4 ms·

“maximizing shareholder value” is a virus? I think that is a gross mis-characterization. It is absolutely self-afflicted, more like a drug addiction. I'm not

“maximizing shareholder value” is a virus? I think that is a gross mis-characterization. It is absolutely self-afflicted, more like a drug addiction. I'm not sure I've fallen for an internet myth or not, but I thought publicly listed corporations were required by law to act in the interest of their investors returns, 'by law' meaning they can be sued by shareholders. Or is that misinformation?

someguydave 5y ago
the author is obviously on the far left
enragedcacti 5y ago
It exists but is generally overstated: > The Business Judgment Rule asserts that as long as the Board of Directors conducts a reasonable effort to make informed decisions about what is best for a company in the long-run, a court will not question said decisions. [1] My layman's understanding is it's fairly narrowly interpreted and really isn't as ever present in the backs of the minds of board members as the internet would suggest. you have to demonstrate some pretty awful judgement or get caught admitting your reasoning for a decision was opposition to shareholder interests. The simpler explanation is that board members and executives have perverse incentives to act in short term interest so they do. As long as they avoid doing it negligently then they won't face any consequences even if most shareholders want a long term approach. [1] https://www.thesustainableinvestor.net/blog/2016/02/23/fact-v-fallacy-the-legal-duty-of-public-corporations https://www.thesustainableinvestor.net/blog/2016/02/23/fact-...
enragedcacti 5y ago
I think virus is actually pretty apt. The host (the company) is infected by the virus (predatory executives, short term investors) that feeds in order to multiply and get fat to the detriment of the host.
cryptonector 5y ago
It... depends. The problem is that "maximizing shareholder value" is what corporations should do, but it's also ill-defined. You see this all the time in debates about whether a company should re-invest earnings or pay dividends. The reality is that "maximizing shareholder value" is just rather vague, therefore meaningless. You need much more guidance than that. If "maximizing shareholder value" is often misconstrued in some particular way leading to accidental value destruction, then I would say that misunderstanding is akin to a virus, yes.

someguydave 5y ago

the author is obviously on the far left

enragedcacti 5y ago

It exists but is generally overstated: > The Business Judgment Rule asserts that as long as the Board of Directors conducts a reasonable effort to make informed decisions about what is best for a company in the long-run, a court will not question said decisions. [1] My layman's understanding is it's fairly narrowly interpreted and really isn't as ever present in the backs of the minds of board members as the internet would suggest. you have to demonstrate some pretty awful judgement or get caught admitting your reasoning for a decision was opposition to shareholder interests. The simpler explanation is that board members and executives have perverse incentives to act in short term interest so they do. As long as they avoid doing it negligently then they won't face any consequences even if most shareholders want a long term approach. [1] https://www.thesustainableinvestor.net/blog/2016/02/23/fact-v-fallacy-the-legal-duty-of-public-corporations https://www.thesustainableinvestor.net/blog/2016/02/23/fact-...

enragedcacti 5y ago

I think virus is actually pretty apt. The host (the company) is infected by the virus (predatory executives, short term investors) that feeds in order to multiply and get fat to the detriment of the host.

cryptonector 5y ago

It... depends. The problem is that "maximizing shareholder value" is what corporations should do, but it's also ill-defined. You see this all the time in debates about whether a company should re-invest earnings or pay dividends. The reality is that "maximizing shareholder value" is just rather vague, therefore meaningless. You need much more guidance than that. If "maximizing shareholder value" is often misconstrued in some particular way leading to accidental value destruction, then I would say that misunderstanding is akin to a virus, yes.