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First of all, if I am the sole owner of a business, and I want to run it into the ground, that is my prerogative, and it is completely legal. Secondly, the 'ma
by pyoung 14y ago
First of all, if I am the sole owner of a business, and I want to run it into the ground, that is my prerogative, and it is completely legal. Secondly, the 'maximize shareholder value' idea is a management principle, and it is not, and never has been, a legally binding requirement for corporations, public or not. Public corporations can be sued for purposefully or negligently destroying shareholder value, but not for failing to 'maximize shareholder value', which would be an absurd and difficult thing to argue in court anyways.
- Variance 14y agoThe context was a publicly-traded for-profit company, like most large members of the banking system. And for those companies, you are indeed given a fiduciary duty to maximize profits (See eBay v Newmark, http://www.delawarelitigation.com/uploads/file/int51%281%29.pdf http://www.delawarelitigation.com/uploads/file/int51%281%29....). So they can indeed be theoretically sued for failing to maximize shareholder value to the best of their ability as a fiduciary: negligence includes knowingly failing to take action that would increase shareholder value, not just destroying it. After all, the two actions are the same thing.