'The Goal o he Fi m is he maximiza ion o he ma ke alue o i s own common s ock - he maxi- miza ion, ha is, o he alue o he equi y owned by i s s ockholde s -subjec o wha e e con- s ain s, legal o mo al, exis in he i m's en i on- men .''· p.io Thus, in business inance li e a u e i seems ha he assump ion ha sha eholde s' weal h is o be maximized eigns sup eme. Mos ex s quali y hese s a emen s by asse ing ha i ms migh ha e o he objec i es; howe e , such quali ica ions ha e li le impac on he es o he con en s o hese books. I o he goals a e indeed p esen , his app oach may be inadequa e o simply w ong. The pu pose o he esea ch p ojec on which his a i- cle epo s, was o de e mine he p ima y goal o goals o i ms lis ed on he Johannesbu g S ock Exchange (JSE) and o es ablish he ela i e impo ance o he concep s o s?~ ~h~lde weal h maximiza ion6 and social espon- s1~1h y o he i m. The majo hypo heses hus es ed in his s udy a e he alidi y o he goals o weal h maximi- za ion and social esponsibili y. The esul s o his s udy a e o impo ance o hose who each business economics and ela ed subjec s, as a clea de ini ion o he capi alis S.A . J. Bus. lgn11 IYH2. l.1(2) impe a i e is i~al o he e y su i al o he Sou h A ican economic sys em. Scope and me hod o esea ch In de e mining he goal s uc u e o i ms, he esea ch was limi ed o. all companies lis ed on he JSE. Two con- side a ions we e pa amoun in selec ing only lis ed com- panies, namely he ac ha daily ma ke alues (p ices) o sha es cons i u e an ac ual (and use ul) pa ame e o sha eholde weal h, and secondly, he sepa a ion be ween owne ship and managemen is heo e ically he g ea es in hese i ms wi h he esul ha be e oppo uni ies exis o de e mining he social esponsibili y a i udes o he i m. In o de o ga he he ele an in o ma ion, ques ionnai es we e sen o chie execu i es o all i ms lis ed on he JSE. A comple e su ey was done and in o al 505 ques ion- nai es we e pos ed o all i ms lis ed on he JSE, add ess- ed pe sonally o ei he he managing di ec o o he chai - man o he speci ic i m. O hese, 170 usable ques ion- nai es we e ecei ed, ep esen ing a 33, 7% e u n. 8 In ad- di ion o he usable ques ionnai es, se e al le e s/memo- anda we e ecei ed explaining ce ain aspec s o he p o- blem in es iga ed. The b eakdown o he pa icipan i ms, using he S ock Exchange classi ica ion as an in- dex, appea s in Table l. Responses we e ecei ed om i ms in all sec o s, wi h Indus ial Holding/Conglome- a es heading he lis and Mining in second place. These wo sec o s a e also he la ges in e ms o he numbe o i ms pe sec o lis ed on he JSE. The ques ionnai e con ained h ee sec ions. The i s sec ion in es iga ed he goal s uc u e o he i ms, and consis ed o 26 ques ions (s a emen s) ep esen ing a a ie y o aspec s o goals and he goal s uc u e o i ms, Table 1 Dis ibu ion o pa icipa ing i ms by in- dus ial ac i i y Indus ies Numbe 07o Mining 19 11,2 Banks and inancial se ices 10 5,9 Insu ance 3 1,8 In es men us s I 0,6 P ope y 4 2,4 Indus ial holdings/Conglome a es 22 12,9 Be e ages and ho els 2 1,2 Building and cons uc ion 16 9,4 Chemicals and oils 6 3,5 Clo hing, oo wea and ex iles 6 3,5 Elec onics 2 1,2 Enginee ing 16 9,4 Fishing 3 1,8 Food 8 4,7 Fu ni u e and household 3 1,8 Mo o 10 5,9 Pape and packaging 8 4,7 Pha maceu ic and medical 3 1,8 P in ing and publishing 2 1,2 S eel and allied 4 2,4 S o es 14 8,2 Suga 3 1,8 Tabacco and ma ches 2 1,2 T anspo a ion 3 1,8 To al 170 100,3 77 wi h special e e ence o weal h maximiza ion and social esponsibili y, as well as he ela ion be ween hem. Mos o he ques ions we e ph ased by means o a s a emen e- ques ing he pa icipan s o selec one o i e possible e~pon_ses o each ques ion: s ongly ag ee, ag ee, unce - ain, disag ee and s ongly disag ee. In a space p o ided, execu i es we e in i ed o make addi ional w i en com- men s on each s a emen . An excep ionally good esponse o hese ques ions was ob ained. Some o hese commen s a e also epo ed. The main ad an age o he modus ope andi as desc ib- ed, is ha i is simple and di ec , hus easily unde s an- dable. Howe e , a se ious poin o c i icism may be ha he possibili y exis s ha i is no he esponden 's pe - sonal opinion ha is being es ed, bu a he his ag ee- men wi h he s a emen s pe se. Fo he sake o b e i y, 's ongly ag ee' and 'ag ee' esponses we e combined, as we e he 's ongly disag ee' and he 'disag ee' esponses, hus elimina ing he e ec o he 'unce ain' and 'non- esponses'. The second sec ion o he ques ionnai e was aimed a ga he ing pe sonal in o ma ion on execu i es hemsel es: hei posi ion in he i m, ype o educa ion/quali ica- ions, numbe o yea s aken o ob ain hese quali ica- ions and he numbe o yea s o business expe ience. The hi d sec ion can assed he opinions o execu i es on a s a emen ela ing o weal h maximiza ion as a p ima y goal. The size dis ibu ion o he pa icipan i ms in e ms o dep ecia ed book alues appea s in Table 2. Using size as a a iable, a c oss abula ion was made in o de o de e mine whe he i ms o all size-ca ego ies ag ee/dis- ag ee wi h he s a emen s posed in he ques ionnai e. Fo analy ical pu poses he esponding i ms we e a he a - bi a ily classi ied in wo g oups, namely 'small-sized' i ms wi h asse s o less han RIOO million (n = 108) and 'la ge-sized' i ms (n = 62) wi h asse s o mo e han R l 00 million. Table 2 Dis ibu ion o pa icipa ing i ms by size Size o o al asse s (books alues) Numbe 07o RI - R50m 76 44,7 R50- RIOOm 32 18,8 RIOO- R150m 20 11,8 Rl50- R200m 7 4,1 R200- R250m 12 7,1 R250m plus 23 13,5 To al 170 100 Speci ic in o ma ion on he posi ion, busi?es~ exp~- ience and quali ica ions o he esponden s 1s gi en m Tables 3, 4, 5 and 6. Table 3 indica es he posi ion o he esponden s in he i ms. Wi hou any excep ion only senio execu i es comple ed he ques ion?ai es. The a e age numbe o yea s o business exp:nence o he execu i es is 24,3 yea s (Table 4). Academic and p o es- sional quali ica ions a e summa ized in Table 5. I~ ap- pea s ha 32,3% o he esponden s hold business managemen quali ica ions as indica ed; 26,5% ha e _ac- coun ing quali ica ions; l 5,307o enginee ing/ echnical 78 Table 3 Dis ibu ion o esponden s by posi ion Posi ion o esponden s Numbe % Ca ego y 1 IOI 59,4 Chie execu i e/managing di ec o / g oup managing di ec o / op execu i e/ gene al manage / di ec o Ca ego y 2 33 19,4 Chai man/chai man and managing di ec o Ca ego y 3 14 8,2 Financial manage / inancial di ec o / senio accoun an Ca ego y 4 16 9,4 Sec e a y/ g oup sec e a y Ca ego y S 3 1,8 Co po a e planne /managemen se ices Ca ego y 6 3 1,8 Sund y: Di e en unc ional manage s, e.g. pe sonnel, ma ke ing To al 170 100 Table 4 Dis ibu ion o esponden s by yea s o business expe ience Yea s o business expe ience Numbe "lo 1-S 2 1,2 6-10 9 5,3 11 - IS 22 12,9 16-20 28 16,S 21-25 35 20,6 26-30 37 21,8 31-35 14 8,2 36-40 14 8,2 41-4S 6 3,5 46-50 2 1,2 SO+ I 0,6 To al 170 100 Table 5 Dis ibu ion o esponden s by academic quali ica ions Academic o p o essional quali ica ions Numbe "lo Business managemen quali ica ions B.Com./M.Com. plus MBA, MBL 13 7,6 B.Sc. plus MBA, MBL 13 7,6 O he business managemen quali ica ions e.g. Banke s' diplomas e c. 29 17, I Accoun ing quali ica ions Cha e ed accoun an s 33 19,4 Business managemen /accoun ing combined 12 7,1 Enginee ing/ echnical deg ees/diplomas B.Sc., echnical quali ica ions 26 IS,3 Legal quali ica ions Q.A. LLB., B.Com. LLB. 8 4,7 Deg ees in a s B.A.,M.A. 12 7,1 Ma ic only 24 14,J To al 170 100 S.-A . Tydsk . Bed y sl. 1982, 13(2) educa ion o some kind; 4, 7% ha e a legal backg ound; 7, l % a e a s g adua es, while 14, l % o he esponden s ha e no o mal e ia y educa ion. The numbe o esponden s wi h ma ic only is also con i med in Table 6 which indica es he numbe o yea s o pos -ma ic s udy. The mean is 4,81 yea s, median 5,00 yea s and he mode 6,00 yea s. Table 6 Dis ibu ion o esponden s by numbe o yea s o pos -ma ic s udy Numbe o yea s o pos -ma ic s udy Numbe "lo Nil 24 14,I 2 5 2,9 3 9 5,3 4 2S 14,7 s 34 20,0 6 36 21,2 7 12 7 ,I 8 14 8,2 9 11 6,5 To al 170 100 Toge he wi h he app op ia e heo e ical backg ound, he ollowing empi ical indings will now be discussed: i s ly, he esponse on goals o he i m in gene al, wi h special e e ence o p ima y and seconda y goals and he equi emen s ha such goals mus mee ; secondly, he e - ec o he sepa a ion o owne ship and con ol on he goal s uc u e o i ms; hi dly, he esponse ega ding he concep o weal h maximiza ion; and inally, he esponse ega ding a se ies o al e na i es o co- objec i es, such as: g ow h, maximum u no e , sa is ac- o y esul s, secu i y and sa e y, and social esponsibili y. Th oughou he discussion he iewpoin will be ha o he inancial manage , seeking an objec i e a ional goal ha can also se e as a decision-c i e ion o inancial decision-making. Ra ional decisions p esuppose well- de ined goals and be o e p oceeding wi h he analysis i is he e o e necessa y o ag ee upon he goals owa ds which inancial decisions should be aimed. The esea ch indings a e con as ed wi h compa able esea ch indings in he Uni ed S a es, pe o med by Cha les P. Edmonds III and John H. Hand. 9 ·PP 75 -si This compa ison enables he eade o d aw some in e es ing conclusions abou he opinions o some Sou h A ican and Ame ican execu i es who pa icipa ed in he su eys. Goals o he i m in gene al P ima y and seconda y goals: equi emen s ha goals mus mee Gene ally speaking, man endea ou s o conduc his a - ai s in a pu pose ul manne , ha is, he seeks o be guided by gene al goals. By he wo d 'goal' is unde s ood he basic sense o di ec ion owa ds which a g oup's ac i i ies a e di ec ed. Pe sons in a g oup con ex will main ain hei own pe sonal goals and aims, bu collec i e ac ion will be based on he goals o he g oup. The goals o he i m mus no be con used wi h he pe sonal goals o he g oup which may be highly a iable and necessa ily sub- jec i e. L S. A . J. Bus. Mgml 1982, 13(2) The basic unc ion o gene al managemen is o guide he i m o achie e i s goals. This includes de e mining he goals o he i m and modi ying hese unde he in- luence o cu en economic, social, poli ical, legal and o he p essu es. Top-managemen decisions in his ega d a e o g ea impo ance and in many espec s hey ha e in hei con ol he e y su i al o he ee en e p ise sys em in one way o ano he . A dis inc ion can be d awn be ween p ima y and seconda y goals. P ima y goals a e mainly p o i - o ien ed and will no mally always be pu sued o ensu e he su i al o he i m. Seconda y goals a e goals ha suppo o lead owa ds he achie emen o p ima y goals. P ima y goals mus mee speci ic equi emen s. Fi s ly, p ima y goals mus be au onomous, he pe manen un- al e able aison d'e e o he i m, hus a p ima y d i ing o ce. Secondly, p ima y goals mus no be a ehicle o achie ing o he goals; hey mus no be de i - ed om o he goals. In addi ion o he abo e wo e- qui emen s o p ima y goals, inance as a unc ional a ea o business economics imposes u he addi ional e- qui emen s on goals pe se. Should al e na i e cou ses o ac ion exis , he pu sued goals mus enable he decision- make o di e en ia e be ween al e na i es in e ms o hei economic- inancial desi abili y. I mus also be possible o ank al e na i es in e ms o descending economic- inancial accep abili y. Fo he pu pose o inance, a goal (o decision-c i e ion) is equi ed ha allows he decision-make o di e en ia e be ween cou ses o ac ion. This goal mus emb ace he amoun s, ime pa e ns and isk o cash lows associa ed wi h al e - na i es. Thus, he goal o inance mus also ul il he unc ion o an ope a ional decision-c i e ion, ha is, a goal which can be used as guideline in p ac ical si ua- ions. The su ey A numbe o possible goals we e lis ed in he ques ion- nai e, eques ing he esponden s o indica e whe he hey ega ded hem as p ima y o seconda y goals o hei i ms. Bo h concep s we e explained in he ques ionnai e. Table 7, pa icula ly ques ions I o 9, includes in o ma- ion on a cons ella ion o goals which ha e, a some ime o ano he , been desc ibed in he heo y o he i m as in- dica i e o he p ima y d i ing o ce o he i m. Se e al in e ences may be made om he in o ma ion con ained in Table 7, in which some o he da a o he Edmonds and Hand su ey (USA) a e also indica ed. Sou h A ican execu i es esponding o his su ey ega d P o i maximiza ion; maximizing he a e o e u n (p o- i abili y) on equi y capi al; main enance o liquidi y and sol ency; and maximiza ion o ea nings pe sha e and g ow h as p ima y objec i es, all sco ing mo e han 500/o o he esponses (ques ions 1, 4, 5, 8 and 9). I seems hen ha despi e he phenomenon ha in ce ain ci cles p o i maximiza ion has become inc easingly an unaccep able wo d, his concep o he goal o he i m canno be ig- no ed, denied o eplaced in he capi alis ic sys em. The 9 1,8% lis ing o p o i maximiza ion and 900Jo o maxi- ?1i~ng he a e o e u n on equi y capi al as p ima y ob- Jec 1 es a e he e o e well in line wi h he basic Philosophy o he ee en e p ise sys em. Al hough highly 79 ambiguous and subjec o se ious c i icism, ea nings pe sha e (79,40Jo a ing as a p ima y objec i e) can be judged as a e lec ion o he consequences o p o i and a e o e u n maximiza ion. The high ankings o liquidi y and sol ency (84, I%) and g ow h (68,20/o) as p ima y goals we e no expec ed because hey do no seem o mee he equi emen s o au onomous goals. Ques ion 3, e e ing o maximizing he ma ke p ice pe sha e - a possible pa ame e o he weal h maximiza ion goal - was lis ed by only 31,80/o o he execu i es as a p ima y goal. A possible eason o his low sco e may be a misunde - s anding o di e en in e p e a ion o he meaning o he concep o weal h maximiza ion. Compa ing he Sou h A ican da a on he i s se en ques ions wi h hose o he Edmonds and Hand su ey, a o ally di e en anking o p ima y objec i es is ound, pa icula ly on maximizing ma ke p ice pe sha e, social esponsibili y and a good company image. In he Edmonds and Hand su ey, ob- jec i es such as maximizing he ma ke p ice pe sha e (67%), social esponsibili y (73,30Jo), a good company image (72,30/o ), p o i maximiza ion (83, 70Jo ), a e o e u n maximiza ion (95, 70/o) and con inui y (84,20Jo ), we e all lis ed as p ima y d i ing o ces o he i m. The only excep ion was maximum u no e -only 18,70Jo deemed sales maximiza ion a p ima y goal. Wi h size as an independen a iable, a c oss- abula ion was done in o de o asce ain i he e we e any di e ences be ween he answe s o execu i es o small-sized and la ge-sized i ms. Excep o he endency ha execu i es in la ge-sized i ms place mo e emphasis on ma ke p ice pe sha e as a p ima y goal, no o he signi ican conclusions could be d awn. In he ques ionnai e space was le open o he lis ing o any 'o he ' p ima y o seconda y goals. As seconda y 'o he ' goals, mos execu i es e e ed o he human side o he i m, s essing he necessi y o sound labou ela- ions. P ima y 'o he ' goals included philosophies ela ing o he possibili ies o ea ning p o i s. The ollowing esponses we e ypical o p ima y 'o he ' goals (ques ion 10): To es ablish a sound base in he basic ... indus y om which he g oup can g ow. (Speci ic indus y dele ed.) Speci ied minimum e u n on sha eholde s' unds and balancing isk and e u n. G ow h in ea nings pe sha e is a p ima y goal, o he g ow h goals a e seconda y. A eal g ow h in di idends o a leas equal he g ow h in GNP o he ... sec o . Achie emen o a speci ied gea ing a io and o e- main independen . Lowes cos compe i o ; ma ke dominance. G ow h by me ge and addi ions o p oduc ange. P oduc a ionaliza ion. To imp o e ange and p o- i abili y. . Maximizing he e u n o sha eholde s, ha 1s capi al app ecia ion o sha es plus di idend payou s o e he long e m. -Maximizing he e u n on o al asse s. The ollowing esponses we e ypical o seconda y 'o he ' goals: . . . -Re en ion o s a , ia compensa wn. mo 1 a 1on, con inuing educa ion and a ac i e en i onmen . - S.-A . Tydsk . Bed y sl. 1982, 13(2) 80 . · 9 o he goals o a numbe o lis ed Sou h A ican companies e sus Uni ed Table 7 A compa a 1 e a in . S a es co po a ions as s a ed by senio o op execu i es Sou h A ican su ey1 be "bl goals o a i m A one ime o ano he each o hose lis ed in Ag ee Lis ed below a e a num o poss, e ·. . 1 ques ions I - 9 has been desc ibed as a p ima y goa l /o 1. P o i maximiza ion (lowes cos s/inpu s; highes e enue/ou pu ) 91,8 2. Maximum u no e 3. Maximizing ma ke p ice pe sha e 4. Maximizing he a e o e u n on equi y capi al s. Main enance o liquidi y and sol ency (in o de o main ain con inui y and su i al) 6. Social esponsibili y 7. A good company image 8. Maximiza ion o ea nings pe sha e 9. G ow h as a goal (example: g ow h in ma ke sha e, sales olume, o al asse s, ea nings pe sha e, ... ) 10. O he possible goals (see ex ) 11. In cases whe e he e a e mul iple objec i es, do you ag ee/disag ee ha i ms can achie e all o hem in he decision-making in he long un? 12. The success o a i m mus no be judged in e ms o maximizing esul s, bu a he 'sa is ac o y' esul s. The opinion exis s ha 'sa is ac o y' esul s (e.g. 'sa is ac o y' a ge a e o e u n, p o i s, ... ) a e mo e ypical o a i m's beha iou han maximum esul s (maximum esul s such as maxi- mum a e o e u n, p o i s •... ) 13. A dis inc ion can be d awn be ween owne -con olled and manage -con olled i ms. The phenome- non o 'capi alism wi hou capi alis s' has come in o being. Do you ag ee/disag ee ha in he sho un ac ions o (p o essional) managemen may come in o con lic wi h he wishes o sha eholde s? 14. Fo he i m(s) o which you ha e had pe sonal expe ience, do you ag ee/disag ee ha 'maximiza ion o sha eholde s weal h' is desc ip i e o hei p ima y long- un objec i e? IS. The managemen o mos i ms is eluc an o emphasize p o i and weal h maximiza ion publicly. 16. I is a gued ha p o i maximiza ion is a shon- e m app oach and ha ' he desi e o secu e p o i s' is an impo an long- e m objec i e. Explana ion: 'secu e p o i s': p o i s ha can be achie ed wi h a minimum o business and inancial isk. 17. The g ow h o i ms is imponan o managemen because he eby he membe s o managemen gain p es ige, pe sonal sa is ac ion om he success ul g ow h o he i m wi h which hey a e con- nec ed, mo e esponsible and be e paid posi ions, and wide scope o hei ambi ions and abili ies. 18. The goal o he i m is he maximiza ion o he ma ke alue o i s own o dina y sha es, subjec o wha e e cons ain s, legal o mo al, exis in he i m's en i onmen . 19. The i m and i s manage s a e, a e all, subjec o he same mo al codes which con ol all he o he ac i i ies o socie y. The law equi es ce ain hings o us. Bu beyond his lies he e hical, which, in he eal sense, ills he gap be ween he law and he ac ual decisions aken by managemen , i s ac ual beha iou . And in his a ea managemen is guided by i s own sense o igh and w ong. Concei ed o in his way, he i m, in mee ing social obliga ions, allows a conside able measu e o manage ial 2S,9 31,8 90,0 84,1 16,S 42,9 79,4 68,2 14,7 86,4 SS,3 71,8 78,3 42,3 60,6 84,1 Sl,2 disc e ion. 90,6 The ollowing s a emen s desc ibe he possible ela ionship be ween he objec i es o weal h maximi- za ion o sha eholde s and he objec i e o being socially esponsible. Indica e whe he you ag ee o disag ee wi h each s a emen . 20. The objec i es o weal h maximiza ion and social esponsibili y a e basically con adic o y 21. Social esponsibili y is simply ano he p e equisi e ha managemen mus conside in ying o sa is y he weal h maximiza ion objec i e 22. Social esponsibili y and weal h maximiza ion a e among many objec i es ha managemen pu sues 23. Owing .o inc eased emphasis on mo al and social esponsibili y, managemen now places less emphasis on s ockholde weal h han i did, say, en yea s ago 24. I ~ou i m we e o. a oid i s social esponsibili y, such a s ep would lead o he ailu e o you i m ( a lu e - dec ease m u no e , a e o e u n, e c.). Do you ag ee/disag ee wi h his s a emen ? 1 As pe o med by he au ho s as desc ibed. 16,S 76,S 83,S 27,7 37,6 Disag ee 07o S,3 6S,9 63.~ 8.2 11,8 79,4 S3,S 17,6 28,8 8,8 7,7 36,4 21,2 IS,9 49,4 32,9 11,2 37,0 3,5 78,2 19,4 10,6 61,2 so.o Uni ed S a es su ey 2 Ag ee Disag ee 1170 'To 83,7 10,1 18,7 70,4 67,0 18,6 9S,7 1,0 84,2 7,6 73,3 16,2 72,3 14,4 • • • • • • • • • • • • 61,8 29,7 37,8 49,8 • • • • • • • • 9,S 80,9 70,8 16,8 87,5 6,6 44,5 44,0 • • - 2 Cha les P. Edmonds and John H. Hand, 'Wha a e he Real Long- un Objec i es o Business?', Business Ho izons, Vol. 19, Dec. 1976 • p.7'. 1 Compa able ques ions no se by Edmonds and Hand. s. A . J. Bus. Mgm 1982. 13(2) To a ac and e ain op-class managemen . To main ain con inued ad ancemen and educa ion o s a o build s abili y. To p omo e he u u e secu i y o all employees. Sound labou ela ions. Fai dealings wi h cus ome s, supplie s and con- sume s. Many execu i es conside ed ques ions I, 3, 4, and 8 o Table 7 o be synonymous. Based on he answe s o ques- ions I o 10 and mo e pa icula ly on he commen s o execu i es on each ques ion, i seems ha p ima y and seconda y goals can change depending on he ci - cums ances in which a company inds i sel wo king a any ime du ing i s li e. Some execu i es see main enance o liquidi y and sol ency, social esponsibili y and a good company image as being p ima y goals a all imes ... bu whe he he maximiza ion o he a e o e u n on equi y capi al o g ow h as a goal should be a p ima y o seconda y objec i e can depend e y much on ci - cums ances. Fo example, wi h he launching o a new p oduc o a new p oduc line, o a he ime o he in- oduc ion o a p oduc in o he ma ke , g ow h could be a p ime objec i e as a means o es ablishing ei he he new p oduc o he company in a new ma ke ; o , al e - na i ely, he possibili y exis s ha he i m's main con- side a ion could be o maximize he a e o e u n on equi y, e en i i encoun e s a educ ion in g ow h, u n- o e and p o i maximiza ion. On he basis o he in o ma ion ob ained om ques- ions 1 o IO only, no conclusion could be eached on he alidi y o he weal h-maximiza ion hypo hesis (ques ion 3) as a p ima y goal o he i m. In o de o asce ain whe he mul iple goals could be in con lic wi h each o he , ques ion 11 was included in he ques ionnai e. Mo e han 86% o he execu i es ag eed ha in cases o mul iple objec i es, i ms can s ill a end o all o hem in he decision-making p ocess in he long un. Only 7, 7% o he execu i es did no sha e his opi- nion. Typical esponses o execu i es ag eeing wi h he s a e- men we e as ollows: Con lic be ween objec i es can a ise and hese should no be se independen ly o each o he . P o ided a p ime aim is chosen subjec o accep able cons ain s o o he s, e.g. maximize p o i s subjec o wage policy cons ain s. T ade-o s o be ound. Many objec i es lead om one o he o he and an e ec i e o ganiza ion can ealize mul iple objec- i es. The sepa a ion o owne ship and con ol and I s Im· pllca lons on he goal s uc u e o i ms Du ing he ee capi alis ic e a (up o ci ca 1870) he p o- ision o capi al (owne ship) and he managemen o i ms we e exclusi ely cen ed in he hands o he same pe son. The in e es s o owne s and managemen we e he same, undamen ally aimed a p o i -maximiza ion. E en a p esen i is o en assumed ha i ms ope a e solely o he bene i o hei owne s. This s a emen may apply in he case o sole p op ie o ships and pa ne - ships, bu since abou 1875 wi h he ise o la ge-scale in- ~us y and he me ging o i ms, as well as he inc easing impo ance o he company as a o m o business en e - L __________________ _ 81 p ise, signi ican changes ha e occu ed in his domain. An inc easing sepa a ion o managemen and owne ship has occu ed in he capi alis ic sys em -one o he mos impo an de elopmen s in he his o y o he capi alis ic sys em. Whe eas he p o ision o capi al and manage- men had p e iously been uni ed in he hands o he same indi idual, he si ua ion has now changed in ha a g oup o p o essional manage s ha e eme ged, whose posi ion is no de e mined by owne ship and whose mo i es and incen i es a e o en no he same as hose o he classical en ep eneu . 10 A dis inc ion can hus be made be ween owne -con olled and manage -con olled i ms. The consequences o he sepa a ion o owne ship and managemen a e a eaching. The indi idual owne s (sha eholde s) do no in e e e wi h he daily manage- men o he i m. No longe do he eal owne s se he goals and policies o manage -con olled i ms - his is done by hi ed p o essional manage s who a e no necessa ily sha eholde s o join p op ie o s. The esul o his sepa a ion o owne ship and managemen is ha he supplie s o he isk-bea ing capi al ha e los hei in- luence on he goals o he i ms and hey a e playing an inc easingly passi e ole. Some sha eholde s e ec a link wi h he i m only when hey expec di idend paymen s. The ques ion has o en been posed whe he p o es- sional managemen pu sues policies which a e in line o a odds wi h he in e es s o sha eholde s. Two un- damen al iews can be epo ed: one based on possible con lic be ween he pa ies, and he o he on uni o mi y and simila i y o in e es s. Depending on he ex en o hei in luence on sha e- holde s and he o m o ma ke s wi hin which hei i ms ope a e, p o essional manage s may pu sue goals which may no be in he bes in e es o sha eholde s. Be le and Means ques ioned his complica ion nea ly i y yea s ago: 'Bu ha e we any jus i ica ion o assuming ha hose in con ol o a mode n co po a ion will also choose o ope a e in he in e es o he s ock- holde s? The answe o his ques ion will depend on he deg ee o which he sel -in e es o hose in con- ol may un pa allel o he in e es o he owne - ship and, in so a as hey di e , on he checks o he use o powe which may be es ablished by poli i- cal, economic, o social condi ions. 11 ·PP 113 - 114 Be le and Means belie e when owne ship is sepa a ed om con ol, he sha eholde s ' ... ha e su en- de ed he igh ha he co po a ion should be ope- a ed in hei sole in e es .. .' 1 1.piii-ii 2 No only mus he i m be managed in he bes in e es o hose who a e in con ol bu also in he in e es o he communi y a la ge. 11 ·P· 312 : io.pp.s-io Wi h ega d o he phenomenon o manage -con olled i ms and he possibili y o a clash o in e es wi h he sha eholde s, Reid es ed he ollowing hypo hesis: 'The mo e ac i ely ha la ge, publicly held i ms me ge, he mo e hey end o be o ien ed o u he - ing manage s' in e es s a he han s ockholde s' in- e es s.' 12 • P· 1 54 Reid ound in gene al ' . . . ha hose i ms which me ge end o be mo e o ien ed o manage s' in e es s han o s ockholde s' in e es s -appea s o ha e been ue o la ge Ame ican in- dus ial i ms .. .' 12 • P· 168 82 Reid 13 • P- 48 ques ions whe he ex e nal g ow h is he bes me hod o g ow h and main ains ha some me ge s a e no made o economic easons, bu me ely o sa is y he ego o an indi idual manage - o e en o help an in- compe en manage o keep his job by con using s ock- holde s. In con as o he opinions o Be le and Means, and he empi ical indings o Reid, We kema 14 • pp.ss-6& a gues ha he bes in e es s o p o essional managemen may no necessa ily be in con lic wi h he wishes o sha eholde s. Acco ding o We kema a g oup o p o essional manage s may use mo e objec i e da a and c i e ia in he decision- making p ocess han would indi iduals. The e o e, a gues We kema, i would be mo e di icul o in- di idual membe s o a g oup o allow pe sonal p e e ences o play a pa in he managemen p ocess. Such pe sonal p e e ences will emain in he backg ound. When a g oup o p o essional manage s akes decisions, one o he equi emen s is ha a measu able goal mus be pu sued. Wi h ce ain excep ions hen, p o essional manage s will ake decisions which a e in he bes in- e es s o he i m and i s owne s, because hey do no wan o endange hei ca ee s. Thei ac ions will he e- o e be maximizing, iden i ied by he pu sui o maxi- mum p o i s in he long un. Should he hesis be ac- cep ed ha he in e es s o managemen and sha eholde s a e complemen a y, managemen can be expec ed o seek he in e es o sha eholde s and ac acco dingly. Whe he his applies in all ci cums ances, s ill emains an open ques ion. The sepa a ion o owne ship and managemen in he capi alis ic sys em has also coincided wi h he uni ica ion o labou e s in ade unions, who he eby ob ained a g ea e oice in a ious ma e s ega ding he in e nal a - ai s o he i m. The usion o labou e s in ade unions, he emancipa ing Ch is ian, humanis ic, and social a - i udes, and changing philosophies owa d li e, oge he wi h he sepa a ion o owne ship and managemen , ha e di ec ed a shi om he i m's pu e economic esponsi- bili y o a mo e social esponsibili y. I may jus ly be claimed ha an e olu ion om he i m's p o i goal o a social goal has occu ed, ma king he appea ance o a new managemen ideology. 'In his ideology', Solomon a gues, ' he owne - manage o he classical sys em, in e es ed solely in his own gain, has been eplaced by he p o essional manage who se es as us ee, no only o owne s bu !o all pa ies connec ed wi h he en e p ise, in- cludmg employees, cus ome s, supplie s, c edi o s, he go e nmen , he gene al public, and manage- men i sel . In his newe ideology, p o i -maximi- za ion is ega ded as un ealis ic, di icul , inapp o- p ia e, and immo al. In i s place we ha e a cons el- la ion o objec i es including se ice, su i al, sales, pe sonal sa is ac ion, and sa is ac o y p o- i s. Businessmen who occasionally lapse in o alk abou p o i -maximiza ion a e chas ised o i .' 15, p.16 .Wi h he abo e changes in he capi alis ic sys em in mind, s a emen s 13 and IS we e es ed as shown in Table 7. S a emen 13 was o mula ed as ollows: 'A dis inc ion can be d awn be ween owne -con olled and manage - con olled i ms. The phenomenon o "capi alism S.-A . Tydsk . Bed y sl. 1982, 13(2) wi hou capi alis s" has come in o being. Do you ag ee/disag ee ha in he sho un ac ions o (p o essio- nal) managemen may come in o con lic wi h he wishes o sha eholde s'? App oxima ely 72% o all esponden s said ha in he sho un he e may be a con lic in in- e es s be ween p o essional managemen and sha e- holde s. The posi ion is qui e di e en in he long un. The e a e easons o belie e ha p o essional manage- men is no ee o ac in an en i ely disc e iona y way. Taking he pe sonal commen s in o accoun , i seems ha in he long un manage s do iden i y wi h he wishes o he b oad spec um o sha eholde s, al hough o an unag eed ex en . Compa able da a we e no gi en by he Edmonds and Hand su ey. Since he p o i concep and p o i -maximiza ion seem o ha e come unde a ack inc easingly in ecen yea s, s a emen 15 es ed opinions on i ms' disclosu e o p o- i s and weal h. App oxima ely 42% o he execu i es ag eed ha he managemen o mos i ms is eluc an o emphasize p o i and weal h maximiza ion publicly, 49,4% disag eed and 8,3% we e unce ain. A c oss- abu- la ion o his s a emen , using size as an independen a iable, indica ed ha i was mos ly small-sized i ms which endo sed his s a emen ( ha is i ms wi h asse s o less han RlOO million). Simila esponses we e epo ed in he Edmonds and Hand su ey: 37 ,8% o he pa - icipan s ag eed and 49,8% disag eed ha he manage- men o mos i ms is eluc an o emphasize p o i publicly. A gumen s suppo ing disag ee esponses, we e he ollowing: The e is a endency o e e o 'ea nings' a he han 'p o i '. Mos public companies seem qui e happy o boas abou p o i inc eases ei he in hei annual epo o media announcemen s. Such managemen does no achie e i s a ge s. Those who ag eed wi h he s a emen p oduced a gumen s like he ollowing: 'P o i ' can be an emo ional wo d, usually de oga o y. No mal accoun ing con en ions do no e en de ine p o i . Wha is p o i ? His o ical e sus eplacemen cos a gumen . Capi alism has de eloped a guil complex. Weal h maximiza ion as a goal The majo hypo hesis unde lying his esea ch - he assump ion ha sha eholde s' weal h maximiza ion is ep esen a i e o he goal o he i m -may, acco ding o Le y and Sa na 6• PP-526 -528 be al e na i ely o mula ed as ei he (a) he maximiza ion o sha e p ices; o (b) he maximiza ion o he alue o he equi y; o (c) he maxi· miza ion o he i m's o al ma ke alue. Using Le y and Sa na 's al e na i e o mula ion o he weal h maximiza· ion goal as a basis, ques ions based on he al e na i e ap- p oaches we e included in he ques ionnai e by means o s a emen s 3, 14, 18 and, o a lesse ex en , s a emen 4. Ques ion 3, a possible pa ame e o he weal h maximi- za ion hypo hesis, can assed he opinions o he espon· den s on whe he maximiza ion o he ma ke p ice pe sha e can be lis ed as a p ima y goal. O he Sou h A i- can execu i es who pa icipa ed, only 31,80/o ega ded maximiza ion o ma ke alues as a p ima y goal; 63,SO o S. A . J. Bus. Mgml 1982, 13(2) disag eed, hus a ing i as a seconda y goal. On his ques ion he e is no ag eemen wha soe e be ween he answe s o he Sou h A ican execu i es and hose epo ed by Edmonds and Hand. Six y-se en pe cen o he Edmonds and Hand esponden s deemed maximizing o ma ke p ice pe sha e o be a p ima y goal; only 18,60' o disag eed. A close in es iga ion o he answe s o hese ques ions, and mo e pa icula ly o he pe sonal commen s on ques ion 3, indica es ha he Sou h A ican execu i es a e p obably no amilia wi h he al e na i e ways o exp essing he weal h maximiza ion goal - his despi e an explana ion supplied in a oo no e in he ques- ionnai e -o ha hey do no pu sue he goal o weal h maximiza ion. Al hough no an exac o mula ion o he weal h maxi- miza ion goal, he esponses o ques ion 4 - ha is, whe he he maximiza ion o he a e o e u n on equi y is a p ima y goal -we e no unexpec ed. Nine y pe cen o he Sou h A ican esponden s a ed his as a p ima y goal, while nea ly 960Jo o he execu i es who pa icipa ed in he Edmonds and Hand su ey ag eed wi h his s a e- men . In o de o es ablish whe he maximiza ion o sha e- holde s' weal h is desc ip i e o i ms' p ima y long- e m objec i es, s a emen 14 was included in he ques ion- nai e. This s a emen ecei ed he suppo o 78,3% o he Sou h A ican esponden s, wi h only 15,9% no sup- po ing he s a emen . In he Edmonds and Hand su ey, less suppo (only 61,8% in a ou ) was gi en o he weal h maximiza ion hypo hesis han in he Sou h A ican case. On balance he esponse o his s a emen , mo e pa icula ly ha o he Sou h A ican execu i es, seems o suppo qui e s ongly he p inciple o weal h maximiza ion as explained in basic inance ex books. The nex s a emen on weal h maximiza ion - he goal o he i m is he maximiza ion o he ma ke alue o i s own o dina y sha es subjec o wha e e cons ain s, legal o mo al, exis in he i m's en i onmen (s a emen 18) -did no ecei e as s ong suppo as did ques ion 14. Only 51,2% o he Sou h A ican execu i es in ques- ion endo sed his s a emen wi h a subs an ial 37% in disag eemen . I is in e es ing o no e ha mo e espon- den s we e unce ain on s a emen 18 (11,2 % ) han in he case o ques ion 14 (5,9%). No ques ion compa able o s a emen 18 was se in he Edmonds and Hand su ey. A c oss- abula ion o ques ions 14 and 18 wi h he size o he i m p oduced some in e es ing indings. The la ge he i m, he s onge he endency o app o e he Weal h maximiza ion goal. Nea ly 64% o execu i es om la ge-sized i ms ag eed wi h he weal h maximiza- ion s a emen , in con as o only 44% o execu i es om small-sized i ms. Some o he commen s o hose whose eplies o s a e- men s 14 and 18 suppo ed he hypo hesis on weal h maximiza ion (wi h p o isos) ollow: -P o ided a long- e m iew is conside ed, plus all o he applicable cons ain s. - In e ms o discoun ed cash low alues and i all Pa ies a e included. -Ou p o essional skills p oduce long- e m 'weal h'. This is a e lec ion o he pe o mance o a com- pany's managemen . - This is he basic unde s anding be ween managemen 83 and sha eholde s. Typical opinions o execu i es who disag eed wi h s a e- men s 14 and 18 we e he ollowing: We aim o p o ide sa is ac o y e u ns o sha e- holde s and o sa egua d he alue o he sha e- holde s' in e es in he long e m. No a goal, bu a consequence o he success ul pu - sui o many objec i es. The company does i s le el bes o make p o i s; he ma ke judges he esul s o he company and es ablishes a sha e p ice. Judging by he esponses o and commen s on ques- ions 3, 4, 14 and 18, i appea s ha he weal h maximiza- ion hypo hesis conside ed in his su ey is applicable o lis ed i ms on he JSE which pa icipa ed in he su ey. G ow h as a goal In ecen imes i has o en been s a ed ha manage- men 's p ime unc ion is he maximiza ion o he physical size o he i m ins ead o p o i s and sha eholde s' weal h. G ow h as a goal may be exp essed in e ms o ma ke sha e, inc eased economic powe , o in absolu e mone a y e ms (such as he alue o ixed asse s, o al asse s, o al ne income, ea nings pe sha e, o size o e- ained p o i s). In esponse o ques ion 9, 68,2% o he execu i es a ed g ow h as a p ima y goal, bu he g ow h o i ms is also impo an om a managemen angle. Opinions on he g ow h goal we e u he es ed by means o s a e- men 17: 'The g ow h o i ms is impo an o manage- men because he eby membe s o managemen gain p es ige, pe sonal sa is ac ion om he success ul g ow h o he i m wi h which hey a e connec ed, mo e esponsi- ble and be e paid posi ions, and wide scope o hei ambi ions and abili ies.' S ong suppo was oiced by he pa icipan s o his app oach: 84, 1 % ag eed, 11,2% disag eed and only 4, 1 % we e unce ain. The esponse om bo h small-sized and la ge-sized i ms o s a emen 17 did no e eal any signi ican a iance. Those who ag eed wi h he s a emen on g ow h as a goal commen ed as ollows: P o ided he e is g ow h in all aspec s o he business, including pe sonnel. Companies in a g oup ha e g ow h a ge s in iew o imp o ing sha eholde s' weal h. G ow h is impo an o ec ui sui able s a . Achie emen is a majo mo i a o o he majo i y o p o essional manage s. Commen om one o hose who disag eed: An execu i e's p ime aim is a sound business wi h con inued employmen o many people and no o pe sonal p es ige. No compa able in o ma ion o Uni ed S a es i ms was a ailable om he Edmonds and Hand su ey. The gene al ag eemen wi h he s a emen s on g ow h may _be explained in ha he pa icipan s in he su ey do ece1 _e mone a y and non-mone a y ewa ds should hey maxi- mize he g ow h o he i m. Howe e , aking he equi e- men s o au onomous goals in o accoun , g ow h may no be lis ed as an independen and au onomous goal, bu only as a condi ion o achie ing he p ima y p o i and weal h goals.