9 ms·

It's not really within the premise of the post, but focusing too much on the law side without much regard on morals & ethics isn't that great either. Some CEOs

It's not really within the premise of the post, but focusing too much on the law side without much regard on morals & ethics isn't that great either. Some CEOs do think that it's OK to cause environmental damage, outsource to sweatshops or conduct mass layoffs - as long as it's a lawful act.

EdwardDiego 11y ago
But there's no shareholder value in acknowledging externalities, so most professional CEOs appointed by a board won't challenge immoral acts if it would contradict their mantra to "increase shareholder value". As a recently arrived member of the "C-suite", I find that the cult of maximising shareholder value leaves me cold. But ultimately, the shareholders pay the piper, so they can call the tune.
- mehrdada 11y ago
  It goes even beyond just upsetting some shareholders paying for it. The CEO has the fiduciary duty to ignore such externalities.
  - jacquesm 11y ago
    That is an oft repeated un-truth.
    - mehrdada 11y ago
      Would love to be corrected with evidence.
      - jacquesm 11y ago
        http://www.nytimes.com/roomfordebate/2015/04/16/what-are-corporations-obligations-to-shareholders/corporations-dont-have-to-maximize-profits http://www.nytimes.com/roomfordebate/2015/04/16/what-are-cor... Will that do?
        mehrdada 11y ago
        Sure, "shareholder values" is not the same thing as bottom line profit and it might be subjective depending on a number of factors, but it is also not the same thing as value to the broader society; it can be at odds with it depending on who the shareholder is. The duty might be vague to define in practice, but it still is very much in existence. I don't think that article claims this is untrue, just that the fiduciary duty is broader than the dollar amount in the financial statements.
        jacquesm 11y ago
        > I don't think that article claims this is untrue "There is a common belief that corporate directors have a legal duty to maximize corporate profits and “shareholder value” — even if this means skirting ethical rules, damaging the environment or harming employees. But this belief is utterly false. To quote the U.S. Supreme Court opinion in the recent Hobby Lobby case: “Modern corporate law does not require for-profit corporations to pursue profit at the expense of everything else, and many do not.”" How much clearer could it be? Note that shareholders can and will sue companies, the board and the executives for whatever reasons they feel will hold water, but suing is not the same as winning that suit, and that the final interpretation of what your required course of action was in a given situation is in the end up to a judge, not up to a shareholder.
        dahart 11y ago
        Jacques, I actually didn't know this. It is a claim that has gone around and is often repeated, I'm pretty sure I've heard it used in "expert" interviews in financial & political documentaries, so I guess I assumed it was true. This might be important enough of a point to include in your post? The actions of a CEO facing difficult decisions might hinge on which of several competing responsibilities they feel most bound or affected by, and removing the belief there's a profit requirement could push Some situations out of gray areas. I'm guessing there also are plenty of other people who also believe that CEOs are bound by law to pursue profits and shareholder values.
      - switch007 11y ago
        Onus Probandi (incumbit ei qui dicit, non ei qui negat)
      - pbhjpbhj 11y ago
        Perhaps you could start by citing that law that requires CEOs to ignore morality and ethics and prefer profit as the sole guiding principle?
        jacquesm 11y ago
        Not just prefer, require!
- jfoster 11y ago
  Shareholder value is put at risk whenever a company takes actions that risk negative PR or reducing employee morale.
- Confusion 11y ago
  There certainly can be shareholder value in acknowledging externalities. Proof examples: The Body Shop, many cases where a company gambled on something immoral not being illegal (pollution, fraud) and being wrong, cases where the public gaining knowledge of the externalities cost the company its reputation, etc.
- tamana 11y ago
  "Maximizing shareholder value" is essentially a myth. Management has wide latitude in deciding how to make long term bets for the brand. Management's job is to decide almost all questions, shareholders choose to buy and sell. Shareholders have no liability for crimes and torts, management does.
jacquesm 11y ago
Good point (no, excellent point). Thank you, I've added a paragraph on that.
- metaphorm 11y ago
  I'm really glad you did. I thought that was the single most important paragraph in your essay. I'd love to read more of your thoughts on the topic of ethical decision making for private enterprises.
  - jacquesm 11y ago
    I will definitely write on that in the future, already had a draft post at sometime but decided not to send it out because it did not feel complete. It's a tough subject, and an even tougher subject to put out there in a way that it is useful because if you let ethics be your main guiding light you might go under just as easily as if you were morally bankrupt and knowing how to find the balance is an extremely hard problem. For instance, last year I broke a couple of ethical rules to make sure that a company survived, I'm sure that did not make me any friends but I'm happy that I did. At the same time, if survival of that company (and by extension the people that get paid their salary every month by that corporation) had not been at stake I would have never done that. Deciding where and when ethics should take a front seat and when the situation dictates you need to purposefully cross a line is super tough. It's akin to the problem where you have to decide which of two groups of people you will rescue when you can rescue only one. I really hope I will never fuck up in that respect because the way in which I go about these things there is no second guessing, once done it is done and if I break it I'll end up owning the pieces.
Symmetry 11y ago
> Some CEOs do think that it's OK to cause environmental damage, outsource to sweatshops or conduct mass layoffs - as long as it's a lawful act. I actually think that any of those three might be appropriate in the right context as long as they are lawful. Essentially every company causes some amount of environmental damage because every company uses electricity and has employees that drive to work. It's important that we as a society decide how much environmental damage is acceptable because if we leave it up to individual companies then the worst will profit and out compete the best. Mass layoffs are unpleasant but if the alternative if bankruptcy then it's better that they occur. It's hard to have an economy that allows new companies to be created and grow without allowing other companies to shrink. And as to sweatshops I'll let Paul Krugman talk for me: http://www.slate.com/articles/business/the_dismal_science/1997/03/in_praise_of_cheap_labor.html http://www.slate.com/articles/business/the_dismal_science/19...
- mattmanser 11y ago
  I was shoe shopping this week and my choice essentially came down to 2 pairs of shoes for £45 or one pair for £90. I bought the one pair. To say that anyone needs to sweatshop or they'll go bust is a wild mischaracterisation of reality. The few pence difference it would make to the price is something consumers wouldn't even notice. The entire process is driven by corporate greed hidden behind closed doors, not commercial sense.
  - sgift 11y ago
    That's not the point of Krugmans article. The point is that without that sweatshops the people working there would be even worse off. Is that correct? Maybe, maybe not, but it's completely different from what you're arguing against. That aside: I also prefer better shoes. I can use them far longer, even if they're more pricey.
    - Pyxl101 11y ago
      > The point is that without that sweatshops the people working there would be even worse off. Is that correct? Maybe, maybe not, but it's completely different from what you're arguing against. The people working there are free agents. Why would they choose to work for a sweatshop if it makes them worse off than their next best alternative? (Note: I'm discussing about law-abiding businesses that pay low wages, not crime syndicates that enslave people or whatever hypothetical.) The answer is that because having a job makes them better off. The workers typically have worse alternatives, which is why sweatshops are able to pay a low wage. The workers would otherwise be jobless or have an even lower paying job, or would be subsistence farming. Discussions about the economics of such situations often fall prey to the weakness in reasoning that's jokingly called the "Copenhagen Interpretation of Ethics": https://blog.jaibot.com/the-copenhagen-interpretation-of-ethics/ https://blog.jaibot.com/the-copenhagen-interpretation-of-eth... - an obviously fallacious ethics where that, simply by interacting with a situation, you somehow become responsible for it. If you take this logical fallacy into account, then more jobs and more options are always better things. People can choose what's best for them, and it's not the employer's fault if no better employment option is available. It is rather typically the case that sweatshops and globalization bring visibility to pre-existing poverty that would exist and would be even worse if not for the wages. People typically work a job because they need the money, after all. If people don't need the money, and have some better alternative, then what's stopping them from doing that instead? (Just so we're clear: there's agreement that people working these jobs have shit options. The disagreement is about whether their employers are somehow doing an immoral thing by offering a job when they might not otherwise have one.)

EdwardDiego 11y ago

But there's no shareholder value in acknowledging externalities, so most professional CEOs appointed by a board won't challenge immoral acts if it would contradict their mantra to "increase shareholder value". As a recently arrived member of the "C-suite", I find that the cult of maximising shareholder value leaves me cold. But ultimately, the shareholders pay the piper, so they can call the tune.

mehrdada 11y ago
It goes even beyond just upsetting some shareholders paying for it. The CEO has the fiduciary duty to ignore such externalities.
- jacquesm 11y ago
  That is an oft repeated un-truth.
  - mehrdada 11y ago
    Would love to be corrected with evidence.
    - jacquesm 11y ago
      http://www.nytimes.com/roomfordebate/2015/04/16/what-are-corporations-obligations-to-shareholders/corporations-dont-have-to-maximize-profits http://www.nytimes.com/roomfordebate/2015/04/16/what-are-cor... Will that do?
      - mehrdada 11y ago
        Sure, "shareholder values" is not the same thing as bottom line profit and it might be subjective depending on a number of factors, but it is also not the same thing as value to the broader society; it can be at odds with it depending on who the shareholder is. The duty might be vague to define in practice, but it still is very much in existence. I don't think that article claims this is untrue, just that the fiduciary duty is broader than the dollar amount in the financial statements.
        jacquesm 11y ago
        > I don't think that article claims this is untrue "There is a common belief that corporate directors have a legal duty to maximize corporate profits and “shareholder value” — even if this means skirting ethical rules, damaging the environment or harming employees. But this belief is utterly false. To quote the U.S. Supreme Court opinion in the recent Hobby Lobby case: “Modern corporate law does not require for-profit corporations to pursue profit at the expense of everything else, and many do not.”" How much clearer could it be? Note that shareholders can and will sue companies, the board and the executives for whatever reasons they feel will hold water, but suing is not the same as winning that suit, and that the final interpretation of what your required course of action was in a given situation is in the end up to a judge, not up to a shareholder.
        dahart 11y ago
        Jacques, I actually didn't know this. It is a claim that has gone around and is often repeated, I'm pretty sure I've heard it used in "expert" interviews in financial & political documentaries, so I guess I assumed it was true. This might be important enough of a point to include in your post? The actions of a CEO facing difficult decisions might hinge on which of several competing responsibilities they feel most bound or affected by, and removing the belief there's a profit requirement could push Some situations out of gray areas. I'm guessing there also are plenty of other people who also believe that CEOs are bound by law to pursue profits and shareholder values.
    - switch007 11y ago
      Onus Probandi (incumbit ei qui dicit, non ei qui negat)
    - pbhjpbhj 11y ago
      Perhaps you could start by citing that law that requires CEOs to ignore morality and ethics and prefer profit as the sole guiding principle?
      - jacquesm 11y ago
        Not just prefer, require!
jfoster 11y ago
Shareholder value is put at risk whenever a company takes actions that risk negative PR or reducing employee morale.
Confusion 11y ago
There certainly can be shareholder value in acknowledging externalities. Proof examples: The Body Shop, many cases where a company gambled on something immoral not being illegal (pollution, fraud) and being wrong, cases where the public gaining knowledge of the externalities cost the company its reputation, etc.
tamana 11y ago
"Maximizing shareholder value" is essentially a myth. Management has wide latitude in deciding how to make long term bets for the brand. Management's job is to decide almost all questions, shareholders choose to buy and sell. Shareholders have no liability for crimes and torts, management does.

jacquesm 11y ago

Good point (no, excellent point). Thank you, I've added a paragraph on that.

metaphorm 11y ago
I'm really glad you did. I thought that was the single most important paragraph in your essay. I'd love to read more of your thoughts on the topic of ethical decision making for private enterprises.
- jacquesm 11y ago
  I will definitely write on that in the future, already had a draft post at sometime but decided not to send it out because it did not feel complete. It's a tough subject, and an even tougher subject to put out there in a way that it is useful because if you let ethics be your main guiding light you might go under just as easily as if you were morally bankrupt and knowing how to find the balance is an extremely hard problem. For instance, last year I broke a couple of ethical rules to make sure that a company survived, I'm sure that did not make me any friends but I'm happy that I did. At the same time, if survival of that company (and by extension the people that get paid their salary every month by that corporation) had not been at stake I would have never done that. Deciding where and when ethics should take a front seat and when the situation dictates you need to purposefully cross a line is super tough. It's akin to the problem where you have to decide which of two groups of people you will rescue when you can rescue only one. I really hope I will never fuck up in that respect because the way in which I go about these things there is no second guessing, once done it is done and if I break it I'll end up owning the pieces.

Symmetry 11y ago

> Some CEOs do think that it's OK to cause environmental damage, outsource to sweatshops or conduct mass layoffs - as long as it's a lawful act. I actually think that any of those three might be appropriate in the right context as long as they are lawful. Essentially every company causes some amount of environmental damage because every company uses electricity and has employees that drive to work. It's important that we as a society decide how much environmental damage is acceptable because if we leave it up to individual companies then the worst will profit and out compete the best. Mass layoffs are unpleasant but if the alternative if bankruptcy then it's better that they occur. It's hard to have an economy that allows new companies to be created and grow without allowing other companies to shrink. And as to sweatshops I'll let Paul Krugman talk for me: http://www.slate.com/articles/business/the_dismal_science/1997/03/in_praise_of_cheap_labor.html http://www.slate.com/articles/business/the_dismal_science/19...

mattmanser 11y ago
I was shoe shopping this week and my choice essentially came down to 2 pairs of shoes for £45 or one pair for £90. I bought the one pair. To say that anyone needs to sweatshop or they'll go bust is a wild mischaracterisation of reality. The few pence difference it would make to the price is something consumers wouldn't even notice. The entire process is driven by corporate greed hidden behind closed doors, not commercial sense.
- sgift 11y ago
  That's not the point of Krugmans article. The point is that without that sweatshops the people working there would be even worse off. Is that correct? Maybe, maybe not, but it's completely different from what you're arguing against. That aside: I also prefer better shoes. I can use them far longer, even if they're more pricey.
  - Pyxl101 11y ago
    > The point is that without that sweatshops the people working there would be even worse off. Is that correct? Maybe, maybe not, but it's completely different from what you're arguing against. The people working there are free agents. Why would they choose to work for a sweatshop if it makes them worse off than their next best alternative? (Note: I'm discussing about law-abiding businesses that pay low wages, not crime syndicates that enslave people or whatever hypothetical.) The answer is that because having a job makes them better off. The workers typically have worse alternatives, which is why sweatshops are able to pay a low wage. The workers would otherwise be jobless or have an even lower paying job, or would be subsistence farming. Discussions about the economics of such situations often fall prey to the weakness in reasoning that's jokingly called the "Copenhagen Interpretation of Ethics": https://blog.jaibot.com/the-copenhagen-interpretation-of-ethics/ https://blog.jaibot.com/the-copenhagen-interpretation-of-eth... - an obviously fallacious ethics where that, simply by interacting with a situation, you somehow become responsible for it. If you take this logical fallacy into account, then more jobs and more options are always better things. People can choose what's best for them, and it's not the employer's fault if no better employment option is available. It is rather typically the case that sweatshops and globalization bring visibility to pre-existing poverty that would exist and would be even worse if not for the wages. People typically work a job because they need the money, after all. If people don't need the money, and have some better alternative, then what's stopping them from doing that instead? (Just so we're clear: there's agreement that people working these jobs have shit options. The disagreement is about whether their employers are somehow doing an immoral thing by offering a job when they might not otherwise have one.)