5 ms·

This is fake dogma that was invented 50 years ago by neoliberal economists and has never actually been a legal or even contractual truth. A company exists to do

by yterdy 3y ago

This is fake dogma that was invented 50 years ago by neoliberal economists and has never actually been a legal or even contractual truth. A company exists to do Company Things. Often, that is, "Make money," but it can also (should primarily) be, "Provide service/product and break even so I don't cease to exist." Ironically, championing "shareholder value" over all else leads to a paperclip apocalypse economy.

jampekka 3y ago
It is the law in most countries and enforced also by international treaties. And something that private capital market selects for automatically. Edit: A summary quote for those not wanting to read the rather lengthy and thorough essay: "Instead of recognizing that for-profit corporations will seek profit for their stockholders using all legal means available, we imbue these corporations with a personality and assume they are moral beings capable of being “better” in the long-run than the lowest common denominator. We act as if entities in which only capital has a vote will somehow be able to deny the stockholders their desires, when a choice has to be made between profit for those who control the board’s reelection prospects and positive outcomes for the employees and communities who do not." 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...
- acdha 3y ago
  No, it isn’t. Try looking for these alleged laws and you’ll see how badly you’ve been lied to. There’s a small industry pushing this idea because it exonerates a bunch of rich people from being accountable for their decisions, but that doesn’t make it true. What you’ll actually find is that executives are expected to act with the best interests of the company in mind but are given broad discretion for what that means. This is because there’s no way to reliably predict the future and any non-trivial business decision requires a gamble on multiple conditions and the outcome is hard to judge over a non-trivial timeframe. You can replace an executive if you’re unhappy, but there’s no way you’re getting any money back unless you can show something like fraud or gross nepotism. As a simple example, during the 90s and early 2000s some analysts said Apple should switch to Windows or license macOS to PC manufacturers. At the time, they had a fair argument that this would boost profits and if your fictitious law really existed, Jobs might not have been able to ignore them – and shareholders would have missed out on many billions in value which was created later. If you measured his performance over a single year, you’d have been disastrously wrong over a decade.
  - jampekka 3y ago
    I'm not well versed in US corporate law, and few of us probably are given the complexity of common law systems. Leo E. Strine, Jr. I linked to definitely is: "By so stating, I do not mean to imply that the corporate law requires directors to maximize short-term profits for stockholders. Rather, I simply indicate that the corporate law requires directors, as a matter of their duty of loyalty, to pursue a good faith strategy to maximize profits for the stockholders. The directors, of course, retain substantial discretion, outside the context of a change of control, to decide how best to achieve that goal and the appropriate time frame for delivering those returns." In Finnish law I'm more familiar with it's very clear: "The purpose of a company is to make profit for its stockholders, unless otherwise prescribed in the company bylaws." (my translation) My claim is that the idea that for-profits somehow have some benevolent interests is the main lie that keeps the populace from demanding more control over the corporations.
    - acdha 3y ago
      Again, that’s a suggested interpretation which is not legally binding and, you’ll note, it includes broad latitude for exactly the reasons I mentioned. It would be quite easy to find, for example, one person who says they’re maximizing profits by reducing labor costs as much as possible and another who thinks that a well-paid, stable workforce will be more productive and resilient to challenges long-term. Both of them can be completely serious, acting in good faith, and neither would have any fear of legal consequences.
      - jampekka 3y ago
        You probably didn't read the essay I linked? It shows through numerous court decisions that maximizing shareholder profit is the legal duty. Yes, there's a lot of leeway for HOW to maximize the profit and on what timescale, but the purpose still has to be profit maximization. For example a court ruled against Henry Ford rising workers' wages for the benefit of the workers and the society. I don't really understand why people struggle with this IMHO plain fact that for-profit is for-profit. Maybe it challenges the idea that "free market" will benefit us all? 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...

by yterdy 3y ago

jampekka 3y ago

It is the law in most countries and enforced also by international treaties. And something that private capital market selects for automatically. Edit: A summary quote for those not wanting to read the rather lengthy and thorough essay: "Instead of recognizing that for-profit corporations will seek profit for their stockholders using all legal means available, we imbue these corporations with a personality and assume they are moral beings capable of being “better” in the long-run than the lowest common denominator. We act as if entities in which only capital has a vote will somehow be able to deny the stockholders their desires, when a choice has to be made between profit for those who control the board’s reelection prospects and positive outcomes for the employees and communities who do not." 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...

acdha 3y ago
No, it isn’t. Try looking for these alleged laws and you’ll see how badly you’ve been lied to. There’s a small industry pushing this idea because it exonerates a bunch of rich people from being accountable for their decisions, but that doesn’t make it true. What you’ll actually find is that executives are expected to act with the best interests of the company in mind but are given broad discretion for what that means. This is because there’s no way to reliably predict the future and any non-trivial business decision requires a gamble on multiple conditions and the outcome is hard to judge over a non-trivial timeframe. You can replace an executive if you’re unhappy, but there’s no way you’re getting any money back unless you can show something like fraud or gross nepotism. As a simple example, during the 90s and early 2000s some analysts said Apple should switch to Windows or license macOS to PC manufacturers. At the time, they had a fair argument that this would boost profits and if your fictitious law really existed, Jobs might not have been able to ignore them – and shareholders would have missed out on many billions in value which was created later. If you measured his performance over a single year, you’d have been disastrously wrong over a decade.
- jampekka 3y ago
  I'm not well versed in US corporate law, and few of us probably are given the complexity of common law systems. Leo E. Strine, Jr. I linked to definitely is: "By so stating, I do not mean to imply that the corporate law requires directors to maximize short-term profits for stockholders. Rather, I simply indicate that the corporate law requires directors, as a matter of their duty of loyalty, to pursue a good faith strategy to maximize profits for the stockholders. The directors, of course, retain substantial discretion, outside the context of a change of control, to decide how best to achieve that goal and the appropriate time frame for delivering those returns." In Finnish law I'm more familiar with it's very clear: "The purpose of a company is to make profit for its stockholders, unless otherwise prescribed in the company bylaws." (my translation) My claim is that the idea that for-profits somehow have some benevolent interests is the main lie that keeps the populace from demanding more control over the corporations.
  - acdha 3y ago
    Again, that’s a suggested interpretation which is not legally binding and, you’ll note, it includes broad latitude for exactly the reasons I mentioned. It would be quite easy to find, for example, one person who says they’re maximizing profits by reducing labor costs as much as possible and another who thinks that a well-paid, stable workforce will be more productive and resilient to challenges long-term. Both of them can be completely serious, acting in good faith, and neither would have any fear of legal consequences.
    - jampekka 3y ago
      You probably didn't read the essay I linked? It shows through numerous court decisions that maximizing shareholder profit is the legal duty. Yes, there's a lot of leeway for HOW to maximize the profit and on what timescale, but the purpose still has to be profit maximization. For example a court ruled against Henry Ford rising workers' wages for the benefit of the workers and the society. I don't really understand why people struggle with this IMHO plain fact that for-profit is for-profit. Maybe it challenges the idea that "free market" will benefit us all? 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...