4 ms·
I'm really tired of this mental virus that's taken over bad CEOs, the imaginary responsibility to shareholders: https://en.wikipedia.org/wiki/Friedman_doctrine
by Firmwarrior 4y ago
I'm really tired of this mental virus that's taken over bad CEOs, the imaginary responsibility to shareholders:
https://en.wikipedia.org/wiki/Friedman_doctrine https://en.wikipedia.org/wiki/Friedman_doctrine
It was actually cooked up in the 70s by Milton Friedman, and over the ensuing few decades it's gone so viral that even its opponents think it's true.
Companies have a responsibility not to just annihilate the shareholders' money for no reason whatsoever, but they have a LOT of leeway to make risky investments or go off on tangents. Executives are NOT legally or morally required to screw people over for an extra short-term buck.
- WalterBright 4y ago> NOT legally or morally required to screw people over for an extra short-term buck I saw nothing in the Friedman doctrine that says anything about prioritizing short term results. But if the company doesn't do what the shareholders want, the shareholders sell, and the stock price goes down.
- cbzbc 4y agoFriedman had a very mystical conception of the market - viewing almost as a collective intelligence - and would say in this case that its judgment of the company strategy was correct.
- WalterBright 4y agoI haven't seen any evidence that Friedman advocated short term profits over long term results.
- cbzbc 4y agoHis view would be that if the stock price went up as a result of some action then that action would be the right one (its orthogonal to the point about short term profits).
- aaomidi 4y agoAgreed, this is the definition of short term profits
- WalterBright 4y ago> this is the definition of short term profits That's not remotely true. Stock prices are based on long term fiscal results. If shareholders get a whiff of a company sacrificing long term results for short term profits, the share price tanks.
- Firmwarrior 4y agoYeah, but even here you have people parroting this line about "responsibility to shareholders to maximize profits" which is blatantly untrue. You're free to be a sociopathic monster within the limits of the law, but you aren't REQUIRED to.
- WalterBright 4y agoIf you entrust your money to someone else to invest for you, what are you expecting?
- corbulo 4y agoIt's more about 10-Q reports than any particular philosophy. Quarterly earnings is a big deal universally for public companies.