3 ms·

Management of publicly traded companies in the US is required by law to put profits first.

rented_mule 3y ago
According to a 2014 US Supreme Court decision... "While it is certainly true that a central objective of for-profit corporations is to make money, modern corporate law does not require for-profit corporations to pursue profit at the expense of everything else, and many do not do so."[1] Public or not, people involved in a business do have fiduciary duties to their investors. But those duties are not specifically about profits. They are about "obedience, information, loyalty, and care"[2]. ---- [1] https://caselaw.findlaw.com/court/us-supreme-court/13-354.html https://caselaw.findlaw.com/court/us-supreme-court/13-354.ht... [2] https://online.hbs.edu/blog/post/fiduciary-duty-to-investors https://online.hbs.edu/blog/post/fiduciary-duty-to-investors
- namaria 3y ago
  Right, I spoke without basis on facts. Thank you, I have done some research and changed my opinion.
triceratops 3y ago
Incorrect and incorrect. This is just mindlessly repeated propaganda. Management has to act in shareholders' best interest. Management decisions cannot be self-serving at the expense of shareholders. Shareholders are a diverse bunch and can be interested in things besides pure profit, and companies can choose to maximize on those alternative dimensions. The Supreme Court said as recently as 2016: "Modern corporate law does not require for-profit corporations to pursue profit at the expense of everything else, and many do not."[1] From that same article, there's more: "More to the point, corporate directors are protected from most interference when it comes to running their business by a doctrine known as the business judgment rule. It says, in brief, that so long as a board of directors is not tainted by personal conflicts of interest and makes a reasonable effort to stay informed, courts will not second-guess the board’s decisions about what is best for the company — even when those decisions predictably reduce profits or share price." 1. https://www.nytimes.com/roomfordebate/2015/04/16/what-are-corporations-obligations-to-shareholders/corporations-dont-have-to-maximize-profits https://www.nytimes.com/roomfordebate/2015/04/16/what-are-co...
- namaria 3y ago
  I should have done some research before writing opinions in American corporate law. You are correct, it is not a legal obligation but a combination of hedge fund activism and CEO compensation structures that conspire for the maximization of profit and maximization of short term stock price. Thank you for pointing that out.

According to a 2014 US Supreme Court decision... "While it is certainly true that a central objective of for-profit corporations is to make money, modern corporate law does not require for-profit corporations to pursue profit at the expense of everything else, and many do not do so."[1] Public or not, people involved in a business do have fiduciary duties to their investors. But those duties are not specifically about profits. They are about "obedience, information, loyalty, and care"[2]. ---- [1] https://caselaw.findlaw.com/court/us-supreme-court/13-354.html https://caselaw.findlaw.com/court/us-supreme-court/13-354.ht... [2] https://online.hbs.edu/blog/post/fiduciary-duty-to-investors https://online.hbs.edu/blog/post/fiduciary-duty-to-investors

namaria 3y ago
Right, I spoke without basis on facts. Thank you, I have done some research and changed my opinion.

triceratops 3y ago

Incorrect and incorrect. This is just mindlessly repeated propaganda. Management has to act in shareholders' best interest. Management decisions cannot be self-serving at the expense of shareholders. Shareholders are a diverse bunch and can be interested in things besides pure profit, and companies can choose to maximize on those alternative dimensions. The Supreme Court said as recently as 2016: "Modern corporate law does not require for-profit corporations to pursue profit at the expense of everything else, and many do not."[1] From that same article, there's more: "More to the point, corporate directors are protected from most interference when it comes to running their business by a doctrine known as the business judgment rule. It says, in brief, that so long as a board of directors is not tainted by personal conflicts of interest and makes a reasonable effort to stay informed, courts will not second-guess the board’s decisions about what is best for the company — even when those decisions predictably reduce profits or share price." 1. https://www.nytimes.com/roomfordebate/2015/04/16/what-are-corporations-obligations-to-shareholders/corporations-dont-have-to-maximize-profits https://www.nytimes.com/roomfordebate/2015/04/16/what-are-co...

namaria 3y ago
I should have done some research before writing opinions in American corporate law. You are correct, it is not a legal obligation but a combination of hedge fund activism and CEO compensation structures that conspire for the maximization of profit and maximization of short term stock price. Thank you for pointing that out.