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I found it fascinating recently (last few years) to try, myself, to consider and challenge that axiom/assumption. Analogy: though I've always been an atheist,

I found it fascinating recently (last few years) to try, myself, to consider and challenge that axiom/assumption. Analogy: though I've always been an atheist, the cultural conditioning is so strong, that in my 20's it took me a LOT of conscious effort to consider the notion that "Religion should not be treated specially" (when it comes to e.g. tax breaks, protection, freedom of speech, etc). On this too then, I've been strongly conditioned that "company's only prerogative is and should be shareholder value", that it took me a lot of effort to consider it critically, but... it's just a sentence, a statement. It's no more true than we desire it to be. Or to put it another way - if company's ONLY priority is shareholder value, over consumer interest, employee well-being, external impact, and long term picture... the system is as broken as the more aggressive amongst us have banged the drums it to be.

mike_hearn 2y ago
There is no legal requirement for a company to prioritize or only consider shareholder value when making decisions, and never has been. This idea is a meme but it's a straw man. The law doesn't say that. In fact CEOs have enormous leeway to do whatever they like, even if it's not good for shareholder profits. The accountability mechanism isn't a legal requirement to make shareholders money but the ability of shareholders to appoint a board who will then fire the CEO if they're not doing a good job. But those shareholders can choose the board and the board choose the CEO using whatever criteria they like, including making less profit to prioritize other things. There is a generalized "duty of care" requirement in most jurisdictions, but it can be and often is interpreted much more widely than a requirement to maximize shareholder returns.
ls612 2y ago
The reason for shareholder value to be the guiding principle for companies is about being clear what an organization is about. There is nothing wrong with a company supporting some nonprofit cause but that should be a distinct legal entity. Productive enterprises should be corporations that endeavor to make money. Social cause organizations should be 501c3 or equivalents and not making products as their primary business. Blurring the lines (C corps getting involved in social activism, nonprofits making lots of money and paying most of it for administrative purposes) causes no end of problems.

mike_hearn 2y ago

There is no legal requirement for a company to prioritize or only consider shareholder value when making decisions, and never has been. This idea is a meme but it's a straw man. The law doesn't say that. In fact CEOs have enormous leeway to do whatever they like, even if it's not good for shareholder profits. The accountability mechanism isn't a legal requirement to make shareholders money but the ability of shareholders to appoint a board who will then fire the CEO if they're not doing a good job. But those shareholders can choose the board and the board choose the CEO using whatever criteria they like, including making less profit to prioritize other things. There is a generalized "duty of care" requirement in most jurisdictions, but it can be and often is interpreted much more widely than a requirement to maximize shareholder returns.

ls612 2y ago

The reason for shareholder value to be the guiding principle for companies is about being clear what an organization is about. There is nothing wrong with a company supporting some nonprofit cause but that should be a distinct legal entity. Productive enterprises should be corporations that endeavor to make money. Social cause organizations should be 501c3 or equivalents and not making products as their primary business. Blurring the lines (C corps getting involved in social activism, nonprofits making lots of money and paying most of it for administrative purposes) causes no end of problems.