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I too wish the meme would die, but not because it's not true, rather because it's overused a lot as a reply. As I understand it these companies do in fact have

by selmnoo 13y ago

I too wish the meme would die, but not because it's not true, rather because it's overused a lot as a reply. As I understand it these companies do in fact have a fiduciary responsibility to make every move be one that benefits their shareholders. Can you please voice your thoughts on how that is not true?

philwelch 13y ago
Any good faith business decision counts as a move meant to benefit shareholders, especially where there are tradeoffs involved. If you make user experience worse to boost advertising revenues, you can argue that was the right call because you get more money. If you make your user experience better in a way that hurts advertising revenues, you can argue that it was the right call because it improves user loyalty and user perception of Facebook, making it more valuable in the long run. Even if it turns out that your decision was wrong, it's an honest mistake and you're allowed to make those. There's no way shareholders could ever win a lawsuit by second-guessing business decisions they disagree with! About the only thing you can't do is outright embezzle money from the company or something. Now, for a public company, lots of investors base their decisions on the GAAP numbers companies are forced to report, so there are incentives to improve those numbers each quarter if you want to boost stock price. But if you communicate a long-term strategy to investors and seem competent enough to pull it off, you're Amazon and your stock price does well anyway, even if you lose money.
michaelt 13y ago
Matthew Yglesias described Amazon as "a charitable organization being run by elements of the investment community for the benefit of consumers." [1] There are many things Amazon could do to transfer cash from their customers to their shareholders. Bezos justifies not doing these things because he claims there is more value in long term customer loyalty and trust. Because it's a good faith business decision, I don't see Bezos being ousted or sued by shareholders. Likewise, it would be easy for Facebook to say "we think there's long term value in delivering the best possible experience to users, and if for some users that means using an extension that's fine with us" - it's a good faith business decision, why would they get ousted or sued where Bezos hasn't? [1] http://www.slate.com/blogs/moneybox/2013/01/29/amazon_q4_profits_fall_45_percent.html http://www.slate.com/blogs/moneybox/2013/01/29/amazon_q4_pro...
- selmnoo 13y ago
  Well, yes, but you're still qualifying the actions building customer loyalty and trust as actions that're ultimately in shareholders' best long-term interest. So the meme in question is just trite, not inaccurate or invalid.
- pdonis 13y ago
  it would be easy for Facebook to say "we think there's long term value in delivering the best possible experience to users, and if for some users that means using an extension that's fine with us" It would be easy for them to say it, but first they would have to believe it, and second they would have to believe they could convince investors of it. it's a good faith business decision, why would they get ousted or sued where Bezos hasn't? It's not a question of being sued, it's a question of having the stock price go down. Investors don't have to sue to do that; they just have to sell.
  - magicalist 13y ago
    > It would be easy for them to say it, but first they would have to believe it, and second they would have to believe they could convince investors of it You're moving goalposts. That's a completely different statement. Whatever it is they truly believe is totally different than "they have to make decisions that benefit their stockholders or they will go bankrupt". > It's not a question of being sued, it's a question of having the stock price go down. Investors don't have to sue to do that; they just have to sell. Again, this has nothing to do with fiduciary duty, which was the topic that the original comment was responding to. The fact remains that for-profit companies do not have some kind of Sword of Damocles hanging over them, waiting for them to make a decision that costs stockholders value.
    - pdonis 13y ago
      Whatever it is they truly believe is totally different than "they have to make decisions that benefit their stockholders or they will go bankrupt". How is this relevant to what I said in the particular statement you were responding to here? I wasn't saying anything in that statement about what FB does believe; all I was saying is that, judging by their behavior, they don't believe that "there's long term value in delivering the best possible experience to users, and if for some users that means using an extension that's fine with us". As for what I think they do believe, see below. this has nothing to do with fiduciary duty Which was exactly my point: saying that FB won't get sued if it lets third-party developers change its UI is not at all the same as saying that FB thinks its stockholders will benefit if it lets third-party developers change its UI. for-profit companies do not have some kind of Sword of Damocles hanging over them, waiting for them to make a decision that costs stockholders value. I wasn't saying they do; nothing in what I said requires that a single decision is all it takes. I didn't specify any time frame in which FB has to benefit stockholders or go bankrupt. If you read other posts of mine in this sub-thread, you'll see that the strategy I think FB is following is not one aimed at maximizing short-term return on capital, but that doesn't change the fact that they have to benefit stockholders on some time horizon that is relevant for the stockholders.
brymaster 13y ago
> these companies do in fact have a fiduciary responsibility Can this meme die too? http://skeptics.stackexchange.com/questions/8146/are-u-s-companies-legally-obligated-to-maximize-profits-for-shareholders http://skeptics.stackexchange.com/questions/8146/are-u-s-com...

by selmnoo 13y ago

philwelch 13y ago

Any good faith business decision counts as a move meant to benefit shareholders, especially where there are tradeoffs involved. If you make user experience worse to boost advertising revenues, you can argue that was the right call because you get more money. If you make your user experience better in a way that hurts advertising revenues, you can argue that it was the right call because it improves user loyalty and user perception of Facebook, making it more valuable in the long run. Even if it turns out that your decision was wrong, it's an honest mistake and you're allowed to make those. There's no way shareholders could ever win a lawsuit by second-guessing business decisions they disagree with! About the only thing you can't do is outright embezzle money from the company or something. Now, for a public company, lots of investors base their decisions on the GAAP numbers companies are forced to report, so there are incentives to improve those numbers each quarter if you want to boost stock price. But if you communicate a long-term strategy to investors and seem competent enough to pull it off, you're Amazon and your stock price does well anyway, even if you lose money.

michaelt 13y ago

Matthew Yglesias described Amazon as "a charitable organization being run by elements of the investment community for the benefit of consumers." [1] There are many things Amazon could do to transfer cash from their customers to their shareholders. Bezos justifies not doing these things because he claims there is more value in long term customer loyalty and trust. Because it's a good faith business decision, I don't see Bezos being ousted or sued by shareholders. Likewise, it would be easy for Facebook to say "we think there's long term value in delivering the best possible experience to users, and if for some users that means using an extension that's fine with us" - it's a good faith business decision, why would they get ousted or sued where Bezos hasn't? [1] http://www.slate.com/blogs/moneybox/2013/01/29/amazon_q4_profits_fall_45_percent.html http://www.slate.com/blogs/moneybox/2013/01/29/amazon_q4_pro...

selmnoo 13y ago
Well, yes, but you're still qualifying the actions building customer loyalty and trust as actions that're ultimately in shareholders' best long-term interest. So the meme in question is just trite, not inaccurate or invalid.
pdonis 13y ago
it would be easy for Facebook to say "we think there's long term value in delivering the best possible experience to users, and if for some users that means using an extension that's fine with us" It would be easy for them to say it, but first they would have to believe it, and second they would have to believe they could convince investors of it. it's a good faith business decision, why would they get ousted or sued where Bezos hasn't? It's not a question of being sued, it's a question of having the stock price go down. Investors don't have to sue to do that; they just have to sell.
- magicalist 13y ago
  > It would be easy for them to say it, but first they would have to believe it, and second they would have to believe they could convince investors of it You're moving goalposts. That's a completely different statement. Whatever it is they truly believe is totally different than "they have to make decisions that benefit their stockholders or they will go bankrupt". > It's not a question of being sued, it's a question of having the stock price go down. Investors don't have to sue to do that; they just have to sell. Again, this has nothing to do with fiduciary duty, which was the topic that the original comment was responding to. The fact remains that for-profit companies do not have some kind of Sword of Damocles hanging over them, waiting for them to make a decision that costs stockholders value.
  - pdonis 13y ago
    Whatever it is they truly believe is totally different than "they have to make decisions that benefit their stockholders or they will go bankrupt". How is this relevant to what I said in the particular statement you were responding to here? I wasn't saying anything in that statement about what FB does believe; all I was saying is that, judging by their behavior, they don't believe that "there's long term value in delivering the best possible experience to users, and if for some users that means using an extension that's fine with us". As for what I think they do believe, see below. this has nothing to do with fiduciary duty Which was exactly my point: saying that FB won't get sued if it lets third-party developers change its UI is not at all the same as saying that FB thinks its stockholders will benefit if it lets third-party developers change its UI. for-profit companies do not have some kind of Sword of Damocles hanging over them, waiting for them to make a decision that costs stockholders value. I wasn't saying they do; nothing in what I said requires that a single decision is all it takes. I didn't specify any time frame in which FB has to benefit stockholders or go bankrupt. If you read other posts of mine in this sub-thread, you'll see that the strategy I think FB is following is not one aimed at maximizing short-term return on capital, but that doesn't change the fact that they have to benefit stockholders on some time horizon that is relevant for the stockholders.

brymaster 13y ago

> these companies do in fact have a fiduciary responsibility Can this meme die too? http://skeptics.stackexchange.com/questions/8146/are-u-s-companies-legally-obligated-to-maximize-profits-for-shareholders http://skeptics.stackexchange.com/questions/8146/are-u-s-com...