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Who decides this is the goal? Do all corporations have this as their ultimate goal?

ssteeper 7y ago
This is the standard/traditional theory of business, right? No one person decided it, it's just a theory about a capitalist markets. This theory is cited as one of the main guiding principles in corporate ethics as well. https://www.accountingtools.com/articles/2019/1/25/shareholder-theory https://www.accountingtools.com/articles/2019/1/25/sharehold...
repolfx 7y ago
Nobody specifically but it's not the wrong goal. Remember that "zombie companies" that don't make sense anymore but the state won't let die is a typical sign of a sclerotic Communist economy. At some point the existence of a company has to be a means not an end, so what is the end? Shareholder value. Because that's what ultimately means a company had positive return on investment and that is the closest signal we have to "doing something useful".
gridlockd 7y ago
It is their legal obligation. https://www.litigationandtrial.com/2010/09/articles/series/special-comment/ebay-v-newmark-al-franken-was-right-corporations-are-legally-required-to-maximize-profits/ https://www.litigationandtrial.com/2010/09/articles/series/s... Imagine you invested money into some enterprise that promised you a share of the profits it will attempt to gain. If that enterprise never actually attempted to turn a profit, it would effectively be fraud. Now let's imagine they do give you a share of the profits, but the enterprise spends most of its income on frivolous and unnecessary expenses and therefore the profits are very small, that would still effectively be fraud. Therefore, the provision is to maximize value. It is the basic responsibility of anyone running a public company. Of course this is all fuzzy and you do have a lot of leeway in justifying expenses/investments, but the principle remains.
- chiefalchemist 7y ago
  > Therefore, the provision is to maximize value. It is the basic responsibility of anyone running a public company. Of course this is all fuzzy and you do have a lot of leeway in justifying expenses/investments, but the principle remains. And this is where the law can step in. The shareholders can unite and take action. Or the gov can atep in. For example, the state of NY is going after Exxon Mobile for fraud, as related to EM's lack of disclosure over their role in climate change.

This is the standard/traditional theory of business, right? No one person decided it, it's just a theory about a capitalist markets. This theory is cited as one of the main guiding principles in corporate ethics as well. https://www.accountingtools.com/articles/2019/1/25/shareholder-theory https://www.accountingtools.com/articles/2019/1/25/sharehold...

repolfx 7y ago

Nobody specifically but it's not the wrong goal. Remember that "zombie companies" that don't make sense anymore but the state won't let die is a typical sign of a sclerotic Communist economy. At some point the existence of a company has to be a means not an end, so what is the end? Shareholder value. Because that's what ultimately means a company had positive return on investment and that is the closest signal we have to "doing something useful".

gridlockd 7y ago

It is their legal obligation. https://www.litigationandtrial.com/2010/09/articles/series/special-comment/ebay-v-newmark-al-franken-was-right-corporations-are-legally-required-to-maximize-profits/ https://www.litigationandtrial.com/2010/09/articles/series/s... Imagine you invested money into some enterprise that promised you a share of the profits it will attempt to gain. If that enterprise never actually attempted to turn a profit, it would effectively be fraud. Now let's imagine they do give you a share of the profits, but the enterprise spends most of its income on frivolous and unnecessary expenses and therefore the profits are very small, that would still effectively be fraud. Therefore, the provision is to maximize value. It is the basic responsibility of anyone running a public company. Of course this is all fuzzy and you do have a lot of leeway in justifying expenses/investments, but the principle remains.

chiefalchemist 7y ago
> Therefore, the provision is to maximize value. It is the basic responsibility of anyone running a public company. Of course this is all fuzzy and you do have a lot of leeway in justifying expenses/investments, but the principle remains. And this is where the law can step in. The shareholders can unite and take action. Or the gov can atep in. For example, the state of NY is going after Exxon Mobile for fraud, as related to EM's lack of disclosure over their role in climate change.