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corporations have a fiduciary duty to their shareholders. what that means is not well defined, and a ceo could say: i’m not doing layoffs because my analysis is

corporations have a fiduciary duty to their shareholders. what that means is not well defined, and a ceo could say: i’m not doing layoffs because my analysis is that they will hurt our business, not help, but generally the meaning of their duty to shareholders is that they increase share prices and layoffs make that happen.

toomuchtodo 4y ago
https://www.marketplace.org/2022/04/25/how-shareholders-jumped-to-first-in-line-for-profits-rerun/ https://www.marketplace.org/2022/04/25/how-shareholders-jump... > “There is a widespread and completely erroneous belief out there that there is some sort of legal duty that corporate managers have to ‘maximize profits’ or ‘maximize shareholder value,’” said Cornell law professor Lynn Stout, author of “The Shareholder Value Myth.” In Stout’s view, the misplaced assumption comes from an old case that cites stockholders’ interests. That case did not set legal precedent, she said, compared to a more recent case. > “You can just pick up the Supreme Court case ‘Hobby Lobby’ decided just a few years ago,” she said. “Read the majority opinion, where Justice Alito says, and I quote, ‘modern corporate law does not require for-profit corporations to pursue profit at the expense of everything else.’” > By contrast, Delaware Chancery Court Judge Leo Strine, now chief justice of the state Supreme Court, wrote in the Wake Forest Law Review: “Corporate law requires directors, as a matter of their duty of loyalty, to pursue a good faith strategy to maximize profits for the stockholders.” The debate goes on. https://www.americanbar.org/content/dam/aba/publications/business_lawyer/2015/70_1/article-hobby-lobby-201501.pdf https://www.americanbar.org/content/dam/aba/publications/bus... > We evaluate the U.S. Supreme Court’s controversial decision in the Hobby Lobby case from the perspective of state corporate law. We argue that the Court is correct in holding that corporate law does not mandate that business corporations limit themselves to pursuit of profit. Rather, state law allows incorporation for any lawful purpose. We elaborate on this important point and also explain what it means for a corporation to “exercise religion.” In addition, we address the larger implications of the Court’s analysis for an accurate understanding both of state law’s essentially agnostic stance on the question of corporate purpose and also of the broad scope of managerial discretion. It is not as black and white as "you must maximize profits" although this is consistently parroted by folks.
- efficax 4y ago
  they do have a fiduciary duty. what does that mean? it's not clear. people interpret it to mean increasing shareholder value in the short term. it doesn't have to mean that, but that's how corporate management tends to behave.

toomuchtodo 4y ago

https://www.marketplace.org/2022/04/25/how-shareholders-jumped-to-first-in-line-for-profits-rerun/ https://www.marketplace.org/2022/04/25/how-shareholders-jump... > “There is a widespread and completely erroneous belief out there that there is some sort of legal duty that corporate managers have to ‘maximize profits’ or ‘maximize shareholder value,’” said Cornell law professor Lynn Stout, author of “The Shareholder Value Myth.” In Stout’s view, the misplaced assumption comes from an old case that cites stockholders’ interests. That case did not set legal precedent, she said, compared to a more recent case. > “You can just pick up the Supreme Court case ‘Hobby Lobby’ decided just a few years ago,” she said. “Read the majority opinion, where Justice Alito says, and I quote, ‘modern corporate law does not require for-profit corporations to pursue profit at the expense of everything else.’” > By contrast, Delaware Chancery Court Judge Leo Strine, now chief justice of the state Supreme Court, wrote in the Wake Forest Law Review: “Corporate law requires directors, as a matter of their duty of loyalty, to pursue a good faith strategy to maximize profits for the stockholders.” The debate goes on. https://www.americanbar.org/content/dam/aba/publications/business_lawyer/2015/70_1/article-hobby-lobby-201501.pdf https://www.americanbar.org/content/dam/aba/publications/bus... > We evaluate the U.S. Supreme Court’s controversial decision in the Hobby Lobby case from the perspective of state corporate law. We argue that the Court is correct in holding that corporate law does not mandate that business corporations limit themselves to pursuit of profit. Rather, state law allows incorporation for any lawful purpose. We elaborate on this important point and also explain what it means for a corporation to “exercise religion.” In addition, we address the larger implications of the Court’s analysis for an accurate understanding both of state law’s essentially agnostic stance on the question of corporate purpose and also of the broad scope of managerial discretion. It is not as black and white as "you must maximize profits" although this is consistently parroted by folks.

efficax 4y ago
they do have a fiduciary duty. what does that mean? it's not clear. people interpret it to mean increasing shareholder value in the short term. it doesn't have to mean that, but that's how corporate management tends to behave.