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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 inte
by 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 agoThat 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 agoThe 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.