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This is the kind of stuff I don't understand. On one hand: "Corporations are bound by fiduciary responsibility to maximize profit" On the other hand...private

This is the kind of stuff I don't understand. On one hand: "Corporations are bound by fiduciary responsibility to maximize profit" On the other hand...private concerts. Could an argument REALLY be made that Microsoft execs are so valuable that if they didn't have this concert, the execs would leave and the company would suffer more losses than it spent on the concert? Why does it seem like executives are the only areas that aren't ever subject to cost cutting? Shouldn't the march to profit necessitate a steady downward trend in CEO salaries? Do I just not understand what fiduciary responsibility is? Why can't shareholders sue over this concert? I was never a fan of the "corporation maximize profit legal responsibility" argument, but it doesn't even seem consistent with itself...

pjerem 4y ago
> Why does it seem like executives are the only areas that aren't ever subject to cost cutting? It’s deceptively as simple as the fact that they are the one cutting costs. Who would fire himself ?
- COGlory 4y ago
  The board?
  - anon7725 4y ago
    And who sits on boards? Current and former executives who have vested interest in the status quo.
- twelve40 4y ago
  ceos get fired all the time https://www.cnn.com/2019/07/19/success/ceos-getting-fired/index.html https://www.cnn.com/2019/07/19/success/ceos-getting-fired/in... aside from those numbers, i suspect a good chunk of ceo drama is underreported, because if you publicly PIP them and kick them out, it will hurt the company.
  - pjerem 4y ago
    Yes but CEOs are fired because the boards are judging they are not up to the task or that they don’t share the same idea of how the company should be driven. Somehow, getting fired is the standard way out for a CEO. They are financially prepared to it (emotionally prepared, I suppose it depends on a per person basis). It’s really not the same as firing thousands of people because you are badly managing the company. And it’s even worse when hiring then firing thousands of people is just part of your plan : executives are not stupid, they knew their last years growth was circumstantial and that it wouldn’t last.
singleshot_ 4y ago
I think you understand more than you think if this statement throws you for a loop: > “Corporations are bound by fiduciary responsibility to maximize profit" This might be the view of some CEOs (maybe it’s the logical conclusion of the Jack Welch school of thought?) but it certainly isn’t the case from a corporate law perspective. Officers have a fiduciary duty of loyalty not to compete against the corporation or steal its opportunities; and officers have the fiduciary duty of care to act in an informed manner, but they certainly do not have a legal responsibility to the shareholders or anyone else to maximize profits.
- jpmoral 4y ago
  At the time of (my) commenting parent is heavily downvoted. > “Corporations are bound by fiduciary responsibility to maximize profit" This is often repeated on HN and elsewhere. I'm not a corporate lawyer or any sort of lawyer but an Internet search indicates this isn't true. I wish people would comment instead of just downvoting.
  - Spooky23 4y ago
    Maximizing shareholder value is a position taken by many that is getting less popular. Value is difficult - Wall St cares about quarterly results, but shareholder value may be better served with a different scope.
_yb2s 4y ago
CEO salaries are sky high due to supply and demand... truly good leadership skills are super rare, and still virtually unobtainable even with high salaries. Think about this- they pay those high salaries, yet the best leaders they could get at this salary level think this private concert was a good idea. These people are still not high caliber leaders. Maybe they could have recruited better with a higher salary? Ultimately, there is something wrong with the pipeline to leadership skills in our society, if these skills are that rare that they're nearly priceless. The world could really benefit from having a lot more skilled, strong, and empathetic leaders that know how to take responsibility and suffer hardship as needed to stick to their principles and goals.
- Centigonal 4y ago
  There's also no great way to vet execs for leadership skill. The biggest signal people use is prior performance, and that can be and is frequently massaged and fudged.
- mullingitover 4y ago
  CEO salaries are decided by boards of directors, who are often other CEOs who have a vested interest in maintaining this system of extremely inflated compensation. It's essentially an aristocracy and is pretty unique to the US[1]. [1] https://www.wtwco.com/en-US/Insights/2020/12/ceo-pay-landscape-in-japan-the-us-and-europe-2020-analysis https://www.wtwco.com/en-US/Insights/2020/12/ceo-pay-landsca...
  - _yb2s 4y ago
    I don’t buy it. If companies could hire sufficient leadership for much less money, this would give them a huge competitive advantage. It looks to me like the problem is actually the opposite: these skills are so rare that an astronomical salary still won’t make it easy to find someone that can do the job well. Companies are paying these crazy amounts and yet still settling for relatively unskilled leaders, and they would get even worse if they paid even less. US ceos get paid more because the demand is higher. I have had the opportunity to work closely with a lot of leaders in industry, and have seen firsthand that only a tiny fraction are competent. A big portion of companies fail because they aren’t able to recruit anyone with strong leadership skills at any price.
nickstinemates 4y ago
An alternate theory - it was planned and paid for long before the cost cutting. They could have cancelled it to save face, but chose not to.
- FearlessNebula 4y ago
  I work at Microsoft and I have many peers upset about this. By the time they realized they needed layoffs it was probably too late to get their money back on the concert anyways.
  - former-aws 4y ago
    They are taking a charge back of $1.2bn with the layoff. Are you suggesting canceling the private performance would have costed a huge amount on similar lines?
    - FearlessNebula 4y ago
      No, of course not. But others seem to be. And in my opinion by the time they decided to do layoffs it would’ve been too late to cancel the concert and get their money back, so you might as well enjoy the concert.
      - feet 4y ago
        But why was the concert planned in the first place
  - mikrotikker 4y ago
    Or they fired the workers so they could afford the concert, as well as fine food, dining and escorts, with all the other aristocrats at Davos. No time to care about the little people when you're pocketing the silverware and golden chandeliers as the titanic sinks.
maeil 4y ago
It's rather simple. > Corporations are bound by fiduciary responsibility to maximize profit This can be thought of as a myth, at least in the way it's usually talked about in online discourse. Leaders have enormous leeway in interpreting "maximizing profit" and anything but very actively and intentionally destroying the company almost certainly does not put one at risk of any kind of material procedures regarding fiduciary responsibility. It is used online as a cop-out trying to excuse people acting in extremely unethical ways, causing massive damage to society, in the name of companies. This does not reflect the reality of fiduciary responsibility as a legal concept whatsoever. This is not legal advice but even a shallow look into the topic will make this clear.
- aaomidi 4y ago
  You can even just draw obvious lines between “hmm is anything ever really enforced on individuals in companies”. The answer is, generally no. In large companies it’s nearly always no.
  - maeil 4y ago
    Indeed, pretty much all such cases of individuals being prosecuted that I can think of are ones where the act is illegal regardless of it taking place as part of the company, i.e. not a concept that purely relates to corporations and has no direct equivalent in the personal sphere. You can also just draw the line to "how would you argue in court that someone wasn't trying to maximize profit". Even if it was illegal (it isn't) it's impossible to prove beyond reasonable doubt in 99.99% of cases where it's brought up online.
- horsawlarway 4y ago
  Because this > Corporations are bound by fiduciary responsibility to maximize profit Is just dead wrong. There is absolutely NOTHING that requires, suggests, or even implies that the duties of the CEO are to maximize profit. The CEO has the following three fiduciary duties: Care - they will act to gain information relevant to their decisions (they will act with care) Loyalty - They will act in the best interests of the company and its owners instead of say - for personal gain, or for the benefit of a 3rd party (they are loyal) Disclosure - They will disclose relevant business proceedings and possible negative outcomes or significant issues (They are honest) ---- Notice what's conspicuously absent? Not a word about profits anywhere in there. Notably - acting with care often means that they should be making decisions that are not immediately profitable, but set the company up for long term success (ie: making large capital investments, or upgrading infrastructure) Now - there's a neo-capitalist viewpoint that says that maximum profit should be the result of the three above duties, and that shareholders (and really the board) should be looking for maximum profits, but... to quote a silly movie: "Yeah, well, you know, that's just, like, your opinion, man." And really - the CEO's job is to keep the board of directors happy. Is it bad optics to host a concert right before a round of layoffs? probably. Can it be a good decision given the above? Certainly. Simple counter you might make: We're about to have to cut a significant portion of the workforce, this will have an impact on moral. We are attempting to keep moral high among our most valuable employees, and the costs of the concert are utterly negligible in comparison to the long term cost of retaining those employees. It is in our best interest to continue providing compelling perks that retain and attract the best talent available - even if we have to make hard decisions to wind down or cancel teams and products that are not meeting our expected goals.
kerpotgh 4y ago
[dead]
joeman1000 4y ago
It’s a greedy little enclave of people who have shucked and jived their way to the top. Of course they’re going to act like this. Execs look out for themselves ONLY.
penciltwirler 4y ago
I think it’s a mix of “execs are the top dogs so they can decide to splurge a little on themselves”, the key is “a little”, I have no idea how much a private concert costs but anything less than $1M is probably considered “acceptable amount of splurge”
rlawson 4y ago
Well the important thing is this is everything you need to know about the corporate world in one article.

pjerem 4y ago

> Why does it seem like executives are the only areas that aren't ever subject to cost cutting? It’s deceptively as simple as the fact that they are the one cutting costs. Who would fire himself ?

COGlory 4y ago
The board?
- anon7725 4y ago
  And who sits on boards? Current and former executives who have vested interest in the status quo.
twelve40 4y ago
ceos get fired all the time https://www.cnn.com/2019/07/19/success/ceos-getting-fired/index.html https://www.cnn.com/2019/07/19/success/ceos-getting-fired/in... aside from those numbers, i suspect a good chunk of ceo drama is underreported, because if you publicly PIP them and kick them out, it will hurt the company.
- pjerem 4y ago
  Yes but CEOs are fired because the boards are judging they are not up to the task or that they don’t share the same idea of how the company should be driven. Somehow, getting fired is the standard way out for a CEO. They are financially prepared to it (emotionally prepared, I suppose it depends on a per person basis). It’s really not the same as firing thousands of people because you are badly managing the company. And it’s even worse when hiring then firing thousands of people is just part of your plan : executives are not stupid, they knew their last years growth was circumstantial and that it wouldn’t last.

singleshot_ 4y ago

I think you understand more than you think if this statement throws you for a loop: > “Corporations are bound by fiduciary responsibility to maximize profit" This might be the view of some CEOs (maybe it’s the logical conclusion of the Jack Welch school of thought?) but it certainly isn’t the case from a corporate law perspective. Officers have a fiduciary duty of loyalty not to compete against the corporation or steal its opportunities; and officers have the fiduciary duty of care to act in an informed manner, but they certainly do not have a legal responsibility to the shareholders or anyone else to maximize profits.

jpmoral 4y ago
At the time of (my) commenting parent is heavily downvoted. > “Corporations are bound by fiduciary responsibility to maximize profit" This is often repeated on HN and elsewhere. I'm not a corporate lawyer or any sort of lawyer but an Internet search indicates this isn't true. I wish people would comment instead of just downvoting.
- Spooky23 4y ago
  Maximizing shareholder value is a position taken by many that is getting less popular. Value is difficult - Wall St cares about quarterly results, but shareholder value may be better served with a different scope.

_yb2s 4y ago

CEO salaries are sky high due to supply and demand... truly good leadership skills are super rare, and still virtually unobtainable even with high salaries. Think about this- they pay those high salaries, yet the best leaders they could get at this salary level think this private concert was a good idea. These people are still not high caliber leaders. Maybe they could have recruited better with a higher salary? Ultimately, there is something wrong with the pipeline to leadership skills in our society, if these skills are that rare that they're nearly priceless. The world could really benefit from having a lot more skilled, strong, and empathetic leaders that know how to take responsibility and suffer hardship as needed to stick to their principles and goals.

Centigonal 4y ago
There's also no great way to vet execs for leadership skill. The biggest signal people use is prior performance, and that can be and is frequently massaged and fudged.
mullingitover 4y ago
CEO salaries are decided by boards of directors, who are often other CEOs who have a vested interest in maintaining this system of extremely inflated compensation. It's essentially an aristocracy and is pretty unique to the US[1]. [1] https://www.wtwco.com/en-US/Insights/2020/12/ceo-pay-landscape-in-japan-the-us-and-europe-2020-analysis https://www.wtwco.com/en-US/Insights/2020/12/ceo-pay-landsca...
- _yb2s 4y ago
  I don’t buy it. If companies could hire sufficient leadership for much less money, this would give them a huge competitive advantage. It looks to me like the problem is actually the opposite: these skills are so rare that an astronomical salary still won’t make it easy to find someone that can do the job well. Companies are paying these crazy amounts and yet still settling for relatively unskilled leaders, and they would get even worse if they paid even less. US ceos get paid more because the demand is higher. I have had the opportunity to work closely with a lot of leaders in industry, and have seen firsthand that only a tiny fraction are competent. A big portion of companies fail because they aren’t able to recruit anyone with strong leadership skills at any price.

nickstinemates 4y ago

An alternate theory - it was planned and paid for long before the cost cutting. They could have cancelled it to save face, but chose not to.

FearlessNebula 4y ago
I work at Microsoft and I have many peers upset about this. By the time they realized they needed layoffs it was probably too late to get their money back on the concert anyways.
- former-aws 4y ago
  They are taking a charge back of $1.2bn with the layoff. Are you suggesting canceling the private performance would have costed a huge amount on similar lines?
  - FearlessNebula 4y ago
    No, of course not. But others seem to be. And in my opinion by the time they decided to do layoffs it would’ve been too late to cancel the concert and get their money back, so you might as well enjoy the concert.
    - feet 4y ago
      But why was the concert planned in the first place
- mikrotikker 4y ago
  Or they fired the workers so they could afford the concert, as well as fine food, dining and escorts, with all the other aristocrats at Davos. No time to care about the little people when you're pocketing the silverware and golden chandeliers as the titanic sinks.

maeil 4y ago

It's rather simple. > Corporations are bound by fiduciary responsibility to maximize profit This can be thought of as a myth, at least in the way it's usually talked about in online discourse. Leaders have enormous leeway in interpreting "maximizing profit" and anything but very actively and intentionally destroying the company almost certainly does not put one at risk of any kind of material procedures regarding fiduciary responsibility. It is used online as a cop-out trying to excuse people acting in extremely unethical ways, causing massive damage to society, in the name of companies. This does not reflect the reality of fiduciary responsibility as a legal concept whatsoever. This is not legal advice but even a shallow look into the topic will make this clear.

aaomidi 4y ago
You can even just draw obvious lines between “hmm is anything ever really enforced on individuals in companies”. The answer is, generally no. In large companies it’s nearly always no.
- maeil 4y ago
  Indeed, pretty much all such cases of individuals being prosecuted that I can think of are ones where the act is illegal regardless of it taking place as part of the company, i.e. not a concept that purely relates to corporations and has no direct equivalent in the personal sphere. You can also just draw the line to "how would you argue in court that someone wasn't trying to maximize profit". Even if it was illegal (it isn't) it's impossible to prove beyond reasonable doubt in 99.99% of cases where it's brought up online.
horsawlarway 4y ago
Because this > Corporations are bound by fiduciary responsibility to maximize profit Is just dead wrong. There is absolutely NOTHING that requires, suggests, or even implies that the duties of the CEO are to maximize profit. The CEO has the following three fiduciary duties: Care - they will act to gain information relevant to their decisions (they will act with care) Loyalty - They will act in the best interests of the company and its owners instead of say - for personal gain, or for the benefit of a 3rd party (they are loyal) Disclosure - They will disclose relevant business proceedings and possible negative outcomes or significant issues (They are honest) ---- Notice what's conspicuously absent? Not a word about profits anywhere in there. Notably - acting with care often means that they should be making decisions that are not immediately profitable, but set the company up for long term success (ie: making large capital investments, or upgrading infrastructure) Now - there's a neo-capitalist viewpoint that says that maximum profit should be the result of the three above duties, and that shareholders (and really the board) should be looking for maximum profits, but... to quote a silly movie: "Yeah, well, you know, that's just, like, your opinion, man." And really - the CEO's job is to keep the board of directors happy. Is it bad optics to host a concert right before a round of layoffs? probably. Can it be a good decision given the above? Certainly. Simple counter you might make: We're about to have to cut a significant portion of the workforce, this will have an impact on moral. We are attempting to keep moral high among our most valuable employees, and the costs of the concert are utterly negligible in comparison to the long term cost of retaining those employees. It is in our best interest to continue providing compelling perks that retain and attract the best talent available - even if we have to make hard decisions to wind down or cancel teams and products that are not meeting our expected goals.

kerpotgh 4y ago

[dead]

joeman1000 4y ago

It’s a greedy little enclave of people who have shucked and jived their way to the top. Of course they’re going to act like this. Execs look out for themselves ONLY.

penciltwirler 4y ago

I think it’s a mix of “execs are the top dogs so they can decide to splurge a little on themselves”, the key is “a little”, I have no idea how much a private concert costs but anything less than $1M is probably considered “acceptable amount of splurge”

rlawson 4y ago

Well the important thing is this is everything you need to know about the corporate world in one article.