4 ms·

Yes, that's absolutely true if you decide to remain a private company. Your obligations change once you decide to go public - pros and cons.

nailer 10y ago
Aren't you obligated to make the highest returns for shareholders? In that case, wouldn't performing an action that slows down the ability of a company to innovate break that promise?
- d_e_solomon 10y ago
  >Aren't you obligated to make the highest returns for shareholders? Actually no. As recently as Burwell v Hobby Lobby, the Supreme Court said: "Modern corporate law does not require for-profit corporations to pursue profit at the expense of everything else, and many do not." http://caselaw.findlaw.com/us-supreme-court/13-354.html http://caselaw.findlaw.com/us-supreme-court/13-354.html
  - nailer 10y ago
    Point taken. I should be more exact: is maximising shareholder return a higher priority than maximising shareholder input?
- rhino369 10y ago
  You get a lot of leeway. There is basically a rebuttable presumption you are acting in the companies best interest. But I wonder if that presumption should be weakened in the cases where the CEO has dictatorial powers over the company without a corresponding share of equity.
- alexqgb 10y ago
  That's a meaningless goal without a specific time frame. And of course, the moment you do specify a time frame, you also define the range of what you'll actually do in ways that flatly contradict what you'd do with different timelines. For example, if you're trying to maximize cash on hand in the very short term, you simply stop paying your bills and declare bankruptcy when creditors attack. But if your goals are further out, this becomes the exact wrong strategy. Whatever your goal may be, you need a time frame to determine what is and isn't a good use of resources in realizing it. Conversely, anyone who says "maximize shareholder value" without specifying a time frame is either a fool or a grifter. You can imagine how well things go when these types get together and "agree" on something this dangerously unbounded as a fundamental operating principle.
matthewmcg 10y ago
Actually, these obligations apply to private corporations as well as public corporations. It's just that the chance of a shareholder suit is much higher in a public company.
deleted 10y ago
[deleted]

nailer 10y ago

Aren't you obligated to make the highest returns for shareholders? In that case, wouldn't performing an action that slows down the ability of a company to innovate break that promise?

d_e_solomon 10y ago
>Aren't you obligated to make the highest returns for shareholders? Actually no. As recently as Burwell v Hobby Lobby, the Supreme Court said: "Modern corporate law does not require for-profit corporations to pursue profit at the expense of everything else, and many do not." http://caselaw.findlaw.com/us-supreme-court/13-354.html http://caselaw.findlaw.com/us-supreme-court/13-354.html
- nailer 10y ago
  Point taken. I should be more exact: is maximising shareholder return a higher priority than maximising shareholder input?
rhino369 10y ago
You get a lot of leeway. There is basically a rebuttable presumption you are acting in the companies best interest. But I wonder if that presumption should be weakened in the cases where the CEO has dictatorial powers over the company without a corresponding share of equity.
alexqgb 10y ago
That's a meaningless goal without a specific time frame. And of course, the moment you do specify a time frame, you also define the range of what you'll actually do in ways that flatly contradict what you'd do with different timelines. For example, if you're trying to maximize cash on hand in the very short term, you simply stop paying your bills and declare bankruptcy when creditors attack. But if your goals are further out, this becomes the exact wrong strategy. Whatever your goal may be, you need a time frame to determine what is and isn't a good use of resources in realizing it. Conversely, anyone who says "maximize shareholder value" without specifying a time frame is either a fool or a grifter. You can imagine how well things go when these types get together and "agree" on something this dangerously unbounded as a fundamental operating principle.

matthewmcg 10y ago

Actually, these obligations apply to private corporations as well as public corporations. It's just that the chance of a shareholder suit is much higher in a public company.

deleted 10y ago

[deleted]