4 ms·

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

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.
  - jacquesm 11y ago
    I will probably do a separate blog post on that one of these days.
- AnthonyMouse 11y ago
  > 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 That's not really the cause of the trouble though. It's that when you're the CEO of a publicly-traded company (i.e. a company owned predominantly by mutual funds that want higher profits), your compensation and continued employment will be based on increasing quarterly profits. So even though there are things you can do that are less profitable without violating your fiduciary duty to the shareholders, doing those things will still cause you to lose your bonus or your job. So the people who stand on their ethics are eventually replaced with people who don't, because the people who don't have better numbers and the shareholders only see how much profit was made, not why.
  - EdwardDiego 11y ago
    > So the people who stand on their ethics are eventually replaced with people who don't, because the people who don't have better numbers and the shareholders only see how much profit was made, not why. Precisely.
    - tamana 11y ago
      Yes, and every time you choose not to do anything horrible for money, the buyer might find someone else. So?
      - EdwardDiego 11y ago
        So the current system optimises for sociopaths.

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.
- jacquesm 11y ago
  I will probably do a separate blog post on that one of these days.
AnthonyMouse 11y ago
> 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 That's not really the cause of the trouble though. It's that when you're the CEO of a publicly-traded company (i.e. a company owned predominantly by mutual funds that want higher profits), your compensation and continued employment will be based on increasing quarterly profits. So even though there are things you can do that are less profitable without violating your fiduciary duty to the shareholders, doing those things will still cause you to lose your bonus or your job. So the people who stand on their ethics are eventually replaced with people who don't, because the people who don't have better numbers and the shareholders only see how much profit was made, not why.
- EdwardDiego 11y ago
  > So the people who stand on their ethics are eventually replaced with people who don't, because the people who don't have better numbers and the shareholders only see how much profit was made, not why. Precisely.
  - tamana 11y ago
    Yes, and every time you choose not to do anything horrible for money, the buyer might find someone else. So?
    - EdwardDiego 11y ago
      So the current system optimises for sociopaths.