Ownership Theory

Ownership Theory suggests that a company's primary purpose is to serve its owners or shareholders by maximizing their wealth. It views the organization as a vehicle to increase the value of its ownership interests, emphasizing profit generation and financial returns. This perspective expects managers to prioritize shareholder interests, making decisions that boost stock prices and dividends. In essence, Ownership Theory considers the firm chiefly as an asset for its owners, focusing on economic gain rather than other stakeholders such as employees, customers, or the community.