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Strategic financial management Introduction to corporate finance

.... focus on maximizing the price of a firms stock is foolhardy. The most obvious example of the problematic nature of a focus on immediate wealth generation is seen in the example of the Enron Corporation. Enron used accounting fraud to make it seem as if the company was fantastically profitable, but the profits only existed on paper, not in reality. There are other, less obvious examples of narrow-minded tradeoffs between long and short-term gains. For example, many American car manufacturers, such as General Motors (GM), continue to lobby against environmental legislation that would require them to spend money to alter the design of many of their vehicles. GM, like the other automakers, has raised concerns about efforts to raise fuel efficiency standards to as high as 60 miles per gallon (Whoriskey 2011).

In the short term, American car manufacturers successful anti-green efforts will no doubt help to raise their stock prices. Long-term evidence indicates that vehicle manufacturers like Toyota, who prioritize fuel efficiency and show concern for the environment, are far stronger, in terms of their stability as companies. GM was a relatively late mover in the hybrid technology market, for example, and instead focused upon generating copycat after