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Most corporate entities have a fiduciary duty to maximize their shareholders’ returns. If your solution to a problem is “companies just need to stop trying to m
by dcolkitt 5y ago
Most corporate entities have a fiduciary duty to maximize their shareholders’ returns. If your solution to a problem is “companies just need to stop trying to make money”, then you’re probably going to be disappointed.
- icehawk 5y agoDo they really though? https://medium.com/bull-market/there-is-no-effective-fiduciary-duty-to-maximize-profits-939ae50d0572 https://medium.com/bull-market/there-is-no-effective-fiducia...
- foo_barrio 5y agoThe board dictates what the company does and share holders can vote the board out if they don't like what they are doing no? Most boards are interested only in money but that reflects the share holders and board more than some sacred pursuit of corps.
- dcolkitt 5y agoPublic companies that don’t maximize profits will usually be targeted by activists who will replace the board and management with people who will max profits. Say a company exists that doesn’t aggressively pursue profits. It makes $1/year and is worth $10 per share. If it started maxing profits it could make $2/year and be worth $20/share. An activist can come in and continue to pay well above market price, knowing that once he acquires enough shares, he’ll replace the board and raise the value of the shares. The simple logic is that almost every public company will eventually evolve to maximize profit regardless of what other social mission they advertise. The sole exception is if a founder retains control of a very large proportion of voting stock.