After IPO, the socks are traded between 3rd parties (let's assume the company's employees don't own shares), so why should the company care what's their (perceived) value on the market? After the IPO, the money they could have recruited from the public has already been recruited...
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2This question is asked here : money.stackexchange.com/questions/7800/…– not-nickCommented Dec 18, 2016 at 17:19
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Why do people care how well they do their jobs? Because we pick people who care the most, and most people want to keep their jobs.– David SchwartzCommented Dec 19, 2016 at 3:26
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1 Answer
The folks who hold stock are the legal owners of the company. If a majority of stock holders become unhappy with the management of a company they can fire the executives and put in new management, or they can direct the company to close its doors and sell off its assets. As a crude approximation, the stock holders are happier when the stock price goes up and unhappier when it goes down. Therefore, executives are highly motivated to drive the stock price up.
A frequent criticism of corporate governence is that management can be so motivated to drive the stock price up, that they will take actions that drive the stock price up in the current year, even if undercuts the company in the long term.
answered Dec 18, 2016 at 18:13
