What Is the Purpose of a Company?

The traditional idea of a company consists of five common characteristics. These are legal personality, limited liability, transferable shares, delegated management with board structure and investor ownership. It is said that these core characteristics support the idea of shareholder primacy. The traditional idea of the purpose of a company has been for a long time to maximize the shareholders’ wealth ie shareholder primacy but in the recent years there has been discussions whether that is actually the right purpose or not. Due to this different theories have been created such as enlightened shareholder value and stakeholder primacy. These theories have been discussed by academics and supporters of each group have tried to show that their idea is the best. It has proven to be a difficult task and no one has been able to create bulletproof evidence that would prove their ideas as the best one. Sometimes it is important to look at the legislation in order to find out the purpose of a company. The wording varies in different countries but some do not state a specific purpose. It must be also remembered that there are other obligations that are imposed on companies and their directors by other laws and regulations. These relate especially to social responsibility. It has been recognised that most of the successful companies are acting responsibly. It must be also noticed that there are some big crises that have arisen from directors’ negligent behaviour, such as Enron and BP’s oil spill. Whatever the purpose is, it must be remembered that in order to create successful business, the directors have a variety of issues to consider and take care of. It is difficult to state just one specific purpose as most of these things are attached together