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> to the point where they get sued if they don't maximize shareholder value. I'm pretty sure that 'maximizing shareholder value' is not a requirement for a com

> to the point where they get sued if they don't maximize shareholder value. I'm pretty sure that 'maximizing shareholder value' is not a requirement for a company. Not even in the US. > they get sued I've seen this claim before but no one ever provides a link to any cases. So, do they? Are there any easily accessible descriptions of such events?

Quarrel 3y ago
In the US, Director's have a fiduciary duty to the company, and in particular a duty of loyalty. The duty of loyalty largely means that you must act in the interests of the company and its shareholders- this is where I think most people get to the 'maximizing shareholder value'. However, afaik, as long as you act in good faith, and take due care, then I don't think there is any case law saying that if you decided that a lower profit margin (for instance), would be better for the company long term, even if some shareholders disagree, that you'd have any issues. (ie, I think you're correct, it is totally overblown on the net that they MUST MAKE MONEY)
- wasimanitoba 3y ago
  That characterization might be over blown, but it's functionally equivalent to reality because hostile takeovers are a thing. Any board of directors that isn't ruthlessly maximizing profit is likely to be replaced by a temporary majority of anonymous shareholders with no attachment to the underlying company beyond whatever quick buck they can make off the stock.
- remich 3y ago
  The precedent in the Delaware Court of Chancery (where pretty much all of the litigation would take place) explicitly does not endorse the idea that corporate fiduciaries must focus on short-term profit making (i.e., maximizing shareholder value) above all other obligations. That's why we don't really have the type of lawsuits that you're talking about. What we do have is the type of suit that is "everything is securities fraud" where the allegation is that corporate fiduciaries committed securities fraud by omitting or concealing information that would have tended to dent their stock price.
epicureanideal 3y ago
Apple even publicly declared its interest in making its products recyclable and told investors who didn’t like it to “get out of this stock”, so it seems like it’s possible to challenge the pure profit assumption.
resolutebat 3y ago
Whether it's a "requirement" or not is irrelevant (and you'll note that I did not claim it is). The part that matters is that companies in practice do act to maximize profit and hand that profit to their shareholders.
- kwhitefoot 3y ago
  > companies in practice do act to maximize profit Again this blanket statement seems to be at odds with observation.

Quarrel 3y ago

In the US, Director's have a fiduciary duty to the company, and in particular a duty of loyalty. The duty of loyalty largely means that you must act in the interests of the company and its shareholders- this is where I think most people get to the 'maximizing shareholder value'. However, afaik, as long as you act in good faith, and take due care, then I don't think there is any case law saying that if you decided that a lower profit margin (for instance), would be better for the company long term, even if some shareholders disagree, that you'd have any issues. (ie, I think you're correct, it is totally overblown on the net that they MUST MAKE MONEY)

wasimanitoba 3y ago
That characterization might be over blown, but it's functionally equivalent to reality because hostile takeovers are a thing. Any board of directors that isn't ruthlessly maximizing profit is likely to be replaced by a temporary majority of anonymous shareholders with no attachment to the underlying company beyond whatever quick buck they can make off the stock.
remich 3y ago
The precedent in the Delaware Court of Chancery (where pretty much all of the litigation would take place) explicitly does not endorse the idea that corporate fiduciaries must focus on short-term profit making (i.e., maximizing shareholder value) above all other obligations. That's why we don't really have the type of lawsuits that you're talking about. What we do have is the type of suit that is "everything is securities fraud" where the allegation is that corporate fiduciaries committed securities fraud by omitting or concealing information that would have tended to dent their stock price.

epicureanideal 3y ago

Apple even publicly declared its interest in making its products recyclable and told investors who didn’t like it to “get out of this stock”, so it seems like it’s possible to challenge the pure profit assumption.

resolutebat 3y ago

Whether it's a "requirement" or not is irrelevant (and you'll note that I did not claim it is). The part that matters is that companies in practice do act to maximize profit and hand that profit to their shareholders.

kwhitefoot 3y ago
> companies in practice do act to maximize profit Again this blanket statement seems to be at odds with observation.