Shareholder theory

Shareholder Theory, primarily associated with economist Milton Friedman, posits that a company's main responsibility is to maximize profits for its shareholders. According to this view, businesses should prioritize financial returns, focusing on increasing shareholder value above other considerations. This means that decisions made by a company should primarily aim to enhance earnings and stock prices, as shareholders are the owners of the company. While ethical and social considerations may arise, the central tenet is that financial performance is the top priority, reinforcing the idea that a company's ultimate accountability lies with its investors.