The Nature of the South African Corporate Economy: A need to review company objectives?

Abstract

The maximisation of shareholders’ wealth as the primary goal of the firm is the cornerstone of modern financial theory which has its source mainly from USA. The South African corporate economy has significantly different characteristics compared with that of the USA. The article notes that the Japanese corporate economy, with its keiretsu groupings and interlocking directorship, has characteristics similar to ours. Consequently, the article proposes that we re-examine the suitability of the US sourced primary goal of the firm relative to the Japanese goal which is to maximise the wealth producing capacity of the enterprise.