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> 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,

by 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.

by 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.