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The first link is discussing whether directors have a legal duty to maximize profit, which, as the article describes, they do not (their duties are open to much

The first link is discussing whether directors have a legal duty to maximize profit, which, as the article describes, they do not (their duties are open to much broader interpretation, which the article also describes). But, of course, there are numerous nonlegal forces that incentivize profit maximization, some of which are noted in the aforementioned article, and these forces are so strong and ubiquitous that their result - profit maximization - should be taken to be the default, which is what GP was saying. Second, a random statement from Tim Cook, which itself is the subject of numerous forces and incentives, is hardly a strong case against the argument that, almost universally, corporations act to maximize profits (which, we as Americans, also often pretend is a universally pro-social motivator). I'll also note that both of your sources focus on short-term profiteering (e.g. ignoring long-term benefits of renewable energy in favor of short-term profits), but are actually supportive of long-term investments, which are, of course, made with the purpose of increasing future profits (e.g. " it is [...] not corporate law [...] that [drives] so many of today’s public companies to myopically focus on short-term earnings; cut back on investment and innovation [...]" and "thinking in terms of long-term profit and returns is an important way of putting society’s resources to their best uses"). Focusing on long-term investments, in both cases, is obviously also motivated by profit (with the second arguing that long-term profits are actually a social good, which is the case only when compared with short-term profits).

FabHK 5y ago
You're right (and I don't dispute) that almost all firms aspire to long-term shareholder value creation, and that there are both practical reasons (market forces, competition) and theoretical reasons (Econ 101 arguments such as the two welfare theorems, principal-agent theory, etc. [1]) why that is and should be so. However, that is just a broad and fast rule, and it is neither empirically true, nor desirable, nor legally required that every firm at every opportunity "maximises profit". It is this over-simplification that I argue against [0]. If Facebook is shown to pursue profit at the expense of teenager health, or at the expense of democratic institutions, or Shell is shown to pursue profit at the expense of the environment, the appropriate response is not to shrug and say "doh, that's what companies do (and must do)!". Instead, one ought to discuss whether A) the legal/regulatory framework within which the firm operates should be tightened (eg with rules that just prohibit certain things, or internalisation of externalities), or B) whether a firm should refrain from doing certain things even though they're (still) legal and increase profits. [0] GP didn't state, as you sensibly do, that "profit maximization should be taken to be the default", but rather (my highlights) "That's any for profit company no matter what anyone believes. Any company its only purpose is profit.", which is just the facile statement I argue against. [1] Note that these Econ 101 arguments for the primacy of profit maximisation rest on many assumptions that don't hold, see for example James Kwak's book Economism: Bad Economics and the Rise of Inequality.
- ravitation 5y ago
  It is of course not a defensible position to say that all corporations only do things for profit (especially as it has not only to do with intent, but intent of an organization); even if it were true in all but a single case. Since that's what you've staked out your argument against, there's not much to discuss here. That profit maximization is not legally obligated (or even "desirable") is not a particularly compelling counterpoint, many things are done that are both legally forbidden and undesirable (of course "desirable" for who is another discussion). Additionally, your Tim Cook quote, which I assume was your attempt at disproof by counterexample, is not particularly compelling either, primarily because it's simply a quote (especially considering there is abundant anecdotal evidence that corporations have the ability to do things for superficial intent other than profit, and many examples where that superficial intent is more defensible). Also, what you read as "doh, that's what companies do (and must do)," I read as "it's naive to assume a for-profit company would prioritize anything over profit by choice." The second (but also the first) implies the necessity of a discussion about "the legal/regulatory framework within which the firm operates." They also both imply that expecting firms to simply "refrain" is naive, even if it superficially occurs.

FabHK 5y ago

You're right (and I don't dispute) that almost all firms aspire to long-term shareholder value creation, and that there are both practical reasons (market forces, competition) and theoretical reasons (Econ 101 arguments such as the two welfare theorems, principal-agent theory, etc. [1]) why that is and should be so. However, that is just a broad and fast rule, and it is neither empirically true, nor desirable, nor legally required that every firm at every opportunity "maximises profit". It is this over-simplification that I argue against [0]. If Facebook is shown to pursue profit at the expense of teenager health, or at the expense of democratic institutions, or Shell is shown to pursue profit at the expense of the environment, the appropriate response is not to shrug and say "doh, that's what companies do (and must do)!". Instead, one ought to discuss whether A) the legal/regulatory framework within which the firm operates should be tightened (eg with rules that just prohibit certain things, or internalisation of externalities), or B) whether a firm should refrain from doing certain things even though they're (still) legal and increase profits. [0] GP didn't state, as you sensibly do, that "profit maximization should be taken to be the default", but rather (my highlights) "That's any for profit company no matter what anyone believes. Any company its only purpose is profit.", which is just the facile statement I argue against. [1] Note that these Econ 101 arguments for the primacy of profit maximisation rest on many assumptions that don't hold, see for example James Kwak's book Economism: Bad Economics and the Rise of Inequality.

ravitation 5y ago
It is of course not a defensible position to say that all corporations only do things for profit (especially as it has not only to do with intent, but intent of an organization); even if it were true in all but a single case. Since that's what you've staked out your argument against, there's not much to discuss here. That profit maximization is not legally obligated (or even "desirable") is not a particularly compelling counterpoint, many things are done that are both legally forbidden and undesirable (of course "desirable" for who is another discussion). Additionally, your Tim Cook quote, which I assume was your attempt at disproof by counterexample, is not particularly compelling either, primarily because it's simply a quote (especially considering there is abundant anecdotal evidence that corporations have the ability to do things for superficial intent other than profit, and many examples where that superficial intent is more defensible). Also, what you read as "doh, that's what companies do (and must do)," I read as "it's naive to assume a for-profit company would prioritize anything over profit by choice." The second (but also the first) implies the necessity of a discussion about "the legal/regulatory framework within which the firm operates." They also both imply that expecting firms to simply "refrain" is naive, even if it superficially occurs.