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It's interesting you would mention Jack Welch because he said: > Shareholder value is the dumbest idea in the world. There is myth about how corporate directo
by chx 3y ago
It's interesting you would mention Jack Welch because he said:
> Shareholder value is the dumbest idea in the world.
There is myth about how corporate directors have a legal duty to maximize "shareholder value" and short term corporate profits at the cost of everything else. This is false. No such thing exists in corporate law. While Burwell v. Hobby Lobby is a deplorable decision, there is a rather remarkable sentence in there:
> modern corporate law does not require for-profit corporations to pursue profit at the expense of everything else, and many do not do so.
https://www.law.cornell.edu/supremecourt/text/13-354 https://www.law.cornell.edu/supremecourt/text/13-354
- tzakrajs 3y ago> Shareholder primacy was famously established in the decision of Dodge v. Ford Motor Co. in 1919. In Dodge v. Ford Motor Co.'s court opinion, it stated that "there should be no confusion" that "a business corporation is organized and carried on primarily for the profit of the stockholders." Because of this opinion, a precedent was set that managers had to maximize shareholder profit. https://en.wikipedia.org/wiki/Shareholder_primacy https://en.wikipedia.org/wiki/Shareholder_primacy
- chx 3y agoDodge v Ford Motor Co was a Michigan Supreme Court decision while I quoted SCOTUS. The very article you linked strongly suggests it's not a general law: > Shareholder primacy is a theory > The doctrine waned in later years
- xrd 3y agoI really enjoyed your comment because I have found myself speaking that untruth out loud when I lament the state of corporate ethics. But, isn't it the case that activist investors aren't really using legal means to ensure that same result; they are using other means anyway? And, the net result is the same?