4 ms·

So given the fiduciary responsibility to maximize shareholder value that is hard right now, but the existence of Edit: The above is apparently more cultural th

by Grimm1 7y ago

So given the fiduciary responsibility to maximize shareholder value that is hard right now, but the existence of Edit: The above is apparently more cultural than legal but I still like the below option. https://en.wikipedia.org/wiki/Benefit_corporation https://en.wikipedia.org/wiki/Benefit_corporation Give's me hope as a mode to found a company, the gist is: "that includes positive impact on society, workers, the community and the environment in addition to profit as its legally defined goals" My understanding is that in the context of the current startup climate is that it is harder but not impossible to raise money under that type of corp though I haven't seen it myself yet.

kens 7y ago
There generally isn't a responsibility to maximize shareholder value. See, for instance https://www.lawschool.cornell.edu/academics/clarke_business_law_institute/corporations-and-society/Common-Misunderstandings-About-Corporations.cfm https://www.lawschool.cornell.edu/academics/clarke_business_...
- Grimm1 7y ago
  Oh interesting, I've heard that repeated so many times by so many different people in different places in business including the worry that they might be going against their fiduciary responsibility to the company I kind of just took it as fact. Thanks! I still think that baking the non financial responsibilities into the founding legal documents would go a long way towards preventing those goals from being eroded after the initial founders move on even more so after what you shared as people clearly make the personal decision to prioritize shareholder value above all else then, which is somewhat more disheartening.
ska 7y ago
> So given the fiduciary responsibility to maximize shareholder value that is hard right now This is more cultural than legal (and, as the article points out, he had a lot to do with this shift)
- pc86 7y ago
  Of course we had a lot to do with it, it's a construct of Man. These are not innate laws of the universe passed down to us. That being said, it is absolutely legal as well as cultural. As a corporate director you can and will be sued if shareholders can show you intentionally made a choice to lower shareholder value even after knowing it would.
  - Apocryphon 7y ago
    If you were planning to sabotage things in some sort of short-seller scheme, probably. That’s likely different from a hypothetical CEO accidentally lowering stock value in the process of fulfilling some sort of ethical or social good, since corporations tend to include an avowed code of values.
  - ska 7y ago
    Of course there is a legal, i.e. fiduciary duty. It just isn't what most people thing it is. To the OP, it was Welch (and others) who popularized the idea of this meaning maximizing "shareholder value", but fiduciary duty existed before then and it is the cultural context that has shifted. It lay terms, many people incorrectly think this means that you have a duty to take actions that will raise the share price. But it's much more nuanced than that. You can absolutely be successfully sued if it can be shown that you did not act in what you reasonably believed to be the best interests of the corporation, but that is a very different thing. Basically your fiduciary duty is to act in good faith, in the interests of the company (& thereby shareholders). It is a pretty high bar to demonstrate failure, and most normal things that shareholders might gripe about will fall well short of this, and under "business judgement". There are other checks and balances here, bear in mind that if the board is unhappy enough about the approach they can replace the CEO, etc.
mikestew 7y ago
So given the fiduciary responsibility to maximize shareholder Not given. I’d ask for a source, but I’ll save you the trouble of a fruitless search by not doing so.
- pc86 7y ago
  Do you not believe that a fiduciary responsibility exists between the board/executive leadership and corporate shareholders?
  - mikestew 7y ago
    I fail to see what my beliefs have to do with the topic. No legal obligation exists, my opinion is irrelevant.
epitrochoidal 7y ago
Even if that responsibility exists, and a number of individuals have questioned whether it does, it doesn't necessarily follow that such maximization needs to be solely focused on short-term gain.

by Grimm1 7y ago

kens 7y ago

There generally isn't a responsibility to maximize shareholder value. See, for instance https://www.lawschool.cornell.edu/academics/clarke_business_law_institute/corporations-and-society/Common-Misunderstandings-About-Corporations.cfm https://www.lawschool.cornell.edu/academics/clarke_business_...

Grimm1 7y ago
Oh interesting, I've heard that repeated so many times by so many different people in different places in business including the worry that they might be going against their fiduciary responsibility to the company I kind of just took it as fact. Thanks! I still think that baking the non financial responsibilities into the founding legal documents would go a long way towards preventing those goals from being eroded after the initial founders move on even more so after what you shared as people clearly make the personal decision to prioritize shareholder value above all else then, which is somewhat more disheartening.

ska 7y ago

> So given the fiduciary responsibility to maximize shareholder value that is hard right now This is more cultural than legal (and, as the article points out, he had a lot to do with this shift)

pc86 7y ago
Of course we had a lot to do with it, it's a construct of Man. These are not innate laws of the universe passed down to us. That being said, it is absolutely legal as well as cultural. As a corporate director you can and will be sued if shareholders can show you intentionally made a choice to lower shareholder value even after knowing it would.
- Apocryphon 7y ago
  If you were planning to sabotage things in some sort of short-seller scheme, probably. That’s likely different from a hypothetical CEO accidentally lowering stock value in the process of fulfilling some sort of ethical or social good, since corporations tend to include an avowed code of values.
- ska 7y ago
  Of course there is a legal, i.e. fiduciary duty. It just isn't what most people thing it is. To the OP, it was Welch (and others) who popularized the idea of this meaning maximizing "shareholder value", but fiduciary duty existed before then and it is the cultural context that has shifted. It lay terms, many people incorrectly think this means that you have a duty to take actions that will raise the share price. But it's much more nuanced than that. You can absolutely be successfully sued if it can be shown that you did not act in what you reasonably believed to be the best interests of the corporation, but that is a very different thing. Basically your fiduciary duty is to act in good faith, in the interests of the company (& thereby shareholders). It is a pretty high bar to demonstrate failure, and most normal things that shareholders might gripe about will fall well short of this, and under "business judgement". There are other checks and balances here, bear in mind that if the board is unhappy enough about the approach they can replace the CEO, etc.

mikestew 7y ago

So given the fiduciary responsibility to maximize shareholder Not given. I’d ask for a source, but I’ll save you the trouble of a fruitless search by not doing so.

pc86 7y ago
Do you not believe that a fiduciary responsibility exists between the board/executive leadership and corporate shareholders?
- mikestew 7y ago
  I fail to see what my beliefs have to do with the topic. No legal obligation exists, my opinion is irrelevant.

epitrochoidal 7y ago

Even if that responsibility exists, and a number of individuals have questioned whether it does, it doesn't necessarily follow that such maximization needs to be solely focused on short-term gain.