3 ms·

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 pr

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.

3 ms·

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 pr

by pfarnsworth 10y ago

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.