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Can someone explain to me how PBCs are structurally different than "regular" for-profit corporations? What's stopping them from turning "evil?"

deleted 7y ago
[deleted]
kube-system 7y ago
Traditional corporations in the US are legally required to maximize shareholder profit. https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co. A PBC is allowed (but not required) to make decisions that benefit the public but might not be beneficial for shareholders.
- deleted 7y ago
  [deleted]
- skybrian 7y ago
  That's only true if by "maximize" you don't mean anything like the mathematical maximization of a function. Due to the "business judgement" rule, the management of a for-profit company gets to do business just about any way they want without any legal constraint; all they need is some reasonable rationale for why it might somehow, in the long term, benefit shareholders. This includes giving stuff away and selling stuff for a loss, as many unicorns do. It includes paying employees very well, as some companies do. It includes making donations to charity. It includes either sticking to their original business, or deciding to spend a lot of money breaking into a new business. In practice, shareholder primacy happens less because of what's legally required and more because many companies have management and employees who are shareholders. If the company stock goes up, the employees do well, and this promotes a culture where people try to make the stock go up.
  - kube-system 7y ago
    For daily business, sure, a lot of public benefit can be justified monetarily. Of course, there are exceptions, and a PBC would be allowed greater ability to choose. As I understand, another big benefit is the ability to use public benefit as a protection from hostile takeovers from companies that might undermine the PBC's social mission.
    - anticensor 7y ago
      All limited liability partnerships have a field of business registered (however broad or vague, but it has to have at least one; some jurisdictions also standardise those fields of business) and you usually need supermajority to split, merge and/or change the registered field and/or name. Or do you mean PBC charter can limit further than business licensure requirements?
      - kube-system 7y ago
        PBCs are corporations. Partnerships (at least in the US) are not corporations and work very differently.
        anticensor 7y ago
        I meant partnerships in broad sense, not in USA classification of entities sense. In that sense, corporations are limited-liability partnerships.
- vonmoltke 7y ago
  > Traditional corporations in the US are legally required to maximize shareholder profit. https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co. They absolutely are not, and Ford v. Dodge concerned the rights of shareholders, in particular minority shareholders, to not have the value of their positions intentionally devalued through actions of the corporation's management. In fact, in the first sentence of the very article you posted: > At the same time, the case affirmed the business judgment rule, leaving Ford an extremely wide latitude about how to run the company. As noted in the "Significance" section, value maximization is a legally-unprovable standard.
  - kube-system 7y ago
    I was summarizing in as plain of English as I could in a single sentence. Also from that page: > This case is frequently cited as support for the idea that corporate law requires boards of directors to maximize shareholder wealth. [...] > However, others [...] found that it was an accurate statement of the law, in that "corporate officers and directors have a duty to manage the corporation for the purpose of maximizing profits for the benefit of shareholders" is a default legal rule

deleted 7y ago

[deleted]

kube-system 7y ago

Traditional corporations in the US are legally required to maximize shareholder profit. https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co. A PBC is allowed (but not required) to make decisions that benefit the public but might not be beneficial for shareholders.

deleted 7y ago
[deleted]
skybrian 7y ago
That's only true if by "maximize" you don't mean anything like the mathematical maximization of a function. Due to the "business judgement" rule, the management of a for-profit company gets to do business just about any way they want without any legal constraint; all they need is some reasonable rationale for why it might somehow, in the long term, benefit shareholders. This includes giving stuff away and selling stuff for a loss, as many unicorns do. It includes paying employees very well, as some companies do. It includes making donations to charity. It includes either sticking to their original business, or deciding to spend a lot of money breaking into a new business. In practice, shareholder primacy happens less because of what's legally required and more because many companies have management and employees who are shareholders. If the company stock goes up, the employees do well, and this promotes a culture where people try to make the stock go up.
- kube-system 7y ago
  For daily business, sure, a lot of public benefit can be justified monetarily. Of course, there are exceptions, and a PBC would be allowed greater ability to choose. As I understand, another big benefit is the ability to use public benefit as a protection from hostile takeovers from companies that might undermine the PBC's social mission.
  - anticensor 7y ago
    All limited liability partnerships have a field of business registered (however broad or vague, but it has to have at least one; some jurisdictions also standardise those fields of business) and you usually need supermajority to split, merge and/or change the registered field and/or name. Or do you mean PBC charter can limit further than business licensure requirements?
    - kube-system 7y ago
      PBCs are corporations. Partnerships (at least in the US) are not corporations and work very differently.
      - anticensor 7y ago
        I meant partnerships in broad sense, not in USA classification of entities sense. In that sense, corporations are limited-liability partnerships.
vonmoltke 7y ago
> Traditional corporations in the US are legally required to maximize shareholder profit. https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co. They absolutely are not, and Ford v. Dodge concerned the rights of shareholders, in particular minority shareholders, to not have the value of their positions intentionally devalued through actions of the corporation's management. In fact, in the first sentence of the very article you posted: > At the same time, the case affirmed the business judgment rule, leaving Ford an extremely wide latitude about how to run the company. As noted in the "Significance" section, value maximization is a legally-unprovable standard.
- kube-system 7y ago
  I was summarizing in as plain of English as I could in a single sentence. Also from that page: > This case is frequently cited as support for the idea that corporate law requires boards of directors to maximize shareholder wealth. [...] > However, others [...] found that it was an accurate statement of the law, in that "corporate officers and directors have a duty to manage the corporation for the purpose of maximizing profits for the benefit of shareholders" is a default legal rule