The primary objective of a business is either shareholders' wealth maximization or stakeholders' wealth maximization. The author explains both the approaches and their acceptability in different countries. The relationship between owners, directors, and managers has been extensively debated in the past. The downfall of many corporates due to the accounting scandals in the recent past has intensified the debate. One focus of the debate is the `agency problem'. Agency problem arises due to the conflict of interests between the shareholders and managers. Shareholders assign the managers to maximize their returns. This might be in conflict with the managers' interests. Here, one needs to understand the primary objective of a corporate.

Around the world, two approaches are used to define the primary goal of a business; one is the stakeholders' wealth maximization and the other is the shareholders' wealth maximization. The two approaches differ in the sense that the former is a socialist approach and the latter is a capitalist approach. Traditionally, in Continental Europe and Japan, the stakeholder approach was adopted. In the stakeholder approach, importance is given to the interests of all stakeholders i.e. customers, suppliers, workers, the government, debt providers, equity holders and even society at large.

In European Union (EU), the member countries have to abide by the measures of the stakeholder approach which has been manifested in a series of social partnership agreements. In Continental Europe, (except UK) concentrated ownership is a governance feature and in Japan, cross-holdings is the governance feature. The legal requirements and market regulations are rather weak in these countries.1 In the US and UK, where the shareholders' wealth maximization approach is adopted, there is a need to maximize shareholder value as expressed by the company's share price. The ownership is widely spread and therefore the regulatory system is very strong.