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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 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 agoAgain, 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 agoYou 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...
- vinceguidry 3y agoIt would help you to make your point if you could refer to the specific legal doctrine outlining exactly what management owes stockholders. It's called 'fiduciary' and, is broadly defined in the US by Delaware state law. https://en.wikipedia.org/wiki/Fiduciary https://en.wikipedia.org/wiki/Fiduciary