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US/UK maximize share-holder value laws/attitude The majority of legal commentators suggest it's all attitude - not law. There are a few dissenting opinions.

dpark 9y ago
Who suggests that it's purely attitude? It's my understanding that executives and the board of directors have a fiduciary duty to shareholders. What they don't have is an obligation to do literally anything legal to create short term gains, as many seem to believe.
- vonmoltke 9y ago
  Fiduciary duty != maximize shareholder value
  - dpark 9y ago
    Then what is fiduciary duty in this context? A fiduciary must act in the best interest of the one they hold a duty to. In the case of shareholders, that is essentially shareholder value. (Arguably it is literally shareholder value, since even non-monetary value is still value.)
    - deleted 9y ago
      [deleted]
    - Symmetry 9y ago
      A fiduciary is obligated to put their duty to the principal over their own interests, not to put the interests of the principal over all other duties.
      - dpark 9y ago
        That seems like a pedantic and pointless distinction. No one thinks that your financial adviser is obliged to deposit embezzled funds into your accounts in order to meet his fiduciary duties to you. Obviously some obligations take priority. The fiduciary duty of board members to shareholders still seems to be mostly about maximizing shareholder value.
        Symmetry 9y ago
        But the point is that that while the fiduciary can't try to profit at the expense of the shareholders at all, they can trade off the interests of the shareholders against that of the employees as a group, the environment, their integrity, common morality, etc.
- alex8022 9y ago
  They do have a fiduciary duty to shareholders, but my understanding is that there is a low bar to meet. Fraud / fleecing shareholders is out, but as long as they have a reasonable case that what they're doing is in shareholders' best interests, they'll be fine. As an example, it would be easy to make the case that reducing the dividend to build a new factory is in shareholders' best interest. It would also be easy to make the case that they shouldn't open a new factory, and instead increase the dividend. Which option they choose is a bit subjective, and a judgement call, but neither would breach their fiduciary duty. Choosing a much higher cost supplier, that is owned by their husband or wife, probably would breach fiduciary duty.
  - dpark 9y ago
    Yes, absolutely. Shareholder value is not the same thing as current stock price.
- grogenaut 9y ago
  Where does your understanding come from? what statute enforces it? https://www.nytimes.com/roomfordebate/2015/04/16/what-are-corporations-obligations-to-shareholders/corporations-dont-have-to-maximize-profits https://www.nytimes.com/roomfordebate/2015/04/16/what-are-co...
  - dpark 9y ago
    You realize you linked to an article refuting an opinion I did not put forth, right? Having fiduciary duty to shareholders doesn't mean maximizing current stock price at any cost and I very specifically said that it does not. The article you linked touches on this. "Delaware (like other states) applies the business judgement rule to protect directors of corporations that reduce profits and share price when directors claim this will ultimately help the corporation." Things that help the corp do increase long term shareholder value. If you limit "shareholder value" to mean "current stock price", then sure, that's not fiduciary duty. But that's a really shallow view of shareholder value.

dpark 9y ago

Who suggests that it's purely attitude? It's my understanding that executives and the board of directors have a fiduciary duty to shareholders. What they don't have is an obligation to do literally anything legal to create short term gains, as many seem to believe.

vonmoltke 9y ago
Fiduciary duty != maximize shareholder value
- dpark 9y ago
  Then what is fiduciary duty in this context? A fiduciary must act in the best interest of the one they hold a duty to. In the case of shareholders, that is essentially shareholder value. (Arguably it is literally shareholder value, since even non-monetary value is still value.)
  - deleted 9y ago
    [deleted]
  - Symmetry 9y ago
    A fiduciary is obligated to put their duty to the principal over their own interests, not to put the interests of the principal over all other duties.
    - dpark 9y ago
      That seems like a pedantic and pointless distinction. No one thinks that your financial adviser is obliged to deposit embezzled funds into your accounts in order to meet his fiduciary duties to you. Obviously some obligations take priority. The fiduciary duty of board members to shareholders still seems to be mostly about maximizing shareholder value.
      - Symmetry 9y ago
        But the point is that that while the fiduciary can't try to profit at the expense of the shareholders at all, they can trade off the interests of the shareholders against that of the employees as a group, the environment, their integrity, common morality, etc.
alex8022 9y ago
They do have a fiduciary duty to shareholders, but my understanding is that there is a low bar to meet. Fraud / fleecing shareholders is out, but as long as they have a reasonable case that what they're doing is in shareholders' best interests, they'll be fine. As an example, it would be easy to make the case that reducing the dividend to build a new factory is in shareholders' best interest. It would also be easy to make the case that they shouldn't open a new factory, and instead increase the dividend. Which option they choose is a bit subjective, and a judgement call, but neither would breach their fiduciary duty. Choosing a much higher cost supplier, that is owned by their husband or wife, probably would breach fiduciary duty.
- dpark 9y ago
  Yes, absolutely. Shareholder value is not the same thing as current stock price.
grogenaut 9y ago
Where does your understanding come from? what statute enforces it? https://www.nytimes.com/roomfordebate/2015/04/16/what-are-corporations-obligations-to-shareholders/corporations-dont-have-to-maximize-profits https://www.nytimes.com/roomfordebate/2015/04/16/what-are-co...
- dpark 9y ago
  You realize you linked to an article refuting an opinion I did not put forth, right? Having fiduciary duty to shareholders doesn't mean maximizing current stock price at any cost and I very specifically said that it does not. The article you linked touches on this. "Delaware (like other states) applies the business judgement rule to protect directors of corporations that reduce profits and share price when directors claim this will ultimately help the corporation." Things that help the corp do increase long term shareholder value. If you limit "shareholder value" to mean "current stock price", then sure, that's not fiduciary duty. But that's a really shallow view of shareholder value.