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Question: C-Corp vs Public-Benefit companies in similar situations. As I understand it Netflix really doesn't have the option of taking a principled stand here

Question: C-Corp vs Public-Benefit companies in similar situations. As I understand it Netflix really doesn't have the option of taking a principled stand here (let me know if I'm wrong) due its financial responsibilities toward shareholders. If they had incorporated as a public-benefit corporation would they have additional freedom to say "We won't participate in this market on ethical grounds?"

DKnoll 8y ago
There is no law (in any jurisdiction, as far as I know) that states a corporation must relentlessly pursue profits. An owner is free to stay out of markets for moral or other reasons without any strategic or financial justification. The only thing stopping them would be other shareholders who disagree. Private, public, public-benefit, etc... doesn't matter.
- iandanforth 8y ago
  How does this square with the principle of shareholder primacy and Dodge v Ford? https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co.
  - DKnoll 8y ago
    That is very interesting, thank you. I am not a lawyer so anything I say is amateur speculation, but it seems like that case rules mostly on Ford's ability to arbitrarily reduce profit to shareholders by reducing or removing dividends, not necessarily acting in the public interest. This goes back to what I said earlier about a corporation being free to act in the public interest as long as the shareholders don't mind, as then there is no injured party.
  - wgerard 8y ago
    This is going to sound condescending but I really don't mean it to be, I just couldn't think of a better way to phrase this: Did you read the bottom half of the entry's summary or the entry itself? Specifically: > In the 1950s and 1960s, states rejected Dodge repeatedly > The general legal position today is that the business judgment that directors may exercise is expansive. Management decisions will not be challenged where one can point to any rational link to benefiting the corporation as a whole. and quotes from a number of law journals: > Dodge is often misread or mistaught as setting a legal rule of shareholder wealth maximization. This was not and is not the law. > the rule of wealth maximization for shareholders is virtually impossible to enforce as a practical matter. The rule is aspirational, except in odd cases.
jimjimjim 8y ago
There is no such requirement!
- trhway 8y ago
  [a potential threat of] shareholders bringing suits makes to some extent up for such a requirement.
  - Lazare 8y ago
    Not really. Such lawsuits aren't really a thing.
    - richard_todd 8y ago
      Wall Street Journal says there were a record number of Shareholder lawsuits in 2017 for reasons including disappointing earnings. Nearly 10% of traded companies faced one that year. It kind of seems like “a thing.” https://www.wsj.com/articles/why-lawsuits-targeting-stock-drops-are-on-the-rise-1503307800 https://www.wsj.com/articles/why-lawsuits-targeting-stock-dr... Edit: 2017, not this year
      - toyg 8y ago
        The number of filings is irrelevant: I can sue NASA for not building a space station on the moon, it doesn’t mean it won’t be thrown out. The article is paywalled so I can’t see if it reports the number that actually matters, i.e. wins.
        richard_todd 8y ago
        From the same article: “Of cases filed from 1997 to 2016, according to Cornerstone, 48% have been settled, 42% have been dismissed and 10% are continuing.“ It later says median settlements range from $2.6 to $13.9 million depending on how far the suit gets and how established the firms are. Another interesting thing was that, recently, most of these suits come from individuals rather than institutional investors.
deleted 8y ago
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DKnoll 8y ago

There is no law (in any jurisdiction, as far as I know) that states a corporation must relentlessly pursue profits. An owner is free to stay out of markets for moral or other reasons without any strategic or financial justification. The only thing stopping them would be other shareholders who disagree. Private, public, public-benefit, etc... doesn't matter.

iandanforth 8y ago
How does this square with the principle of shareholder primacy and Dodge v Ford? https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co.
- DKnoll 8y ago
  That is very interesting, thank you. I am not a lawyer so anything I say is amateur speculation, but it seems like that case rules mostly on Ford's ability to arbitrarily reduce profit to shareholders by reducing or removing dividends, not necessarily acting in the public interest. This goes back to what I said earlier about a corporation being free to act in the public interest as long as the shareholders don't mind, as then there is no injured party.
- wgerard 8y ago
  This is going to sound condescending but I really don't mean it to be, I just couldn't think of a better way to phrase this: Did you read the bottom half of the entry's summary or the entry itself? Specifically: > In the 1950s and 1960s, states rejected Dodge repeatedly > The general legal position today is that the business judgment that directors may exercise is expansive. Management decisions will not be challenged where one can point to any rational link to benefiting the corporation as a whole. and quotes from a number of law journals: > Dodge is often misread or mistaught as setting a legal rule of shareholder wealth maximization. This was not and is not the law. > the rule of wealth maximization for shareholders is virtually impossible to enforce as a practical matter. The rule is aspirational, except in odd cases.

jimjimjim 8y ago

There is no such requirement!

trhway 8y ago
[a potential threat of] shareholders bringing suits makes to some extent up for such a requirement.
- Lazare 8y ago
  Not really. Such lawsuits aren't really a thing.
  - richard_todd 8y ago
    Wall Street Journal says there were a record number of Shareholder lawsuits in 2017 for reasons including disappointing earnings. Nearly 10% of traded companies faced one that year. It kind of seems like “a thing.” https://www.wsj.com/articles/why-lawsuits-targeting-stock-drops-are-on-the-rise-1503307800 https://www.wsj.com/articles/why-lawsuits-targeting-stock-dr... Edit: 2017, not this year
    - toyg 8y ago
      The number of filings is irrelevant: I can sue NASA for not building a space station on the moon, it doesn’t mean it won’t be thrown out. The article is paywalled so I can’t see if it reports the number that actually matters, i.e. wins.
      - richard_todd 8y ago
        From the same article: “Of cases filed from 1997 to 2016, according to Cornerstone, 48% have been settled, 42% have been dismissed and 10% are continuing.“ It later says median settlements range from $2.6 to $13.9 million depending on how far the suit gets and how established the firms are. Another interesting thing was that, recently, most of these suits come from individuals rather than institutional investors.

deleted 8y ago

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