Why do they say that managers should focus only on shareholders? wealth maximization? The statement is much focused to point out that Strategic Management is about maximizing shareholders? wealth. Everything else comes secondary. This is not to say that the organization should not focus on profits, or employees, or customer satisfaction. But this is to say that if the achievement of profits or other objectives conflicts with maximization of shareholders? wealth, then the management should have no issues in choosing shareholders? wealth.
For example, when Compaq was finally sold off to Hewlett-Packard(& formally launched as the new HP) on May 7th 2002, the ground motive for Michael Capellas, CEO of Compaq, was not profit maximization but shareholders? wealth maximization. As the CEO, he knew that he could attempt to continue competing against HP, Dell, and Sun Microsystems in respective areas, but the alternative proposition from HP?s head Carleton(Carly) S. Fiorina was also an attractive strategy. The trade-off was extremely easy to choose because the most important objective for him was maximization of his shareholders? wealth. HP & Compaq were merged in an all-stock deal, and later on Michael Capellas was eased out of his position of President in the new HP within one year of the merger becoming effective.
A true example of how a manager should be ready to sacrifice his position, power, future career for the sake of shareholders. Capellas, like so many hostile takeover incidents, could have fought on to oppose the merger. But both he and Carly Fiorina maintained a stoic & steadfast focus on the merger, despite repeated attempts by various HP shareholders to oppose the same. This was easier because Carly & Mike were able to convince the majority of shareholders on the basis of facts and figures, properly researched and tested, rather than using gut-feel.
It?s the shareholders? money that created the organization; therefore, it has to be for the shareholders? benefit that any manager should undertake strategies.