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This idea that companies should be all about shareholder value is so recent, but it seems to have infected minds so thoroughly that people even assume there are

This idea that companies should be all about shareholder value is so recent, but it seems to have infected minds so thoroughly that people even assume there are laws enforcing it. To quote the US Supreme Court: "Modern corporate law does not require for-profit corporations to pursue profit at the expense of everything else, and many do not."

castlecrasher2 8y ago
>people even assume there are laws enforcing it Aren't there? I was under the impression that shareholders can and do file lawsuits against directors and executive leadership. A cursory Google search suggests that this is true.
- EliRivers 8y ago
  I was under the impression that shareholders can and do file lawsuits against directors and executive leadership. A cursory Google search suggests that this is true. I'm certainly not suggesting that shareholders can't file lawsuits. Anyone can file lawsuits. Do you mean lawsuits specifically because companies didn't seek to maximise shareholder value? A cursory google search also suggests it's not true. 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://scholarship.law.cornell.edu/cgi/viewcontent.cgi?article=2311&context=facpub https://scholarship.law.cornell.edu/cgi/viewcontent.cgi?arti... US Supreme Court opinion: “Modern corporate law does not require for-profit corporations to pursue profit at the expense of everything else, and many do not.” and so on. Now, it's true that laws reflect society, and if enough people believe something to be correct for long enough, the law will change. It's certainly true that in recent years we've heard more people, more loudly proclaim, that shareholder value is the whole point and should be the law. We've certainly seen legals cases exploring this. Nonetheless, companies have a number of obligations and responsibilities, and those they hold to their shareholders are but some among many.
  - castlecrasher2 8y ago
    I didn't intend to suggest specifically "maximize shareholder value." I was referring more to if directors or officers breach their duty of care they open themselves to lawsuits.
    - EliRivers 8y ago
      Oh, of course they do. So does everyone. If I don't do my job properly, if I have some duty of care that I breach, I open myself to legal action. So do you. So does the guy operating the pump at my local gas station. But this seems to be going off-topic. I was talking about the myth that the law enforces shareholder value above all; not about people neglecting their duty in general. I did say "shareholder value".
sonnyblarney 8y ago
Companies have always basically been about shareholder value. The whole point of a 'company' was for investors to hire an 'Executive Officer' sailor, so he could make/rent a ship, hire a crew, buy some stuff 1/2 way around the world, come back and sell it a profit so the investors could make money. That's it. And there are definitely laws to protect those interests. People mostly buy shares and found companies to make money. There are other motivations and concerns, always ... But if a group of people are getting together, raising money, to do something other than making money ... there are other words for those: non-profits, NGOs, clubs ...
- EliRivers 8y ago
  Companies have always basically been about shareholder value. History seems to disagree, and given that companies predate shareholders, that's not really surprising. In the early modern era, companies were about a convenient way to group together people engaged in a common business endeavour. [0] In more modern times, shareholders are one responsibility amongst many. The idea that shareholder value is the number one priority always is new, and it's an idea that has done very well over the last three or four decades. However, according to some, that consensus is already crumbling [1]. Perhaps we'll see the idea vanish over the next couple of decades. [0] https://en.wikipedia.org/wiki/Corporation https://en.wikipedia.org/wiki/Corporation [1] https://scholarship.law.cornell.edu/cgi/viewcontent.cgi?article=2311&context=facpub https://scholarship.law.cornell.edu/cgi/viewcontent.cgi?arti...
- ummonk 8y ago
  Note, non-profit and corporation are not mutually exclusive. A not-for-profit corporation is a type of corporation, and has shareholders.

castlecrasher2 8y ago

>people even assume there are laws enforcing it Aren't there? I was under the impression that shareholders can and do file lawsuits against directors and executive leadership. A cursory Google search suggests that this is true.

EliRivers 8y ago
I was under the impression that shareholders can and do file lawsuits against directors and executive leadership. A cursory Google search suggests that this is true. I'm certainly not suggesting that shareholders can't file lawsuits. Anyone can file lawsuits. Do you mean lawsuits specifically because companies didn't seek to maximise shareholder value? A cursory google search also suggests it's not true. 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://scholarship.law.cornell.edu/cgi/viewcontent.cgi?article=2311&context=facpub https://scholarship.law.cornell.edu/cgi/viewcontent.cgi?arti... US Supreme Court opinion: “Modern corporate law does not require for-profit corporations to pursue profit at the expense of everything else, and many do not.” and so on. Now, it's true that laws reflect society, and if enough people believe something to be correct for long enough, the law will change. It's certainly true that in recent years we've heard more people, more loudly proclaim, that shareholder value is the whole point and should be the law. We've certainly seen legals cases exploring this. Nonetheless, companies have a number of obligations and responsibilities, and those they hold to their shareholders are but some among many.
- castlecrasher2 8y ago
  I didn't intend to suggest specifically "maximize shareholder value." I was referring more to if directors or officers breach their duty of care they open themselves to lawsuits.
  - EliRivers 8y ago
    Oh, of course they do. So does everyone. If I don't do my job properly, if I have some duty of care that I breach, I open myself to legal action. So do you. So does the guy operating the pump at my local gas station. But this seems to be going off-topic. I was talking about the myth that the law enforces shareholder value above all; not about people neglecting their duty in general. I did say "shareholder value".

sonnyblarney 8y ago

Companies have always basically been about shareholder value. The whole point of a 'company' was for investors to hire an 'Executive Officer' sailor, so he could make/rent a ship, hire a crew, buy some stuff 1/2 way around the world, come back and sell it a profit so the investors could make money. That's it. And there are definitely laws to protect those interests. People mostly buy shares and found companies to make money. There are other motivations and concerns, always ... But if a group of people are getting together, raising money, to do something other than making money ... there are other words for those: non-profits, NGOs, clubs ...

EliRivers 8y ago
Companies have always basically been about shareholder value. History seems to disagree, and given that companies predate shareholders, that's not really surprising. In the early modern era, companies were about a convenient way to group together people engaged in a common business endeavour. [0] In more modern times, shareholders are one responsibility amongst many. The idea that shareholder value is the number one priority always is new, and it's an idea that has done very well over the last three or four decades. However, according to some, that consensus is already crumbling [1]. Perhaps we'll see the idea vanish over the next couple of decades. [0] https://en.wikipedia.org/wiki/Corporation https://en.wikipedia.org/wiki/Corporation [1] https://scholarship.law.cornell.edu/cgi/viewcontent.cgi?article=2311&context=facpub https://scholarship.law.cornell.edu/cgi/viewcontent.cgi?arti...
ummonk 8y ago
Note, non-profit and corporation are not mutually exclusive. A not-for-profit corporation is a type of corporation, and has shareholders.