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Is the behaviors of managers consistent with profit maximization?
Wiki User
∙ 11y ago
In theory, managers act to maximize the profit of their organization, assuming it is a for-profit organization. In fact, however, they have more of a tendency to maximize their personal well-offness. This is true for a number of reasons:
1. Their personal financial incentives are based on things other than the profit of the organization as a whole so they tend to make decisions that maximize their bonus or raise. Such decisions may make themselves look good at the expense of other parts of the company, thus reducing total company profit.
2. Their personal job security my depend on the continued existence of a string of problems that they solve. Getting at the root cause of the problems would eliminate their job so they continue to do their job and keep quiet about a potential way to save the company money.
3. They may feel mistreated or underpaid. They may intentionally cause problems that will be blamed on others in order to "get back" at the company.
4. They may feel the company is mistreating customers and go out of their way to secretly assist customers - adversely to company interests.
There are many other reasons why many, if not most, manager behaviors do not add to profit maximization.
Wiki User
∙ 11y ago
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Under what conditions might profit maximization not lead to stock price maximization?
Under what conditions might profit maximization not lead to stock price maximization?"
Are wealth maximization and profit maximization related?
Not necessarily
Advantages of profit maximization?
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What are the examples of profit maximization and maximization of shareholders profit?
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Is profit maximization is good or bad for society?
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Sales maximization vs profit maximization?
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discount rate
Shareholder wealth maximization is considered to be a more appropriate goal for the firm than profit maximization because?
Shareholder wealth maximization is considered to be a more appropriate goal for the firm than profit maximization
What are the policies on profit and maximization in manegerial economics?
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Differentiate between value for money and profit maximization concept in corporate governance?
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