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Just a friendly reminder that as far as I understand it, publicly traded companies are required by law to maximize their profits (which is what's happening here

by comboy 6y ago

Just a friendly reminder that as far as I understand it, publicly traded companies are required by law to maximize their profits (which is what's happening here). Then there are always politicians shouting about companies following that, instead of trying to do something to fix the problem. Problem which won't be fixed by companies and must be fixed by governments. edit: or rather maximize shareholders value, which basically means profits on the long run, which still means paying as little tax as you can legally

Karunamon 6y ago
This. No company anywhere is going to pay a cent more in taxes than they're legally required to; the proper places to attack this kind of abuse is changing the laws.
2OEH8eoCRo0 6y ago
That's false. You're only legally required to act in the interest of shareholders. That can mean a lot of things.
- onetimemanytime 6y ago
  OK. John takes over Google and pays more taxes when the current scheme is legal. How is that rationalized? Why not pay even more?
  - HPsquared 6y ago
    Building goodwill or other intangibles.
    - andromeduck 6y ago
      No such thing. Governments are inherently extractive same as any other monopoly.
    - onetimemanytime 6y ago
      Goodwill with the government? That $5 Billion or whatever will last, what, 4 seconds in Capitol Hill? Name a US company that lost market share for not paying more taxes than required. They should invest more when it comes to good causes, yeah.
      - ObserverNeutral 6y ago
        > Goodwill with the government? No, with the people. What you could do is a direct deposit in each American bank account in a very public way. 180M adults * 10USD = 1.8B Not a joke but also not that much for Google to build long lasting goodwill among the public In one swoop you delegitimize politicians by doing direct payments (maybe even a PR campaign with "money for nothing" as soundtrack) and win the public favor. "UBI-light" offered by Google..so many PR angles to think this thing through
- tomhoward 5y ago
  Not even that: directors are required to act in the interests of the company. Acting in the interests of shareholders is problematic, as different shareholders have different interests (especially minority vs majority). And by keeping the duty to act in the interests of the company, directors are not required to focus on short-term profitability and shareholder dividends; decisions can be justified as being in the long-term interests of the company, and better for the company's reputation and culture, even if they don't deliver shareholders the maximum short-term gains.
elmalto 6y ago
No law I am aware of requires public companies to maximize profits for shareholders. I think it only applies when a company is for sale
thatwasunusual 6y ago
> publicly traded companies are required by law to maximize their profits Is that really true, though? "[...] there is no legal requirement for for-profit companies to maximize returns to shareholders. When a company is for sale, its directors are required to do all they can to maximize its value. At any other time, corporate law simply dictates that directors are supposed to help the company prosper and do nothing to benefit themselves at the company’s expense. But no law requires corporations to maximize returns to shareholders."[0] [0] https://www.washingtonpost.com/opinions/harold-meyerson-the-myth-of-maximizing-shareholder-value/2014/02/11/00cdfb14-9336-11e3-84e1-27626c5ef5fb_story.html https://www.washingtonpost.com/opinions/harold-meyerson-the-...
- Sebguer 6y ago
  Of course it's not true, it's just an easy excuse to abdicate any responsibility.
MDWolinski 6y ago
Don’t believe it’s legally required. Reference: https://skeptics.stackexchange.com/questions/8146/are-u-s-companies-legally-obligated-to-maximize-profits-for-shareholders https://skeptics.stackexchange.com/questions/8146/are-u-s-co...
shillforhumanty 6y ago
On a similar note, I recently learned that theres a few politicians who benefit from insider trading but it's technically not called that. I can assume most politicians hold a few of these giants' shares(as well as others in the public market). It seems like conflict of interest can easily arise if these aren't just some wild ramblings.
tomcam 5y ago
There is no such law.
redis_mlc 5y ago
> companies are required by law to maximize their profits No, US court rulings say that mgmt. has "wide latitude" in how the company is managed. It's up to shareholders and the board to step in if they disagree, but since they appointed mgmt., it's rare for major disagreements. Which makes sense in a capitalist country, as there is little central planning outside of certain industries like defense and banking (regulated.) (In both the US and UK, the govt. tells industry how many airplane or ship builders they want, and who has to merge. After WW2, this caused concentration in the airplane industry. My understanding is that Northrop was told to drop the F-20 (an upgrade on the F-5 and a challenger for the F-16) to focus on their bomber contract, and then still told to merge.) I'm not going to comment in detail about offshore tax structuring like Ireland except to say that it is an abuse of tax avoidance.
tomhoward 5y ago
> "maximize shareholders value, which basically means profits on the long run, which still means paying as little tax as you can legally" Nope. Directors are required to act in the interests of the company, and that can include maximising the company's reputation for ethics (which is also financially justifiable, in order to attract the best staff and customers long-term).

by comboy 6y ago

Karunamon 6y ago

This. No company anywhere is going to pay a cent more in taxes than they're legally required to; the proper places to attack this kind of abuse is changing the laws.

2OEH8eoCRo0 6y ago

That's false. You're only legally required to act in the interest of shareholders. That can mean a lot of things.

onetimemanytime 6y ago
OK. John takes over Google and pays more taxes when the current scheme is legal. How is that rationalized? Why not pay even more?
- HPsquared 6y ago
  Building goodwill or other intangibles.
  - andromeduck 6y ago
    No such thing. Governments are inherently extractive same as any other monopoly.
  - onetimemanytime 6y ago
    Goodwill with the government? That $5 Billion or whatever will last, what, 4 seconds in Capitol Hill? Name a US company that lost market share for not paying more taxes than required. They should invest more when it comes to good causes, yeah.
    - ObserverNeutral 6y ago
      > Goodwill with the government? No, with the people. What you could do is a direct deposit in each American bank account in a very public way. 180M adults * 10USD = 1.8B Not a joke but also not that much for Google to build long lasting goodwill among the public In one swoop you delegitimize politicians by doing direct payments (maybe even a PR campaign with "money for nothing" as soundtrack) and win the public favor. "UBI-light" offered by Google..so many PR angles to think this thing through
tomhoward 5y ago
Not even that: directors are required to act in the interests of the company. Acting in the interests of shareholders is problematic, as different shareholders have different interests (especially minority vs majority). And by keeping the duty to act in the interests of the company, directors are not required to focus on short-term profitability and shareholder dividends; decisions can be justified as being in the long-term interests of the company, and better for the company's reputation and culture, even if they don't deliver shareholders the maximum short-term gains.

elmalto 6y ago

No law I am aware of requires public companies to maximize profits for shareholders. I think it only applies when a company is for sale

thatwasunusual 6y ago

> publicly traded companies are required by law to maximize their profits Is that really true, though? "[...] there is no legal requirement for for-profit companies to maximize returns to shareholders. When a company is for sale, its directors are required to do all they can to maximize its value. At any other time, corporate law simply dictates that directors are supposed to help the company prosper and do nothing to benefit themselves at the company’s expense. But no law requires corporations to maximize returns to shareholders."[0] [0] https://www.washingtonpost.com/opinions/harold-meyerson-the-myth-of-maximizing-shareholder-value/2014/02/11/00cdfb14-9336-11e3-84e1-27626c5ef5fb_story.html https://www.washingtonpost.com/opinions/harold-meyerson-the-...

Sebguer 6y ago
Of course it's not true, it's just an easy excuse to abdicate any responsibility.

MDWolinski 6y ago

Don’t believe it’s legally required. Reference: https://skeptics.stackexchange.com/questions/8146/are-u-s-companies-legally-obligated-to-maximize-profits-for-shareholders https://skeptics.stackexchange.com/questions/8146/are-u-s-co...

shillforhumanty 6y ago

On a similar note, I recently learned that theres a few politicians who benefit from insider trading but it's technically not called that. I can assume most politicians hold a few of these giants' shares(as well as others in the public market). It seems like conflict of interest can easily arise if these aren't just some wild ramblings.

tomcam 5y ago

There is no such law.

redis_mlc 5y ago

> companies are required by law to maximize their profits No, US court rulings say that mgmt. has "wide latitude" in how the company is managed. It's up to shareholders and the board to step in if they disagree, but since they appointed mgmt., it's rare for major disagreements. Which makes sense in a capitalist country, as there is little central planning outside of certain industries like defense and banking (regulated.) (In both the US and UK, the govt. tells industry how many airplane or ship builders they want, and who has to merge. After WW2, this caused concentration in the airplane industry. My understanding is that Northrop was told to drop the F-20 (an upgrade on the F-5 and a challenger for the F-16) to focus on their bomber contract, and then still told to merge.) I'm not going to comment in detail about offshore tax structuring like Ireland except to say that it is an abuse of tax avoidance.

tomhoward 5y ago

> "maximize shareholders value, which basically means profits on the long run, which still means paying as little tax as you can legally" Nope. Directors are required to act in the interests of the company, and that can include maximising the company's reputation for ethics (which is also financially justifiable, in order to attract the best staff and customers long-term).