5 ms·

> the first rule for any publicly traded company is to maximize shareholder value. It always bothers me to see this, as I feel it is the reason many companies

• iopq 10y ago
  >The first rule should be "make the customers happy" and the second rule should be "keep the employees happy" if you burn through your cash reserves doing those things and now you don't have any money, that doesn't do anything for you since you burned all your cash - even if employees and customers are happy the first rule should be "make money", the second rule should be "spend less money than you make" if those two are achieved, THEN shareholder value is maximized
  • pfarnsworth 10y ago
    Not true. Sometimes shareholders want metrics like Return on Equity, which forces the hand of management to sell profitable parts of the business... but not profitable enough. That's the insanity of trying to maximize shareholder value.
    • twblalock 10y ago
      That's only insane if you assume the success of the business is the goal, rather than the success of the shareholders.
      • pfarnsworth 10y ago
        Success of the business and success of the shareholders is not a zero-sum game. You can usually have both. What is insane is sacrificing the success of the business for the success of shareholders. That affects employees, and you end up getting situations where entire towns get fucked because the profitable-but-not-profitable-factory gets shut down because of some obscure metric.
        • stinkytaco 10y ago
          I think a culture has developed -- in the United States specifically -- where we expect companies to act according to some undefined ethical principle. We're upset when they don't pay taxes, close factories, pollute the environment or whatever. The problem is these principles are always moving goalposts and more often than not, immeasurable. A business exists to make money. That is a concrete and measurable goal and thus one that the organization is made to pursue. If a business it not in it to make money, it's something else: perhaps a non-profit, an NGO, a union, a cooperative, etc. There are places for organizations that don't exist to make money, but publicly traded exchanges are not it. It's really the responsibility of communities to plan, governments to regulate and enforce and people to rationally choose the best for themselves and their community. As pointed out above, there are a variety of ways to do this, it's a matter of choosing the right ones.
• overcast 10y ago
  Unfortunately that is not a reality. Once you go public, the entire focus of a company is paying out to shareholders. Everything else is secondary.
• twblalock 10y ago
  If companies operated like that, people would not invest in them. Why would you invest in a company that does not put your share growth as a priority, when others will? Besides, the shareholders own the company. Why shouldn't a company prioritize those who own it? The shareholders take on risk by providing capital to the company, and they deserve to be compensated for that risk.
• eagsalazar2 10y ago
  I think you are confusing strategic principles with actual goals. Unless you are essentially an NGO and your investors are donating money as philanthropists, the #1 goal of a public company is never anything but make money for the shareholders. The goals of the investors and owners are the goals of the company. Focusing on customer and employee happiness are just means to that end.