A goal of financial management can be to maximize shareholder wealth by paying dividends and/or causing the market value to increase.
There is one word that emerges as an operative one in this discussion. That is transparency. Financial transparency is an aspect of corporate governance that comes into play in such an integral way in the world's real time financial market. The enactment of Sarbanes-Oxley was necessary to level the playing field so that all players recognize, once again, that there are and always have been rules to entering the game of finance. Most importantly, Sarbanes-Oxley will enforce the need for transparency to help gain investor confidence. Consequently, over time, greater corporate transparency will translate into increased shareholder/stakeholder confidence and trust which will greatly enhance a company's valuation. The financial manager today is focusing on those drivers of operational excellence that are critical to bottom-line performance (Couto, Neilson, 2004). Publicly traded companies not only require the skills of the seasoned financial manager but he or she must be confident, dynamic and possess the ability to be thrust upon a public stage for an ongoing series of media and analysts interviews reports and board or shareholder meetings. All of these ongoing activities help to maximize shareholder value.
Investor Relations is another critical activity required in the financial manager's repertoire of skills. This capability focuses on the financial manager's ability to field a myriad of financial questions on the spot, during interviews, and expertly each time. In fact, fielding questions from all company stakeholders, e.g. employees, investors, analysts and the media, is a mandatory skill requirement of financial managers, whatever rank, in the global financial market today (Clark, 2004).
The Financial Manager's Viewpoint
The viewpoint of the corporate financial manager clearly differs from that of the shareholder or employee. The financial manager is charged with increasing the value of the firm by obtaining capital in increasingly competitive financial markets in order to finance a company's investment activities. He or she is also responsible for enacting the long-term financial strategy of a firm by continually replying to the three key questions that all financial managers must answer. These questions are: what decisions will be made regarding capital budgeting, financing and the ongoing management of day-to-day cash or net working capital. The financial manager unlike the shareholder or employee (who may have another integrally important role to play in the entity) must make sustainable growth and a corporation's valuation of paramount importance and have both emerge while he is working to achieve maximum shareholder value.
The shareholder, or owner of the corporation, reaps the rewards of the financial manager's work, so to speak, as does the employee. The employee, provided his or her performance is demonstrating excellence, has the potential to chart a career path with the opportunity for advancement in rank and in financial rewards. Shareholders, who are often also employees, are
navigating the global, corporate landscape looking for companies capable of providing the best return on their potential investment. Simply put, they want compensation for taking the risks of equity ownership
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