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It's going to take a long time, but first is to destroy the myth that corporations have one purpose they need to fulfill: Generate revenue and ensure things are
by moose_man 3y ago
It's going to take a long time, but first is to destroy the myth that corporations have one purpose they need to fulfill: Generate revenue and ensure things are profitable for shareholders. This myth artificially took root in the 1970s. Business schools have to stop teaching this.
- ameister14 3y agoIt took root in 1919, so I don't think that's actually the issue. The problem is short-term thinking based on financial markets and the ability of corporations to reinvest their capital freely. Regulating stock buybacks and the ability of corporations to invest in markets will cut down on corporate fissure.
- kazen44 3y agowhy 1919 specifically? in my opinion, it seeems to have been enormously on the rise since the end of world war 2 and especially after the end of the cold war.
- dinero_rojo 3y agoFairly certain he’s referring to Dodge v. Ford Motor Company, where it was established that a company needs to operate in the best interests of shareholders above all else. https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co.?wprov=sfti1# https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co.?wprov=...
- euroderf 3y agoAlso IIRC there was a case before the Supreme Court where the dispute was whether shareholder value was the sole & supreme goal, or there could be other factors involved from other stakeholders (such as workers, the community, ...). The Supremes ruled for shareholder value. However I forget details of ths case. If anyone here happens to know what case I am referring to, please chime in.
- dragonwriter 3y agoYou are probably thinking of the case described in GP, which is the decision of the Michigan Supreme Court on this issue.
- euroderf 3y agoI should have added, this was a case back in the 1980s.
- ameister14 3y agoI don't know of a case where the Court affirmed shareholder primacy - as far as I am aware it's a state by state thing though since Delaware has it in their code it impacts a massive number of corporations.
- jgeada 3y agoThat will only happen if we change laws to make boards and executives criminally liable for these types of problems. We need to pierce the corporate veil and directly go after the responsible individuals when they, either directly or by deliberate ignorance, cause problems that lead to people dying etc. No shielding behind a corporation if your decisions to make lots more bucks led to avoidable deaths.
- RandomLensman 3y agoThat isn't the corporate veil unless you mean to go after the owners/shareholders. Considering changes to what limited liability corporations can and cannot do is a potential avenue.
- digging 3y agoThe problem with this assertion is that focusing on profit for the shareholders no longer has any downsides because the public is numb to it. So it's the winning play. We need regulations that sufficiently disincentive such behavior in order to approach equilibrium (that being a state where businesses exist to serve customers).
- jamesdhutton 3y agoIt's not a myth. It's a fact. The whole point of any for-profit company is to generate a return for the company's owners. Companies which fail to do so go out of business. It has always been thus. As for the notion that Boeing has prioritized shareholder value over safety: just look at their share price over the last few days. It tanked by 10% since this accident occurred. Clearly, making safe planes is a prerequisite for generating shareholder value. There is no conflict there.
- Aeolun 3y agoIt’ll tank for a few days, maybe even weeks before it resumes it’s upward trend.
- ip26 3y agoOk, suppose the myth is destroyed and companies change their ways. Then a small group of activist investors demands a return to "shareholder value", the company refuses, and the investors orchestrate a takeover with other people who have not yet learned the myth was dispelled. What next?
- postingawayonhn 3y agoWorking in the best interests of shareholders is fine. The problem is that because Boeing has a US monopoly and global duopoly on large jets neither the regulators or customers are willing to punish them when they under perform. Boeing has become too big to fail.
- PontifexMinimus 3y agoChanging what is taught in business schools will make little difference. You have to change what incentives operate on people.