My research has confirmed that not only do different shareholders have different objectives, but the same shareholder’s objectives vary among different investment targets.

It is possible, but not particularly useful, to talk of a set of generic objectives shared by the community of shareholders. Such objectives will necessarily be in general and generic terms such as maximisation of 'wealth' or 'benefit'.

The difficulty comes from an attempt to define such concepts as 'wealth' and 'benefit'. It means different things to different investors. Some may interpret wealth enhancement as asset growth, while others may interpret it as dividend maximisation. 'Benefit' may mean dividend to one investor while it may mean share price growth to another.

The error of many boards and management is that they argue from the general to the particular. If they believe that all shareholders want, say, dividend maximisation, then they argue that their shareholders want dividend maximisation. The issue is that corporate strategies to minimise risk or grow assets are different and have fundamental impacts on what a corporation does and how it does it.

Compounded upon this error is the assumption that each shareholder will have consistent objectives across all investments. Institutional investors weight certain attributes such as growth, industry sector, risk, etc. and choose their investment targets on the basis of those weightings (among other criteria).

They may invest in a certain industry sector in order to minimise risk or to secure the benefits from fast growth. Their expectations (and therefore objectives) from such investment decisions will vary according to the character and attributes of each target and what that target represents for the investor in the investor’s context. A typical large investor will (and mom-and-dad investors may) therefore have a range of objectives within his (their) investment portfolio/s.

How then, can a corporation claim to be pursuing shareholder wealth or benefit if it does not know in real and quantifiable terms what it is that its shareholders regard as 'wealth' and 'benefit' as it relates to the shareholder’s objectives in that particular corporation?

This is a fundamental issue with modern corporate management and the cause of much owner pain and management dysfunction. Boards and management make fundamental strategic, operational and investment decisions based on incorrect assumptions about shareholder 'well-being' or on ill-founded subjective assessments. 

Without clear and quantified owner objectives, management will continue to fire its strategies at shadows rather than at substance and continue to wonder why owners are unhappy. Corporate investments and resources will continue to be applied in directions that are presumed to be appropriate without ratification in measured terms of the correctness of those actions.  And those actions will continue to detract from the maximisation of owner satisfaction as long as 'owner satisfaction' remains undefined and unquantified.