State reasons why management might pursue goals other than shareholder wealth

maximisation.
Shareholder wealth is the appropriate goal of a business firm in a capitalist
society. In a capitalist society, there is private ownership of goods and services by
individuals. Those individuals own the means of production to make money. The profits
from the businesses in the economy accrue to the individuals. Shareholders wealth
maximisation as the primary objective of the firm and at the same time the existence of
other stakeholder groups such as creditors, employees, customers and community are also
affected when adapting to a corporate goal.
The shareholder wealth maximization objective provides a convenient framework
for evaluating both the timing and the risks associated with various investment and
financing strategies. The marginal decision rules derived from economic theory are
extremely useful to a wealth maximizing firm. Any decision, either in the short run or the
long run, which results in marginal revenues exceeding the marginal costs of the decision
will be consistent with wealth maximisation. Hence, in making decisions that maximize
shareholder wealth, management must consider the long-run impact on the firm and not
just focus on short-run effects. For example, a firm could increase short-run earnings and
dividends by eliminating all research and development expenditures.
However, this decision would reduce long-run earnings and dividends, and hence
shareholder wealth, because the firm would be unable to develop new products to
produce and sell.