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> they are legally obliged to do for their shareholders Isn't that an "old wives tale" that doesn't have any basis in reality?

nologic01 3y ago
Alas it does. Think, e.g. about the backlash against asset managers for pursuing sustainability agendas. Closer to the topic, think also about the "furore" and supposed panic at Google that they are not capitalizing (literally) on their AI leadership.
- justinclift 3y ago
  > pursuing sustainability agendas My impression is that the "sustainability agendas" these asset managers were pursuing turned out to be er... mostly bullshit. Along the lines of companies "green washing" stuff that was not in fact green. Also stuff marketed as "socially progressive" as a sales tactic.
  - nologic01 3y ago
    It just goes to show that if you want real change you need to get really serious about it. As in: change the regulatory and legal framework. Self-regulation doesn't work. You just get an army of consultants, rating agencies and other intermediaries providing "assurance" for-profit, never biting the hand that feeds them. PS. For the record and while tangential to the digital monopoly discussion, it is still a good thing that we got the ESG and greenwashing debacle. Just a few years ago nobody but the perennial "tree huggers" was even talking about sustainability. Now it is a much more broad based discussion although obviously it has not landed anywhere yet. I wish people would also take regulation of the digital sphere more seriously as it is the backbone on which we will solve all these other problems.
reaperducer 3y ago
Isn't that an "old wives tale" that doesn't have any basis in reality? You are correct. Nobody has ever been able to point to a law requiring companies to maximize profits for shareholders at all costs. In fact, there are thousands and thousands of companies that exist with a primary purpose of doing things other than making money for their shareholders. Any "legal" obligation to "maximize shareholder value" started out as a way to excuse the greed of other people, but falls flat upon even cursory examination.
- itsoktocry 3y ago
  Exactly. Having a fiduciary duty to act in shareholder's interests (a very common sense rule) is a long way from "maximizing shareholder profits at all costs", even if those sometimes align.
- nologic01 3y ago
  "An activist shareholder is a shareholder who uses an equity stake in a corporation to put pressure on its management" https://en.wikipedia.org/wiki/Activist_shareholder https://en.wikipedia.org/wiki/Activist_shareholder I am not excusing greed. I am just saying that if shareholders are focused on financial gain the corporate management is obliged to deliver. Not all shareholders are greedy. But overwhelmingly they are.
  - itsoktocry 3y ago
    >An activist shareholder is a shareholder who uses an equity stake in a corporation to put pressure on its management Would you be surprised to learn that there are shareholder groups that use their equity claims to pursue environmental, DEI or other goals that benefit society? >Not all shareholders are greedy. But overwhelmingly they are. Not even close. The vast majority of shareholders own stock through ETFs and pay no attention to the finances (or politics) of the companies they own. The fiduciary rule is to prevent executives from running the company in their interest, as opposed to the interests of the silent shareholders who actually own the company.
    - swexbe 3y ago
      >Not even close. The vast majority of shareholders own stock through ETFs and pay no attention to the finances (or politics) of the companies they own. Right, but many would sell their ETFs and buy others if they suddenly started to deliver below market returns.
    - nologic01 3y ago
      I am quite aware of impact investors, ESG etc. The space is full of convulsions and strife [1]. But its a different debate. The point I was trying to make is that corporate managers are legally controlled by shareholders, its not a myth. Actually the difficulty with sustainable investments shows how difficult to rely on shareholder's values to goad corporates in the "right" direction: unless the risk is clear, present and impossible to disguise there is just enormous resistance to interfere with profitable opportunities. Now in the context of digital information oligopolies good luck convincing shareholders that their big tech darlings are detrimental for the future of digital society. [1] https://www.pionline.com/esg/blackrock-voted-against-record-91-shareholder-proposals-2023-proxy-season https://www.pionline.com/esg/blackrock-voted-against-record-...
terminous 3y ago
For US companies registered in Delaware (which is most of them), the doctrine of shareholders primacy holds. Shareholders can and have sued corporate boards/execs for not acting in their best interest. It goes back to the 1910s when Henry Ford very loudly and explicitly announced he was cutting shareholder dividends to pay workers the famous $5/day wage (double what any other factory workers were paid), and minority shareholders sued and won. Of course it is debated and different in different jurisdictions, as it is common law and not a specific statute. But ambiguity in law means execs lean towards the safe decision. Shareholders can go a long way with a legal threat that never sees trial. https://en.m.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co https://en.m.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co.
- itsoktocry 3y ago
  >Shareholders can and have sued corporate boards/execs for not acting in their best interest. Translating "best interest" to "maximize profits" is the stretch though. The shareholders define what is their best interest. Shareholders aren't faceless demons. They are you and me.
  - starbugs 3y ago
    Come on. You know who the "shareholders" are that the parent commenter talks about. They are board members and people with a huge amount of shares, not "normal" people who hold 5 shares in their retirement portfolio. The main interest of a shareholder is return on investment. And that's fine. The problem is that if you don't have enough competing entities in a market, these shareholders of the few companies that still exist hold disproportionate power that can and will be misused to make any attempt at new, reasonable competition infeasible. It's really not that hard to understand.
    - mistrial9 3y ago
      no this is insufficiently informed.. company bylaws can vary quite a lot about voting rights. Your typical SiliValley cut-n-paste corp less so..
    - 3y ago

nologic01 3y ago

Alas it does. Think, e.g. about the backlash against asset managers for pursuing sustainability agendas. Closer to the topic, think also about the "furore" and supposed panic at Google that they are not capitalizing (literally) on their AI leadership.

justinclift 3y ago
> pursuing sustainability agendas My impression is that the "sustainability agendas" these asset managers were pursuing turned out to be er... mostly bullshit. Along the lines of companies "green washing" stuff that was not in fact green. Also stuff marketed as "socially progressive" as a sales tactic.
- nologic01 3y ago
  It just goes to show that if you want real change you need to get really serious about it. As in: change the regulatory and legal framework. Self-regulation doesn't work. You just get an army of consultants, rating agencies and other intermediaries providing "assurance" for-profit, never biting the hand that feeds them. PS. For the record and while tangential to the digital monopoly discussion, it is still a good thing that we got the ESG and greenwashing debacle. Just a few years ago nobody but the perennial "tree huggers" was even talking about sustainability. Now it is a much more broad based discussion although obviously it has not landed anywhere yet. I wish people would also take regulation of the digital sphere more seriously as it is the backbone on which we will solve all these other problems.

reaperducer 3y ago

Isn't that an "old wives tale" that doesn't have any basis in reality? You are correct. Nobody has ever been able to point to a law requiring companies to maximize profits for shareholders at all costs. In fact, there are thousands and thousands of companies that exist with a primary purpose of doing things other than making money for their shareholders. Any "legal" obligation to "maximize shareholder value" started out as a way to excuse the greed of other people, but falls flat upon even cursory examination.

itsoktocry 3y ago
Exactly. Having a fiduciary duty to act in shareholder's interests (a very common sense rule) is a long way from "maximizing shareholder profits at all costs", even if those sometimes align.
nologic01 3y ago
"An activist shareholder is a shareholder who uses an equity stake in a corporation to put pressure on its management" https://en.wikipedia.org/wiki/Activist_shareholder https://en.wikipedia.org/wiki/Activist_shareholder I am not excusing greed. I am just saying that if shareholders are focused on financial gain the corporate management is obliged to deliver. Not all shareholders are greedy. But overwhelmingly they are.
- itsoktocry 3y ago
  >An activist shareholder is a shareholder who uses an equity stake in a corporation to put pressure on its management Would you be surprised to learn that there are shareholder groups that use their equity claims to pursue environmental, DEI or other goals that benefit society? >Not all shareholders are greedy. But overwhelmingly they are. Not even close. The vast majority of shareholders own stock through ETFs and pay no attention to the finances (or politics) of the companies they own. The fiduciary rule is to prevent executives from running the company in their interest, as opposed to the interests of the silent shareholders who actually own the company.
  - swexbe 3y ago
    >Not even close. The vast majority of shareholders own stock through ETFs and pay no attention to the finances (or politics) of the companies they own. Right, but many would sell their ETFs and buy others if they suddenly started to deliver below market returns.
  - nologic01 3y ago
    I am quite aware of impact investors, ESG etc. The space is full of convulsions and strife [1]. But its a different debate. The point I was trying to make is that corporate managers are legally controlled by shareholders, its not a myth. Actually the difficulty with sustainable investments shows how difficult to rely on shareholder's values to goad corporates in the "right" direction: unless the risk is clear, present and impossible to disguise there is just enormous resistance to interfere with profitable opportunities. Now in the context of digital information oligopolies good luck convincing shareholders that their big tech darlings are detrimental for the future of digital society. [1] https://www.pionline.com/esg/blackrock-voted-against-record-91-shareholder-proposals-2023-proxy-season https://www.pionline.com/esg/blackrock-voted-against-record-...

terminous 3y ago

For US companies registered in Delaware (which is most of them), the doctrine of shareholders primacy holds. Shareholders can and have sued corporate boards/execs for not acting in their best interest. It goes back to the 1910s when Henry Ford very loudly and explicitly announced he was cutting shareholder dividends to pay workers the famous $5/day wage (double what any other factory workers were paid), and minority shareholders sued and won. Of course it is debated and different in different jurisdictions, as it is common law and not a specific statute. But ambiguity in law means execs lean towards the safe decision. Shareholders can go a long way with a legal threat that never sees trial. https://en.m.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co https://en.m.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co.

itsoktocry 3y ago
>Shareholders can and have sued corporate boards/execs for not acting in their best interest. Translating "best interest" to "maximize profits" is the stretch though. The shareholders define what is their best interest. Shareholders aren't faceless demons. They are you and me.
- starbugs 3y ago
  Come on. You know who the "shareholders" are that the parent commenter talks about. They are board members and people with a huge amount of shares, not "normal" people who hold 5 shares in their retirement portfolio. The main interest of a shareholder is return on investment. And that's fine. The problem is that if you don't have enough competing entities in a market, these shareholders of the few companies that still exist hold disproportionate power that can and will be misused to make any attempt at new, reasonable competition infeasible. It's really not that hard to understand.
  - mistrial9 3y ago
    no this is insufficiently informed.. company bylaws can vary quite a lot about voting rights. Your typical SiliValley cut-n-paste corp less so..
  - 3y ago