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I'm not an economist, but I disagree. The purpose of a corporation is to make money. Money benefits the shareholders. If its purpose was to benefit the "stakeho

I'm not an economist, but I disagree. The purpose of a corporation is to make money. Money benefits the shareholders. If its purpose was to benefit the "stakeholders" then it would be a nonprofit. Stakeholder sounds good for public relations, but I don't see it truly occurring in practice.

Marazan 7y ago
No, the purpose of a corporation is to undertake the business of the corporation. That can be to make money but it doesn't have to be.
wavefunction 7y ago
You can make money without a corporation though. And a corporation adds a bunch of overhead and costs to "making money," so I can't agree that's the purpose of a corporation.
em3rgent0rdr 7y ago
Right...or it could also be a Social Benefit Corporation [1], to emphasize that it will make profit while focusing on a certain social benefit. [1] https://en.wikipedia.org/wiki/Benefit_corporation https://en.wikipedia.org/wiki/Benefit_corporation
eridius 7y ago
It's true that the corporation making a profit benefits the shareholders, but that doesn't mean the purpose of the corporation is to maximize this shareholder benefit. The corporation obviously wants to attract and retain shareholders, and so it must give them sufficient return on their investment, but that's it. And giving the shareholders value isn't at all the "purpose" of the corporation, it's merely something it must do. You may as well say "the purpose of a startup is to maximize return for VCs"; that's certainly what the VCs want but that's not a healthy mindset to be conducting business with.
dredmorbius 7y ago
Incorporation, and the legal protections extending from it, are extended by the state, to provide value, ultimately to the state as a whole (e.g., not just the government, but the people). You'll find a form of this expressed in Adam Smith's Wealth of Nations, though he speaks here in terms of the entire field of political economy: POLITICAL œconomy, considered as a branch of the science of a statesman or legislator, proposes two distinct objects: first, to provide a plentiful revenue or subsistence for the people, or more properly to enable them to provide such a revenue or subsistence for themselves; and secondly, to supply the state or commonwealth with a revenue sufficient for the public services. It proposes to enrich both the people and the sovereign. https://oll.libertyfund.org/titles/smith-an-inquiry-into-the-nature-and-causes-of-the-wealth-of-nations-cannan-ed-vol-1#lf0206-01_label_892 https://oll.libertyfund.org/titles/smith-an-inquiry-into-the... Of incorporated firms -- joint-stock companies -- Smith is markedly less enthused, and limits them to serving in insurance and banking, major civil engineering, and public works projects. The only trades which it seems possible for a joint stock company to carry on successfully without an exclusive privilege are those of which all the operations are capable of being reduced to what is called a Routine, or to such a uniformity of method as admits of little or no variation. Of this kind is, first, the banking trade; secondly, the trade of insurance from fire, and from sea risk and capture in time of war; thirdly, the trade of making and maintaining a navigable cut or canal; and, fourthly, the similar trade of bringing water for the supply of a great city. https://en.wikisource.org/wiki/The_Wealth_of_Nations/Book_V/Chapter_1 https://en.wikisource.org/wiki/The_Wealth_of_Nations/Book_V/... This is also the major thrust of Matt Levine's Bloomberg article on the Roundtable announcement commented elsewhere in this thread: https://www.bloomberg.com/opinion/articles/2019-08-19/maximize-shareholder-value-top-ceos-might-be-opting-out https://www.bloomberg.com/opinion/articles/2019-08-19/maximi...
- 18pfsmt 7y ago
  Smith wasn't some prophet. He got some things right, and some things wrong. He was trying to imagine a world he couldln't possibly imagine from a point in time when slavery was rampant across the world, there were nobles and monarchs, and power was as centralized as the technology would allow. Free enterprise is not intuitive because tribes were so small and the world was so sparsely populated, they never had the issue. Edit: spelling.
phkahler 7y ago
>> The purpose of a corporation is to make money. I dont agree. Most of them that is probably true. I think the purpose is whatever the founder wants it to be, and after they're gone its whatever the person in charge says it is. Perhaps they've agreed to follow the founders vision too. I think it's up to the one in charge to tell shareholders what the purpose of the company is and if an investor wants to buy in, that would be their informed choice. Even under that concept, I think most companies would say their purpose is to make money. But what if the purpose of SpaceX really is to colonize Mars? Is that a problem? I think not.

Marazan 7y ago

No, the purpose of a corporation is to undertake the business of the corporation. That can be to make money but it doesn't have to be.

wavefunction 7y ago

You can make money without a corporation though. And a corporation adds a bunch of overhead and costs to "making money," so I can't agree that's the purpose of a corporation.

em3rgent0rdr 7y ago

Right...or it could also be a Social Benefit Corporation [1], to emphasize that it will make profit while focusing on a certain social benefit. [1] https://en.wikipedia.org/wiki/Benefit_corporation https://en.wikipedia.org/wiki/Benefit_corporation

eridius 7y ago

It's true that the corporation making a profit benefits the shareholders, but that doesn't mean the purpose of the corporation is to maximize this shareholder benefit. The corporation obviously wants to attract and retain shareholders, and so it must give them sufficient return on their investment, but that's it. And giving the shareholders value isn't at all the "purpose" of the corporation, it's merely something it must do. You may as well say "the purpose of a startup is to maximize return for VCs"; that's certainly what the VCs want but that's not a healthy mindset to be conducting business with.

dredmorbius 7y ago

Incorporation, and the legal protections extending from it, are extended by the state, to provide value, ultimately to the state as a whole (e.g., not just the government, but the people). You'll find a form of this expressed in Adam Smith's Wealth of Nations, though he speaks here in terms of the entire field of political economy: POLITICAL œconomy, considered as a branch of the science of a statesman or legislator, proposes two distinct objects: first, to provide a plentiful revenue or subsistence for the people, or more properly to enable them to provide such a revenue or subsistence for themselves; and secondly, to supply the state or commonwealth with a revenue sufficient for the public services. It proposes to enrich both the people and the sovereign. https://oll.libertyfund.org/titles/smith-an-inquiry-into-the-nature-and-causes-of-the-wealth-of-nations-cannan-ed-vol-1#lf0206-01_label_892 https://oll.libertyfund.org/titles/smith-an-inquiry-into-the... Of incorporated firms -- joint-stock companies -- Smith is markedly less enthused, and limits them to serving in insurance and banking, major civil engineering, and public works projects. The only trades which it seems possible for a joint stock company to carry on successfully without an exclusive privilege are those of which all the operations are capable of being reduced to what is called a Routine, or to such a uniformity of method as admits of little or no variation. Of this kind is, first, the banking trade; secondly, the trade of insurance from fire, and from sea risk and capture in time of war; thirdly, the trade of making and maintaining a navigable cut or canal; and, fourthly, the similar trade of bringing water for the supply of a great city. https://en.wikisource.org/wiki/The_Wealth_of_Nations/Book_V/Chapter_1 https://en.wikisource.org/wiki/The_Wealth_of_Nations/Book_V/... This is also the major thrust of Matt Levine's Bloomberg article on the Roundtable announcement commented elsewhere in this thread: https://www.bloomberg.com/opinion/articles/2019-08-19/maximize-shareholder-value-top-ceos-might-be-opting-out https://www.bloomberg.com/opinion/articles/2019-08-19/maximi...

18pfsmt 7y ago
Smith wasn't some prophet. He got some things right, and some things wrong. He was trying to imagine a world he couldln't possibly imagine from a point in time when slavery was rampant across the world, there were nobles and monarchs, and power was as centralized as the technology would allow. Free enterprise is not intuitive because tribes were so small and the world was so sparsely populated, they never had the issue. Edit: spelling.

phkahler 7y ago

>> The purpose of a corporation is to make money. I dont agree. Most of them that is probably true. I think the purpose is whatever the founder wants it to be, and after they're gone its whatever the person in charge says it is. Perhaps they've agreed to follow the founders vision too. I think it's up to the one in charge to tell shareholders what the purpose of the company is and if an investor wants to buy in, that would be their informed choice. Even under that concept, I think most companies would say their purpose is to make money. But what if the purpose of SpaceX really is to colonize Mars? Is that a problem? I think not.