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For-profit LLCs' purpose by law is to make profit for its shareholders. In common law systems it may be to pinpoint to a specific law, but from judgements its c

For-profit LLCs' purpose by law is to make profit for its shareholders. In common law systems it may be to pinpoint to a specific law, but from judgements its clear[1]. In e.g. Finland it's plain and clear in the law too. Take time to smell the bullshit. [1] https://www.wakeforestlawreview.com/2012/04/our-continuing-struggle-with-the-idea-that-for-profit-corporations-seek-profit/ https://www.wakeforestlawreview.com/2012/04/our-continuing-s...

ethanbond 3y ago
OpenAI is neither a for-profit nor an LLC. It’s a non-profit that (confusingly) owns a for-profit arm which very specifically disclaims any obligation to produce a profit.
- jampekka 3y ago
  If there are no special clauses in OpenAI Global LLC charter, Microsoft can sue if OpenAI Inc if they decline to do something profitable for e.g. moral reasons. 51% ownership doesn't mean you can do anything you want with the company. It's sort of a main point of a LLC.
  - ethanbond 3y ago
    There are special clauses. Look up the OpenAI purple box.
philipov 3y ago
https://insight.kellogg.northwestern.edu/article/shareholder-value-purpose-corporation https://insight.kellogg.northwestern.edu/article/shareholder... There are a lot of misconceptions about maximizing shareholder value, even among economists. But talk to a legal scholar or a corporate lawyer: a CEO or board is not legally obliged to maximize shareholder value. They need to maximize the value of the corporation and act in its best interest. Only when there is a change in legal control, such as a merger or imminent hostile takeover, do they have to maximize shareholder value. Just to be very clear: modern corporate law does not require profits at the expense of everything else, and maximizing profits or shareholder value is not the same thing as serving shareholders’ best interest. The company is supposed to serve the best interests of the shareholders, but that does not require an unwavering commitment to profit. What it does require is defined in the company's investment prospectus. The CEO and board must act as good fiduciaries but they are given broad discretion to decide what that entails. If you disagree with what the officers think is the best way to carry out these duties, the courts say your option is not to sue them, it is to invest in a different company.
- jampekka 3y ago
  If the company leaves profit on the table based on e.g. moral reasons, shareholders have grounds to sue and typically win. Why is it so hard for people to accept that for profit means for profit?
  - philipov 3y ago
    You don't have to take every profit opportunity if you believe it would jeopardize the long-term value of the company. If the shareholders don't agree and want you to maximize their short term interests instead, their recourse is to invest in a different company. It seems hard for some people to understand that as well. Within the bounds of the prospectus, reasonable people can disagree on how to maximize the value of a corporation, and the shareholders don't get to decide how to do that. They only get to decide how to allocate their funds. It is the job of corporate management to decide what risks are worth taking.
    - jampekka 3y ago
      Yes, there's a lot of leeway on how to maximize the shareholder profit and on what timescale. But in any case the decisions can't be justified by e.g. morals, especially if it means monetary loss (unless no shareholder complains of course).
      - philipov 3y ago
        It's just a matter of how you frame it. The view to take is that alienating customers and employees by violating e.g. morality, is not in the best interests of shareholders. Saying that the long term value of the company is best served by avoiding banditry is not only within management's discretion, it happens to be true. You can't even point to successful companies that treat consequences from violating laws or morality as just a cost of doing business and say that forces everyone else to follow suit. What might be good for one company isn't necessarily good for another. The fact that companies advertising on twitter don't want their products appearing next to far right diatribe is proof enough that considering morality and ethics is important to maximizing value.

ethanbond 3y ago

OpenAI is neither a for-profit nor an LLC. It’s a non-profit that (confusingly) owns a for-profit arm which very specifically disclaims any obligation to produce a profit.

jampekka 3y ago
If there are no special clauses in OpenAI Global LLC charter, Microsoft can sue if OpenAI Inc if they decline to do something profitable for e.g. moral reasons. 51% ownership doesn't mean you can do anything you want with the company. It's sort of a main point of a LLC.
- ethanbond 3y ago
  There are special clauses. Look up the OpenAI purple box.

philipov 3y ago

https://insight.kellogg.northwestern.edu/article/shareholder-value-purpose-corporation https://insight.kellogg.northwestern.edu/article/shareholder... There are a lot of misconceptions about maximizing shareholder value, even among economists. But talk to a legal scholar or a corporate lawyer: a CEO or board is not legally obliged to maximize shareholder value. They need to maximize the value of the corporation and act in its best interest. Only when there is a change in legal control, such as a merger or imminent hostile takeover, do they have to maximize shareholder value. Just to be very clear: modern corporate law does not require profits at the expense of everything else, and maximizing profits or shareholder value is not the same thing as serving shareholders’ best interest. The company is supposed to serve the best interests of the shareholders, but that does not require an unwavering commitment to profit. What it does require is defined in the company's investment prospectus. The CEO and board must act as good fiduciaries but they are given broad discretion to decide what that entails. If you disagree with what the officers think is the best way to carry out these duties, the courts say your option is not to sue them, it is to invest in a different company.

jampekka 3y ago
If the company leaves profit on the table based on e.g. moral reasons, shareholders have grounds to sue and typically win. Why is it so hard for people to accept that for profit means for profit?
- philipov 3y ago
  You don't have to take every profit opportunity if you believe it would jeopardize the long-term value of the company. If the shareholders don't agree and want you to maximize their short term interests instead, their recourse is to invest in a different company. It seems hard for some people to understand that as well. Within the bounds of the prospectus, reasonable people can disagree on how to maximize the value of a corporation, and the shareholders don't get to decide how to do that. They only get to decide how to allocate their funds. It is the job of corporate management to decide what risks are worth taking.
  - jampekka 3y ago
    Yes, there's a lot of leeway on how to maximize the shareholder profit and on what timescale. But in any case the decisions can't be justified by e.g. morals, especially if it means monetary loss (unless no shareholder complains of course).
    - philipov 3y ago
      It's just a matter of how you frame it. The view to take is that alienating customers and employees by violating e.g. morality, is not in the best interests of shareholders. Saying that the long term value of the company is best served by avoiding banditry is not only within management's discretion, it happens to be true. You can't even point to successful companies that treat consequences from violating laws or morality as just a cost of doing business and say that forces everyone else to follow suit. What might be good for one company isn't necessarily good for another. The fact that companies advertising on twitter don't want their products appearing next to far right diatribe is proof enough that considering morality and ethics is important to maximizing value.