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When I've herd this concept invoked the source has generally been attributed to Dodge v. Ford Motor Co.[1] That ruling seems to cut in either direction dependin

When I've herd this concept invoked the source has generally been attributed to Dodge v. Ford Motor Co.[1] That ruling seems to cut in either direction depending on the analysis. But in the end the most compelling argument seems to be lack of enforceability... the rule of wealth maximization for shareholders is virtually impossible to enforce as a practical matter. The rule is aspirational, except in odd cases. As long as corporate directors and CEOs claim to be maximizing profits for shareholders, they will be taken at their word, because it is impossible to refute these corporate officials' self-serving assertions about their motives. — Jonathan Macey While the rule of wealth maximization for shareholders is not an enforceable law, it is a standard of conduct for officers and directors of a company. [1] https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co.

philipov 6y ago
The trick is that there is no single standard you can apply for what constitutes wealth maximization. In the very simplest interpretation, you have contradictory behaviors that will maximize short term versus long term wealth. This mantra is usually invoked to justify any kind of short-term greed at the cost of everything else. Corporations are not obligated to prioritize short-sighted behavior that can damage the entire ecosystem just to make a quick buck.
mattkrause 6y ago
Macey's whole article develops that idea a bit more (here: https://digitalcommons.law.yale.edu/fss_papers/1384/ https://digitalcommons.law.yale.edu/fss_papers/1384/). Ford's response to the Dodge Brothers was: My ambition is to employ still more men, to spread the benefits of this industrial system to the greatest possible number, to help them build up their lives and their homes. and Macey says this was precisely the right amount to torpedo his case. If he had said less ("we're expanding"), he would have been fine. Had he said more and provided even a shred of a business justification (goodwill, better work from talented workers, expanding the customer base), he would have been fine. As it was though, he put the court in a situation where they more or less had to find that he couldn't openly do as he pleases with other people's money. Shlensky has a fairly similar fact pattern. The Cubs decision was supposedly driven by non-economic factors, namely beliefs about 'proper' baseball and possible effects on the neighborhood. However, they left open the door that these factors might themselves affect Cub's business prospects, a door that Ford slammed shut on himself. As a result, the Court found: “Plaintiff in the instant case argues that the directors are acting for reasons unrelated to the financial interest and welfare of the Cubs. However, we are not satisfied that the motives assigned to Philip K. Wrigley, and through him to the other directors, are contrary to the best interests of the corporation and the stockholders. For example, it appears to us that the effect on the surrounding neighborhood might well be considered by a director who was considering the patrons who would or would not attend the games if the park were in a poor neighborhood. Furthermore, the long run interest of the corporation in its property value at Wrigley Field might demand all efforts to keep the neighborhood from deteriorating. By these thoughts we do not mean to say that we have decided that the decision of the directors was a correct one. That is beyond our jurisdiction and ability. We are merely saying that the decision is one properly before directors and the motives alleged in the amended complaint showed no fraud, illegality or conflict of interest in their making of that decision.” (from https://casetext.com/case/shlensky-v-wrigley https://casetext.com/case/shlensky-v-wrigley)
- DangitBobby 6y ago
  Just so you know, this is what a mobile user sees when someone uses code blocks to format quotes on HN: https://i.imgur.com/EDI0Ist.png https://i.imgur.com/EDI0Ist.png It makes people scroll side to side to read the quote. Please don't use code blocks for quotes.
  - mattkrause 6y ago
    There's a link at the bottom to the text, if that's easier. And frankly, the fact that there's no other way to indicate a block quote is absurd.
    - DangitBobby 6y ago
      I agree, there should be one.

philipov 6y ago

The trick is that there is no single standard you can apply for what constitutes wealth maximization. In the very simplest interpretation, you have contradictory behaviors that will maximize short term versus long term wealth. This mantra is usually invoked to justify any kind of short-term greed at the cost of everything else. Corporations are not obligated to prioritize short-sighted behavior that can damage the entire ecosystem just to make a quick buck.

mattkrause 6y ago

Macey's whole article develops that idea a bit more (here: https://digitalcommons.law.yale.edu/fss_papers/1384/ https://digitalcommons.law.yale.edu/fss_papers/1384/). Ford's response to the Dodge Brothers was: My ambition is to employ still more men, to spread the benefits of this industrial system to the greatest possible number, to help them build up their lives and their homes. and Macey says this was precisely the right amount to torpedo his case. If he had said less ("we're expanding"), he would have been fine. Had he said more and provided even a shred of a business justification (goodwill, better work from talented workers, expanding the customer base), he would have been fine. As it was though, he put the court in a situation where they more or less had to find that he couldn't openly do as he pleases with other people's money. Shlensky has a fairly similar fact pattern. The Cubs decision was supposedly driven by non-economic factors, namely beliefs about 'proper' baseball and possible effects on the neighborhood. However, they left open the door that these factors might themselves affect Cub's business prospects, a door that Ford slammed shut on himself. As a result, the Court found: “Plaintiff in the instant case argues that the directors are acting for reasons unrelated to the financial interest and welfare of the Cubs. However, we are not satisfied that the motives assigned to Philip K. Wrigley, and through him to the other directors, are contrary to the best interests of the corporation and the stockholders. For example, it appears to us that the effect on the surrounding neighborhood might well be considered by a director who was considering the patrons who would or would not attend the games if the park were in a poor neighborhood. Furthermore, the long run interest of the corporation in its property value at Wrigley Field might demand all efforts to keep the neighborhood from deteriorating. By these thoughts we do not mean to say that we have decided that the decision of the directors was a correct one. That is beyond our jurisdiction and ability. We are merely saying that the decision is one properly before directors and the motives alleged in the amended complaint showed no fraud, illegality or conflict of interest in their making of that decision.” (from https://casetext.com/case/shlensky-v-wrigley https://casetext.com/case/shlensky-v-wrigley)

DangitBobby 6y ago
Just so you know, this is what a mobile user sees when someone uses code blocks to format quotes on HN: https://i.imgur.com/EDI0Ist.png https://i.imgur.com/EDI0Ist.png It makes people scroll side to side to read the quote. Please don't use code blocks for quotes.
- mattkrause 6y ago
  There's a link at the bottom to the text, if that's easier. And frankly, the fact that there's no other way to indicate a block quote is absurd.
  - DangitBobby 6y ago
    I agree, there should be one.