Question
Suppose a publicly traded firm's management determines that it will spend half of its free cash flow on social causes (saving rain forest; increase the
Suppose a publicly traded firm's management determines that it will spend half of its free cash flow on social causes (saving rain forest; increase the availability of the arts to the economically disadvantaged, etc.). The decision does not result in any economic benefit that accrues to the firm. What might the current owners or outsiders interested in maximizing value do?
Bid up the price of the stock based on the firm's performance. | ||
Increase the amount spent on social causes | ||
Buy other stocks and force those companies to make similar investments in social causes. | ||
Fire the current management and/or buy a controlling interest in the firm to make changes to align the interest of the shareholders with the managers. |
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