4 ms·

Of course they are. Facebook is a public company, it has a financial duty to its shareholders to take as much as society will give it.

dogcomplex 8y ago
But taking "morally bankrupt" risks that backfire in PR down the road is (sometimes) a bad long-term finanical strategy.
eropple 8y ago
> Facebook is a public company, it has a financial duty to its shareholders to take as much as society will give it. This is not and has never been true and at this point the repetition is difficult to chalk up as anything but mendacity.
toufiqbarhamov 8y ago
Why does that bit of nonsense get repeated so often? It’s a myth. https://scholarship.law.cornell.edu/cgi/viewcontent.cgi?article=2311&context=facpub https://scholarship.law.cornell.edu/cgi/viewcontent.cgi?arti... Debunking the Shareholder Value Myth: History Although many contemporary business experts take shareholder primacy as a given, the rise of shareholder primacy as dominant business philosophy is a relatively recent phenomenon. For most of the twentieth century, large public companies followed a philosophy called managerial capitalism. Boards of directors in managerial companies operated largely as self-selecting and autonomous decision-making bodies, with dispersed shareholders playing a passive role. What’s more, directors viewed themselves not as shareholders’ servants, but as trustees for great institutions that should serve not only shareholders but other corporate stakeholders as well, including customers, creditors, employees, and the community. Equity investors were treated as an important corporate constituency, but not the only constituency that mattered. Nor was share price assumed to be the best proxy for corporate performance.7... So where did the idea that corporations exist only to maximize shareholder value come from? Originally, it seems, from free-market economists. In 1970, Nobel Prize winner Milton Friedman published a famous essay in the New York Times arguing that the only proper goal of business was to maximize profits for the company’s owners, whom Friedman assumed (incorrectly, we shall see) to be the company’s shareholders.9 Even more influential was a 1976 article by Michael Jensen and William Meckling titled the “Theory of the Firm.”10 This article, still the most frequently cited in the business literature,11 repeated Friedman’s mistake by assuming that shareholders owned corporations and were corporation’s residual claimants. From this assumption, Jensen and Meckling argued that a key problem in corporations was getting wayward directors and executives to focus on maximizing the wealth of the corporations’ shareholders. Don’t repeat outright bullshit like it’s a fact.
- ibeckermayer 8y ago
  Sincere question: is this UCLA law professor mistaken in his first paragraph? https://www.nytimes.com/roomfordebate/2015/04/16/what-are-corporations-obligations-to-shareholders/a-duty-to-shareholder-value https://www.nytimes.com/roomfordebate/2015/04/16/what-are-co...
  - asdfasgasdgasdg 8y ago
    He's right, however, managers can simply say, "We believe long term wealth maximization is dependent on not being assholes and getting the company regulated out of existence," and that will be the end of any shareholder lawsuit on the subject. US case law gives wide leeway to managers to determine what is best for the business.
    - LanceH 8y ago
      and 12 years later "that will be the end of any shareholder lawsuit on the subject".
      - asdfasgasdgasdg 8y ago
        99% of the time, that doesn't actually happen, and even when it does, it tends to amount to more of an annoyance than a serious threat. It's not like it takes the CEO's time personally to deal with an activist shareholder lawsuit. They hire a team to handle it, and things move on. Managers are practical people. They don't optimize for rare activist shareholder cases.
- rmrfrmrf 8y ago
  You've only proved their point. Since 1970 (ie at least a decade before most users of this site were born), it has been a major guiding principle in finance. Because of that, the majority of board members and large shareholders will also share this value. If it sounds like a circular argument, that's because it is.
- ineedasername 8y ago

dogcomplex 8y ago

But taking "morally bankrupt" risks that backfire in PR down the road is (sometimes) a bad long-term finanical strategy.

eropple 8y ago

> Facebook is a public company, it has a financial duty to its shareholders to take as much as society will give it. This is not and has never been true and at this point the repetition is difficult to chalk up as anything but mendacity.

toufiqbarhamov 8y ago

Why does that bit of nonsense get repeated so often? It’s a myth. https://scholarship.law.cornell.edu/cgi/viewcontent.cgi?article=2311&context=facpub https://scholarship.law.cornell.edu/cgi/viewcontent.cgi?arti... Debunking the Shareholder Value Myth: History Although many contemporary business experts take shareholder primacy as a given, the rise of shareholder primacy as dominant business philosophy is a relatively recent phenomenon. For most of the twentieth century, large public companies followed a philosophy called managerial capitalism. Boards of directors in managerial companies operated largely as self-selecting and autonomous decision-making bodies, with dispersed shareholders playing a passive role. What’s more, directors viewed themselves not as shareholders’ servants, but as trustees for great institutions that should serve not only shareholders but other corporate stakeholders as well, including customers, creditors, employees, and the community. Equity investors were treated as an important corporate constituency, but not the only constituency that mattered. Nor was share price assumed to be the best proxy for corporate performance.7... So where did the idea that corporations exist only to maximize shareholder value come from? Originally, it seems, from free-market economists. In 1970, Nobel Prize winner Milton Friedman published a famous essay in the New York Times arguing that the only proper goal of business was to maximize profits for the company’s owners, whom Friedman assumed (incorrectly, we shall see) to be the company’s shareholders.9 Even more influential was a 1976 article by Michael Jensen and William Meckling titled the “Theory of the Firm.”10 This article, still the most frequently cited in the business literature,11 repeated Friedman’s mistake by assuming that shareholders owned corporations and were corporation’s residual claimants. From this assumption, Jensen and Meckling argued that a key problem in corporations was getting wayward directors and executives to focus on maximizing the wealth of the corporations’ shareholders. Don’t repeat outright bullshit like it’s a fact.

ibeckermayer 8y ago
Sincere question: is this UCLA law professor mistaken in his first paragraph? https://www.nytimes.com/roomfordebate/2015/04/16/what-are-corporations-obligations-to-shareholders/a-duty-to-shareholder-value https://www.nytimes.com/roomfordebate/2015/04/16/what-are-co...
- asdfasgasdgasdg 8y ago
  He's right, however, managers can simply say, "We believe long term wealth maximization is dependent on not being assholes and getting the company regulated out of existence," and that will be the end of any shareholder lawsuit on the subject. US case law gives wide leeway to managers to determine what is best for the business.
  - LanceH 8y ago
    and 12 years later "that will be the end of any shareholder lawsuit on the subject".
    - asdfasgasdgasdg 8y ago
      99% of the time, that doesn't actually happen, and even when it does, it tends to amount to more of an annoyance than a serious threat. It's not like it takes the CEO's time personally to deal with an activist shareholder lawsuit. They hire a team to handle it, and things move on. Managers are practical people. They don't optimize for rare activist shareholder cases.
rmrfrmrf 8y ago
You've only proved their point. Since 1970 (ie at least a decade before most users of this site were born), it has been a major guiding principle in finance. Because of that, the majority of board members and large shareholders will also share this value. If it sounds like a circular argument, that's because it is.
ineedasername 8y ago