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To be clear, business operators have extremely, extremely broad latitude in how they interpret their fiduciary duty to shareholders. We actually need to combat

• throwawayoldie 1y ago
  I have a better idea: let's combat the notion that putting shareholder value ahead of the common good is moral.
  • sorcerer-mar 1y ago
    Great! You've convinced nobody of anything. Businesses are powerful tools for the common good and the fact they produce returns for investors is absolutely critical to their continued existence and long-term viability. But the point for businesses to exist at all is to produce positive externalities and they need to produce those externalities for more than just their owners. It cannot be "either/or" and it's not immoral to pursue profits.
    • egypturnash 1y ago
      You can explicitly build the business to say "delivering shareholder value is not our highest goal, we must remember that we live in a society and upon a planet". https://en.wikipedia.org/wiki/Benefit_corporation https://en.wikipedia.org/wiki/Benefit_corporation
    • monkaiju 1y ago
      Their purpose is absolutely not "to produce positive externalities" (whatever that even means). What makes you say that? You can, and people do, run a business doing all sorts of heinous things
      • sorcerer-mar 1y ago
        You should read a history book about why corporations were invented and allowed to exist.
        • moefh 1y ago
          There's an old saying: The purpose of a system is what it does[1]. You can't (well, shouldn't) judge something by its intended purpose if what it ends up doing goes against it. [1] https://en.wikipedia.org/wiki/The_purpose_of_a_system_is_what_it_does https://en.wikipedia.org/wiki/The_purpose_of_a_system_is_wha...
          • sorcerer-mar 1y ago
            And businesses as a whole produce positive externalities, as intended, which is why we continue to allow them to exist.
            • crawfordcomeaux 1y ago
              Only when accounting is done without calculating ecological cost, including human quality of life.
              • Nasrudith 1y ago
                Human quality of life tends to be pretty shit without them though, and that is ignoring all of the competitively a necessity "choices" where not doing so is literally suicidal. Not adopting early agriculture and settling down leads to nomadic hunter gatherers being outnumbered and genocided by sedentary farmers sorts of necessity. Refusing to mine and pollute means bad things happen to you when you encounter metallic armed and armored foes.
            • asdf6969 1y ago
              > we continue to allow them to exist Who is “we”? I can’t do anything about it. No more than peasants “allow” the king to exist..
    • throwawayoldie 1y ago
      Yes, I've heard the party line too. The difference is, I realized it was horseshit.
    • wat10000 1y ago
      It’s pretty rare for businesses to produce positive externalities. Businesses create value and some of that value goes to others, but that normally happens through explicit transactions.
    • _Algernon_ 1y ago
      >But the point for businesses to exist at all is to produce positive externalities and they need to produce those externalities for more than just their owners. I see little evidence that this is true. If anything, modern VC companies are "externality parasites". They produce positive externalities for some (ie. shareholders), by putting a lot of negative externalities on society as a whole (see for example the cost to democracy, societal cohesion, etc. that comes for Facebook and the like).
  • kelseyfrog 1y ago
    If I had to choose between common good and shareholder value all else being equal, I'd choose common good every time. We should be suspicious of games that favor shareholder value over common good and repair them. Of course this is harder than it sounds, but letting the person with the most money in a Monopoly game also set the rules is absurd and and obviously wrong. Wrong even without having a consensus reality on what "common good" entails and this is important. The "capital game" should serve us, rather than us serving it. A fatalistic lack of imagination is no longer an option. When we're more afraid of unintended consequences than accepting that we have a responsibility to the current consequences, our current consequences look rather intended.
    • wonderwonder 1y ago
      I hear you but disagree. Who decides what the common good is? You end up with companies moralizing, forcing employees to adhere to those common goods in both their work and personal lives. Forcing people to get the vaccine was for the common good. DEI was common good and that in turn led to Trump being elected. The pendulum swings. At least with share holder value, you know where you stand. The common good is a constantly changing thing determined by the moral authority in charge at a moment in time.
      • crawfordcomeaux 1y ago
        Common good: humans, according to systems theory, have the same needs and there's a finite set. We can map them & then design systems so as to satisfice all of them.
        • aianus 1y ago
          One of humans' needs is for status which is by definition zero sum. Same with mating. If anything those two are probably the most important needs so it's not possible to build such a system.
          • kelseyfrog 1y ago
  • jbs789 1y ago
    It’s a question of time horizon.
    • throwawayoldie 1y ago
      ...go on.
  • klik99 1y ago
    I wish it were that simple, I think capitalism works best when personal self-interested incentives are aligned with what creates common good - IE policy is like game design where you design the rules in a way that provides an overall good outcome. In this lens, there is a huge problem with PE right now (the rules incentivize buying out industries and gutting them), and something wrong with VC (the rules incentivize enshittification) so the rules need to be adjusted to align with the broader outcomes we want.
  • badpun 1y ago
    Would you put your money into a business which put common good above your return on investment?
    • or_am_i 1y ago
      Would you give to charity? You are pointing at the heart of the prisoner's dilemma endlessly recreated by the very existence of capital: why choose long-term public benefit over a short-term personal gain?
      • badpun 1y ago
        People give to charity what they don't need. If all businesses are expected to be charities, they cease to be profitable and thus cease to function, as no one will bankroll the initial investment required to set up a business without the prospect of making money on it. Let's look at an example. In order to produce e.g. wind turbines, a large factory is needed, full of expensive machines. Let's assume that the buldings plus the machines all costs $500 million altogether. Where would that $500m come from, if the factory will never be profitable, so entities with money will never bankroll it? The only alternative I can think of is 100% socialism and centrally managed economy, where all businesses are owned and bankrolled by the state. However, in practice all such implementations so far (over probably at least a dozen different countries) has been terribly inefficient and corrupt.
  • carlosjobim 1y ago
    Then don't make a company with shares. This is like complaining in a tennis court that it's better to play football. Anybody who makes his business a company with shares will be beholden to shareholders, even if he's the only shareholder. There are plenty of venues for any activity, which isn't structured in this way. 1. Nobody forces you to use a smart phone. 2. Nobody forces you to have social media or use it. 3. Nobody forces you to watch Netflix. We all choose what we do in life.
    • wat10000 1y ago
      #1 is rapidly approaching the practicality of “nobody forces you to have money.” Technically true but deeply impractical. #2 is heading that way. Lots of official info is only available on social media. Travel to certain countries can be difficult if you don’t have any social media presence as they’ll decide you’re trying to hide something.
    • wolvesechoes 1y ago
      1 and 2 are simply false
      • trollbridge 1y ago
        #1, I’m forced to file taxes and use 2FA to log in to do so. #2, I have to use SM for marketing. To avoid these I’d need to basically be a homeless vagrant.
        • carlosjobim 1y ago
          There are billions of people in the world who don't need to market on social media to survive. Are you genetically different from them?
  • pstuart 1y ago
    The only way to make that happen is to have that common good be priced into the shareholder value, i.e., removing externalities that allow the privatization of profit and the public subsidies of the remediation of the damage done. Easy peasy, no?
  • geodel 1y ago
    Even better idea is not to have shareholders. After all there are millions of business running without external shareholders.
    • trollbridge 1y ago
      Or to remove limited liability from shareholders.
• slt2021 1y ago
  There is no latitude. They have only one requirement: growth growth growth. If you hit the growth targets, they will pat you in the back and will demand Hyperscale growth growth growth and will throw money at you to supercharge it. If you refuse to chase the growth, they will simply kick you off the company via Board or fund your competitor that will chase the growth at all means
  • sorcerer-mar 1y ago
    Your board firing you is not a "legal obligation".
    • slt2021 1y ago
      The funding is raised to chase growth, otherwise no VC will ever give money. If you get the money and then try to U-turn and refuse to chase growth, the board will start asking questions The legal obligation is that CEO does whatever board tells him to, otherwise board can fire ceo
      • sorcerer-mar 1y ago
        This still does not produce any legal obligation.
        • sssilver 1y ago
          Ok but you’ve lost your mission, your tools to accomplish that mission, and effectively your company.
          • watwut 1y ago
            Yeah, but you not getting what you want, you not having own little imperium is not the same as "you having legal obligation". This amounts to an argument that if doing something immoral gives you money and power, you can not possibly say no and no one can blame you. That somehow more money and power is good enough excuse.
• danenania 1y ago
  > To be clear, business operators have extremely, extremely broad latitude in how they interpret their fiduciary duty to shareholders. That may be true legally, but practically it's only true if they control the board. Otherwise they will simply be replaced by people who are willing to do what the board wants.
  • sorcerer-mar 1y ago
    The difference between getting fired and getting convicted of a crime is pretty important, actually!
    • danenania 1y ago
      The annoying tone is unnecessary. Yes, legally speaking operators can go against the board and get replaced, which they certainly should do if they feel they're being asked to do something unethical. But it's not going to change how the company is run.
    • marcosdumay 1y ago
      On that level, on the quasi-feudal economy that is taking over the world, it's not clear which of those is more impactful.
    • gipp 1y ago
      For the executive, sure. Not for the impact of the overall incentive structure on the trajectory of the business. Which is what this discussion is about.
      • sorcerer-mar 1y ago
        The discussion literally said "legal obligation." That's what I was responding to.
        • lovich 1y ago
          The root comment this thread is in reply to had the implication that people are only acting this way because of an inaccurate idea of how strict the legal obligations are, and the other comments are about how that’s obviously not the only force producing the current outcome
• duped 1y ago
  The idea that executives have a duty to maximize shareholder value is a trope from business ethics class, not law. I say this because you used the phrase "fiduciary duty" which does not exist in this context.
  • sorcerer-mar 1y ago
    Correct, because GP said “legal obligation," which I agree: there isn't one.
    • klik99 1y ago
      Genuine question because I think I might be wrong on this one, or maybe misunderstanding what you're saying - aren't there cases of shareholders suing CEOs for not acting in shareholders interest and winning? If there was no legal obligation to act on behalf of shareholders how could they win those cases? My understanding is those kind of cases aren't common because a) they are hard to prove, b) the people being sued if they actually have the money to make it worth suing them also have the money to fight it, and c) it's a really bad look for an investor to be suing a previous member of their portfolio and would a strong adverse affect on their deal flow Unless you're saying there is no explicit legal obligation / fiduciary duty in law, but it does emerge from civil court cases, which is how I understand it, but short paragraphs are not a good place for the amount of nuance so I just said "legal obligation" as a shorthand for something real but very complex.
      • duped 1y ago
        I think Matt Levine coined this phrase: "everything is securities fraud." Activist investors will sue for anything alleging that executives broke securities law by doing anything that harmed their portfolio. It doesn't mean they win the cases, or that anyone is guilty. There's also something worth noting that even if there isn't a legal obligation for executives to act on their shareholders interests, they have a really strong incentive when their compensation is mostly stock grants and the shareholders can fire them.
      • sorcerer-mar 1y ago
• lovich 1y ago
  > To be clear, business operators have extremely, extremely broad latitude in how they interpret their fiduciary duty to shareholders. Legally maybe. The market and shareholders will punish you if you deviate from the current standard behavior. We’ve all seen companies do layoffs just because “Wall Street” was concerned about the economy and then instantly see the stock price spike up. These negative consequences are all results of bog standard prisoner dilemma issues that need government regulation to make sure everyone picks the good square, but the tech industry and this boards community as well is allergic to the idea that regulations can improve the situation for everyone
• potatolicious 1y ago
  Yeah, I think it honestly lets founders off the hook too much. In 95% of cases, the founder isn't smashing moral barriers because the VCs and shareholders are making them, or lording the threat of legal action or any some such. In 95% of cases, the founder is smashing through moral barriers because their interests are aligned with the VCs: because they think what they are doing will lead to stupendous mega-wealth for them personally. Like sure, I think the idea that corporate execs must be beholden to maximizing share price is a) corrosive to our society and b) not as true as often portrayed, but I don't think that's even a real factor here.
  • sorcerer-mar 1y ago
    100% agreed, well put
  • j7ake 1y ago
    It’s also survivorship bias. Given that a start up has explosive growth, it way more likely that they are amoral. The ones who play the game with integrity and morals never have the type of growth that makes headlines. But I’m sure they exist.
    • Nasrudith 1y ago
      That really doesn't follow. Explosive growth guarantees amorality? What sin is inherit to success? Has envy become so embedded in our thinking that success alone is proof of guilt? Or is it just Original Sin style bullshit where everone is automatically guilty?
      • conradkay 1y ago
        Far from guaranteed, but to be a moral founder you now have a second goal alongside growth. Inevitably the two will be in conflict.
      • j7ake 1y ago
        Didn’t say guaranteed, I said more likely. To succeed, you have to execute many things well and avoid bad luck. Add to this an extra constraint that one also needs integrity or morals and it will drastically reduce your success rate. My statement will be true as long as having integrity or morals could hinder growth in some way.
• klik99 1y ago
  Maybe in theory, but in practice there is a strong power mismatch that causes investors to have a strong influence. Sand Hill learned it's lesson from Facebook/Zuckerberg and now always have a seat on the board. Only outliers like zuck/bezos/similar have the weight to push back against investors. Heck, even Dorsey couldn't for whatever reason. And even if what you said is true, you can look at the results of years of this system, the difference between companies with outside investment vs without makes a strong case against what you're saying. It's like saying educating people about their rights wrt police helps, but in practice police don't derive their power from actual laws and it comes at considerable personal expense to push it to courts, in the same way Delaware is very strongly biased towards shareholder rights.
• kmeisthax 1y ago
  [dead]
• chipsrafferty 1y ago
  Even focusing on short term profit would be fine, if you want to blow up the business go ahead, if those profits were actually shared fairly with shareholders. Too often companies can just dilute their stock over and over, which fucks over individual investors and benefits the 51% owners, and investors don't really get a say, yes there's a vote but if 51% is owned by a few it's not a vote. Individual investors are largely operating on trust.