Shareholder Primacy Theory

Shareholder Primacy Theory is the idea that a company's primary goal should be to maximize profits and value for its shareholders—the owners or investors. Under this view, the company's management should focus on increasing stock prices and dividends, as shareholders are the rightful owners who have invested in the business. While other stakeholders like employees, customers, or communities matter, the main responsibility of executives and managers is to serve shareholder interests, often prioritizing financial returns over other considerations. This concept influences corporate decisions and policies, emphasizing profit maximization as the central purpose of a business.