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What else should for profit companies exist for?

by a_imho 7y ago

t-writescode 7y ago
For profit companies should exist for whatever they want to exist for, as long as they can stay alive. Public companies, on the other hand, apparently have a legal obligation to make as much money as possible, a feature I find despicable.
- a_imho 7y ago
  Right. Is it more despicable if some are upfront about it? Do we need to entertain the idea companies are our friends?
- chalst 7y ago
  The idea that company directors have a fiduciary duty to maximise shareholder value is mostly a myth: it is one of those ideas that many economists like that seem to simplify things but actually can't be made to work. James Kwak has a nice article (Medium, sorry) on this https://medium.com/bull-market/there-is-no-effective-fiduciary-duty-to-maximize-profits-939ae50d0572 https://medium.com/bull-market/there-is-no-effective-fiducia... > The specific fiduciary duties of corporate directors...are common law: legal principles that have been established by courts in the process of adjudicating cases over the years. As it turns out, in Delaware, which is the state that matters—not only because most large corporations are incorporated there, but because courts in other states tend to look to Delaware law when dealing with new issues of corporate law—there are exactly two fiduciary duties: the duty of loyalty and the duty of care. > They duty of care is basically the duty to pay attention to your job: in essence, to make decisions on the basis of reasonably adequate information. There is an academic controversy—fueled by careless uses of language by the courts—about whether the standard of conduct is negligence or gross negligence. But the point here is that the duty of care isn’t a duty to do any particular thing, such as maximize profits. > The duty of loyalty is marginally more complicated. This duty (like the duty of care) existed in agency law—the law governing the relationship between agents, such as employees, and principals, such as companies—before corporations became widespread in the nineteenth century. There, the duty of loyalty essentially meant that you couldn’t use your position as an agent to make a personal profit—by stealing directly from the principal, via a transaction with the principal, or, in the famous case of Reading v. Regem, by using your British Army uniform to help smugglers during your off hours.
- vonmoltke 7y ago
  > Public companies, on the other hand, apparently have a legal obligation to make as much money as possible, a feature I find despicable. No, they don't. Please stop spreading this myth.
- Xixi 7y ago
  For profit companies (including public companies) can be established to pursue any lawful purpose. They are absolutely not required to make as much money as possible. "While it is certainly true that a central objective of for-profit corporations is to make money, modern corporate law does not require for-profit corporations to pursue profit at the expense of everything else, and many do not do so. For-profit corporations, with ownership approval, support a wide variety of charitable causes, and it is not at all uncommon for such corporations to further humanitarian and other altruistic objectives. Many examples come readily to mind. So long as its owners agree, a for-profit corporation may take costly pollution-control and energy-conservation measures that go beyond what the law requires." [1] https://www.law.cornell.edu/supremecourt/text/13-354#OPINION_3-23ref https://www.law.cornell.edu/supremecourt/text/13-354#OPINION...
hannasanarion 7y ago
Most companies at least pretend to have a mission aside from making money. If you go to a major bank and ask "why do you exist", they'll give you a whole spiel about how they help people achieve fiscal stability, they help new businesses get established and bring new products to market, they help people grow their retirement funds, providing services so that the world can be a better place, yada yada yada. Google will tell you "We help people find information, and we help businesses find an audience for their products, and we make pocket-size computing cheap and available for everyone all over the world, and we hope that the sum of these activities will make the world a better place" If you go to Oracle and say "why do you exist" they'll simply say "we make money". That's it. They don't have a mission, they're not trying to make the world a better place, they just want to make money.

What else should for profit companies exist for?

by a_imho 7y ago

What else should for profit companies exist for?

For profit companies should exist for whatever they want to exist for, as long as they can stay alive. Public companies, on the other hand, apparently have a legal obligation to make as much money as possible, a feature I find despicable.

a_imho 7y ago
Right. Is it more despicable if some are upfront about it? Do we need to entertain the idea companies are our friends?
chalst 7y ago
The idea that company directors have a fiduciary duty to maximise shareholder value is mostly a myth: it is one of those ideas that many economists like that seem to simplify things but actually can't be made to work. James Kwak has a nice article (Medium, sorry) on this https://medium.com/bull-market/there-is-no-effective-fiduciary-duty-to-maximize-profits-939ae50d0572 https://medium.com/bull-market/there-is-no-effective-fiducia... > The specific fiduciary duties of corporate directors...are common law: legal principles that have been established by courts in the process of adjudicating cases over the years. As it turns out, in Delaware, which is the state that matters—not only because most large corporations are incorporated there, but because courts in other states tend to look to Delaware law when dealing with new issues of corporate law—there are exactly two fiduciary duties: the duty of loyalty and the duty of care. > They duty of care is basically the duty to pay attention to your job: in essence, to make decisions on the basis of reasonably adequate information. There is an academic controversy—fueled by careless uses of language by the courts—about whether the standard of conduct is negligence or gross negligence. But the point here is that the duty of care isn’t a duty to do any particular thing, such as maximize profits. > The duty of loyalty is marginally more complicated. This duty (like the duty of care) existed in agency law—the law governing the relationship between agents, such as employees, and principals, such as companies—before corporations became widespread in the nineteenth century. There, the duty of loyalty essentially meant that you couldn’t use your position as an agent to make a personal profit—by stealing directly from the principal, via a transaction with the principal, or, in the famous case of Reading v. Regem, by using your British Army uniform to help smugglers during your off hours.
vonmoltke 7y ago
> Public companies, on the other hand, apparently have a legal obligation to make as much money as possible, a feature I find despicable. No, they don't. Please stop spreading this myth.
Xixi 7y ago
For profit companies (including public companies) can be established to pursue any lawful purpose. They are absolutely not required to make as much money as possible. "While it is certainly true that a central objective of for-profit corporations is to make money, modern corporate law does not require for-profit corporations to pursue profit at the expense of everything else, and many do not do so. For-profit corporations, with ownership approval, support a wide variety of charitable causes, and it is not at all uncommon for such corporations to further humanitarian and other altruistic objectives. Many examples come readily to mind. So long as its owners agree, a for-profit corporation may take costly pollution-control and energy-conservation measures that go beyond what the law requires." [1] https://www.law.cornell.edu/supremecourt/text/13-354#OPINION_3-23ref https://www.law.cornell.edu/supremecourt/text/13-354#OPINION...

hannasanarion 7y ago

Most companies at least pretend to have a mission aside from making money. If you go to a major bank and ask "why do you exist", they'll give you a whole spiel about how they help people achieve fiscal stability, they help new businesses get established and bring new products to market, they help people grow their retirement funds, providing services so that the world can be a better place, yada yada yada. Google will tell you "We help people find information, and we help businesses find an audience for their products, and we make pocket-size computing cheap and available for everyone all over the world, and we hope that the sum of these activities will make the world a better place" If you go to Oracle and say "why do you exist" they'll simply say "we make money". That's it. They don't have a mission, they're not trying to make the world a better place, they just want to make money.