Assessing the Goals of Sports Products, Inc.
Establishing and monitoring goals of any organization can be a difficult task to accomplish. Assessing goals of an organization involves considering stakeholders such as owners, managers, employees, stockholders, customers, or clients of the business. Other factors also come into play such as maximizing shareholder wealth, maximizing profits, corporate governance, and ethical considerations. In the case of Sport Products, Inc. two employees, Dale and Loren, begin questioning the goals of the organization they work for. A conversation unfolds, and the reader is left with a series of questions regarding the goals of Sports Products, Inc. based upon the dialogue between Dale and Loren. Pursuing the Overriding Goal
The first question in the Sports Products, Inc. case asks “what should the management of Sports Products, Inc., pursue as its overriding goal and why?” (Gitman, 2009, p. 39). After reading over the conversation between Dale and Loren, it seems that Sports Products, Inc. is not focusing on the proper goals and should be focusing on shareholder wealth. Maximizing shareholder wealth is an action that requires financial decisions to be based on the premise that the action will increase the share price of the firm’s stock. “Because share price represents the owners’ wealth in the firm, maximizing share price will maximize owner wealth” (Gitman, 2009, p. 15). Though managers are compensated based upon the firm’s profits it seems that managers are not considering shareholder’s wealth. Managers are making financial decisions based upon their own benefit and not considering the various stakeholders of Sports Products, Inc. Agency Problems
The next issue to address is if Sports Products, Inc. has an agency problem. An agency relationship is the relationship between stockholders and management. An agency problem arises when there is a conflict of interest between the...