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Corporations have a legal obligation to their shareholders to maximize their profits. If they did something as negligent as paying taxes they didn't have to pay

Corporations have a legal obligation to their shareholders to maximize their profits. If they did something as negligent as paying taxes they didn't have to pay, and that none of their competitors pay, they'd be opening themselves up to a lawsuit from shareholders. Laws are weird.

rcMgD2BwE72F 9y ago
Source?
- sammychl 9y ago
  obligation definitely would come from the board+investors..who would kick out any ceo who doesn't maximise profit
- aerotwelve 9y ago
  There is no source because there is no legal imperative for corporations to maximize shareholder value anywhere in the United States. It's a myth. Shareholder primacy is a theory -- though it's really more of an ideology -- that executives/board members can believe in, but it is by no means required by law[1]. [1] https://en.wikipedia.org/wiki/Business_judgment_rule https://en.wikipedia.org/wiki/Business_judgment_rule
  - lightbyte 9y ago
    It's not a myth, it's a very common interpretation of Dodge v Ford [1] >A business corporation is organized and carried on primarily for the profit of the stockholders. The powers of the directors are to be employed for that end. The discretion of directors is to be exercised in the choice of means to attain that end, and does not extend to a change in the end itself, to the reduction of profits, or to the non-distribution of profits among stockholders in order to devote them to other purposes... It's not the only interpretation however >Dodge is often misread or mistaught as setting a legal rule of shareholder wealth maximization. This was not and is not the law. Shareholder wealth maximization is a standard of conduct for officers and directors, not a legal mandate. The business judgment rule [which was also upheld in this decision] protects many decisions that deviate from this standard. This is one reading of Dodge. If this is all the case is about, however, it isn't that interesting. [1] https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co.
- lightbyte 9y ago
  Dodge v Ford Motor Co. [1] >A business corporation is organized and carried on primarily for the profit of the stockholders. The powers of the directors are to be employed for that end. The discretion of directors is to be exercised in the choice of means to attain that end, and does not extend to a change in the end itself, to the reduction of profits, or to the non-distribution of profits among stockholders in order to devote them to other purposes... [1] https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co.
adventured 9y ago
Factually, corporations do not have a legal obligation to their shareholders to maximize their profits. That's a myth and a very absurd one at that. If it were true, Salesforce couldn't operate its various corporate charity programs as one example. You could have researched that one pretty easily: 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... https://medium.com/bull-market/there-is-no-effective-fiduciary-duty-to-maximize-profits-939ae50d0572 https://medium.com/bull-market/there-is-no-effective-fiducia... https://www.washingtonpost.com/opinions/harold-meyerson-the-myth-of-maximizing-shareholder-value/2014/02/11/00cdfb14-9336-11e3-84e1-27626c5ef5fb_story.html?utm_term=.7edd4ec6acf6 https://www.washingtonpost.com/opinions/harold-meyerson-the-... https://www.quora.com/Taxes-To-what-extent-are-U-S-companies-legally-obligated-to-maximize-profits-for-shareholders https://www.quora.com/Taxes-To-what-extent-are-U-S-companies...
- jdoliner 9y ago
  I don't really see the difference between having a legal obligation to act in your shareholders best interests and an obligation to maximize profits. Given that profit is most shareholders only interest in owning the stock. Now that does mean that companies should maximize long term profit, perhaps at the cost of short term profit. But I fail to see how paying taxes you don't have to is ever in the best interests of their shareholders.
  - FireBeyond 9y ago
    Fairly simply, many investors see corporate longevity, while paying smaller, more reliable dividends as their best interest. Doing so could easily be orthogonal to "maximizing profits".
    - jdoliner 9y ago
      Corporate longevity is only in their interests because it maximizes long term profits.

rcMgD2BwE72F 9y ago

Source?

sammychl 9y ago
obligation definitely would come from the board+investors..who would kick out any ceo who doesn't maximise profit
aerotwelve 9y ago
There is no source because there is no legal imperative for corporations to maximize shareholder value anywhere in the United States. It's a myth. Shareholder primacy is a theory -- though it's really more of an ideology -- that executives/board members can believe in, but it is by no means required by law[1]. [1] https://en.wikipedia.org/wiki/Business_judgment_rule https://en.wikipedia.org/wiki/Business_judgment_rule
- lightbyte 9y ago
  It's not a myth, it's a very common interpretation of Dodge v Ford [1] >A business corporation is organized and carried on primarily for the profit of the stockholders. The powers of the directors are to be employed for that end. The discretion of directors is to be exercised in the choice of means to attain that end, and does not extend to a change in the end itself, to the reduction of profits, or to the non-distribution of profits among stockholders in order to devote them to other purposes... It's not the only interpretation however >Dodge is often misread or mistaught as setting a legal rule of shareholder wealth maximization. This was not and is not the law. Shareholder wealth maximization is a standard of conduct for officers and directors, not a legal mandate. The business judgment rule [which was also upheld in this decision] protects many decisions that deviate from this standard. This is one reading of Dodge. If this is all the case is about, however, it isn't that interesting. [1] https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co.
lightbyte 9y ago
Dodge v Ford Motor Co. [1] >A business corporation is organized and carried on primarily for the profit of the stockholders. The powers of the directors are to be employed for that end. The discretion of directors is to be exercised in the choice of means to attain that end, and does not extend to a change in the end itself, to the reduction of profits, or to the non-distribution of profits among stockholders in order to devote them to other purposes... [1] https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co.

adventured 9y ago

Factually, corporations do not have a legal obligation to their shareholders to maximize their profits. That's a myth and a very absurd one at that. If it were true, Salesforce couldn't operate its various corporate charity programs as one example. You could have researched that one pretty easily: 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... https://medium.com/bull-market/there-is-no-effective-fiduciary-duty-to-maximize-profits-939ae50d0572 https://medium.com/bull-market/there-is-no-effective-fiducia... https://www.washingtonpost.com/opinions/harold-meyerson-the-myth-of-maximizing-shareholder-value/2014/02/11/00cdfb14-9336-11e3-84e1-27626c5ef5fb_story.html?utm_term=.7edd4ec6acf6 https://www.washingtonpost.com/opinions/harold-meyerson-the-... https://www.quora.com/Taxes-To-what-extent-are-U-S-companies-legally-obligated-to-maximize-profits-for-shareholders https://www.quora.com/Taxes-To-what-extent-are-U-S-companies...

jdoliner 9y ago
I don't really see the difference between having a legal obligation to act in your shareholders best interests and an obligation to maximize profits. Given that profit is most shareholders only interest in owning the stock. Now that does mean that companies should maximize long term profit, perhaps at the cost of short term profit. But I fail to see how paying taxes you don't have to is ever in the best interests of their shareholders.
- FireBeyond 9y ago
  Fairly simply, many investors see corporate longevity, while paying smaller, more reliable dividends as their best interest. Doing so could easily be orthogonal to "maximizing profits".
  - jdoliner 9y ago
    Corporate longevity is only in their interests because it maximizes long term profits.