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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

by 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.
- rogerkirkness 4y ago
  I think this comment is conflating a few different things. The definition of fiduciary duty varies depending on the jurisdiction you're in. Most public companies are based in Delaware, and this seems like some version of that. In Delaware, the duty of disclosure is part of the duty of loyalty, along with good faith and oversight. Likewise, the duties are the same for both directors and officers whether CEO or not on the care and loyalty front. Most of the CEO obligations and duties are outlined in the charter of the company rather than in Delaware law. I believe the only CEO specific duty in Delaware law is signing share certificates. Agreed with your analysis of the business importance of this. That said, I hope the leaders would not feel good about doing this in light of the hard choices they ultimately made.
- horns4lyfe 4y ago
  The idea that these are the most valuable employees is just a weird cult. Ya, so valuable that led the company into a situation where they have to make mass layoffs, wouldn’t want to lose any of these geniuses. It’s just a walled garden of MBAs and their family and friends.
  - horsawlarway 4y ago
    I mean... arguably. On the whole I'd probably agree with you - the US business schools seem to be having disastrous long term impacts on the economy (although good stock growth and profits - hence the drastic inequality we're seeing right now). But the way companies operate mean it's not you or me who gets to decide who's valuable... it's the company executives.

by maeil 4y ago

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.

rogerkirkness 4y ago
I think this comment is conflating a few different things. The definition of fiduciary duty varies depending on the jurisdiction you're in. Most public companies are based in Delaware, and this seems like some version of that. In Delaware, the duty of disclosure is part of the duty of loyalty, along with good faith and oversight. Likewise, the duties are the same for both directors and officers whether CEO or not on the care and loyalty front. Most of the CEO obligations and duties are outlined in the charter of the company rather than in Delaware law. I believe the only CEO specific duty in Delaware law is signing share certificates. Agreed with your analysis of the business importance of this. That said, I hope the leaders would not feel good about doing this in light of the hard choices they ultimately made.
horns4lyfe 4y ago
The idea that these are the most valuable employees is just a weird cult. Ya, so valuable that led the company into a situation where they have to make mass layoffs, wouldn’t want to lose any of these geniuses. It’s just a walled garden of MBAs and their family and friends.
- horsawlarway 4y ago
  I mean... arguably. On the whole I'd probably agree with you - the US business schools seem to be having disastrous long term impacts on the economy (although good stock growth and profits - hence the drastic inequality we're seeing right now). But the way companies operate mean it's not you or me who gets to decide who's valuable... it's the company executives.