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> their legal duty is to maximize profits I am not nit-picking, asking in good faith: is that enacted into a law ? Or is that part of a contract between shareh

> their legal duty is to maximize profits I am not nit-picking, asking in good faith: is that enacted into a law ? Or is that part of a contract between shareholders and the board of executives ? I have heard about that walmart competitor run like a family business and that gives every employees a voice (a cooperative ?).

andrekandre 8y ago
there is such a thing as “fedicuary duty” [1] which could be sometimes interpreted as “maximize profits” i suppose... according to this ny times article [2] it states: `There is a common belief that corporate directors have a legal duty to maximize corporate profits and “shareholder value” — even if this means skirting ethical rules, damaging the environment or harming employees. But this belief is utterly false. To quote the U.S. Supreme Court opinion in the recent Hobby Lobby case: “Modern corporate law does not require for-profit corporations to pursue profit at the expense of everything else, and many do not.”` the ny times article also cites some sources such as supreme court case; it’s well worth a read [1] https://www.sandiegobusinesslawyerblog.com/fiduciary-duties-of-officers-a/ https://www.sandiegobusinesslawyerblog.com/fiduciary-duties-... [2] 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...
- hannasanarion 8y ago
  The hyperbole isn't helping the case. It is true that companies are not required to "pursue profit at the expense of everything else". But it is also true that companies are held to legal standards that "include acting to promote the value of the corporation for the benefit of its stockholders" (Ebay v Newmark). This was famously weaponized against Craigslist several years ago, who were successfully sued over their refusal to let shareholders change corporate culture.
chipotle_coyote 8y ago
It is neither. This seems to be a very common belief (i.e., that corporations are legally required to maximize returns for shareholders), but it is neither law nor regulation. Nothing prevents a company, even a publicly-traded one, from making decisions with other goals in mind, even if those decisions will reduce profits.
hirsin 8y ago
It's part of the contract for most standard corporations (that aren't B Corps) - the management has a duty to do what's best for the company, which usually comes out to "have a good reason behind doing something". If Amazon comes out tomorrow and says they're throwing in the towel and giving away their money to the Seattle poor because that will have a more positive impact, the lawsuits will be immediate and fairly one-sided. It would be a fairly easy case to argue that Amazon would be failing in their duty to shareholders by spending their money on something with no hope of an ROI.

andrekandre 8y ago

there is such a thing as “fedicuary duty” [1] which could be sometimes interpreted as “maximize profits” i suppose... according to this ny times article [2] it states: `There is a common belief that corporate directors have a legal duty to maximize corporate profits and “shareholder value” — even if this means skirting ethical rules, damaging the environment or harming employees. But this belief is utterly false. To quote the U.S. Supreme Court opinion in the recent Hobby Lobby case: “Modern corporate law does not require for-profit corporations to pursue profit at the expense of everything else, and many do not.”` the ny times article also cites some sources such as supreme court case; it’s well worth a read [1] https://www.sandiegobusinesslawyerblog.com/fiduciary-duties-of-officers-a/ https://www.sandiegobusinesslawyerblog.com/fiduciary-duties-... [2] 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...

hannasanarion 8y ago
The hyperbole isn't helping the case. It is true that companies are not required to "pursue profit at the expense of everything else". But it is also true that companies are held to legal standards that "include acting to promote the value of the corporation for the benefit of its stockholders" (Ebay v Newmark). This was famously weaponized against Craigslist several years ago, who were successfully sued over their refusal to let shareholders change corporate culture.

chipotle_coyote 8y ago

It is neither. This seems to be a very common belief (i.e., that corporations are legally required to maximize returns for shareholders), but it is neither law nor regulation. Nothing prevents a company, even a publicly-traded one, from making decisions with other goals in mind, even if those decisions will reduce profits.

hirsin 8y ago

It's part of the contract for most standard corporations (that aren't B Corps) - the management has a duty to do what's best for the company, which usually comes out to "have a good reason behind doing something". If Amazon comes out tomorrow and says they're throwing in the towel and giving away their money to the Seattle poor because that will have a more positive impact, the lawsuits will be immediate and fairly one-sided. It would be a fairly easy case to argue that Amazon would be failing in their duty to shareholders by spending their money on something with no hope of an ROI.