3 ms·

There may not be statutes but there absolutely is case law. In fact, I'm sure there are indirect statutes. There's just no way that the purpose of a for profi

by dd36 13y ago

There may not be statutes but there absolutely is case law. In fact, I'm sure there are indirect statutes. There's just no way that the purpose of a for profit company is not to maximize profits to the owners of that company. There may be reasonable debate about where best to deploy capital but those decisions should be justified.

moocowduckquack 13y ago
A company can have more than one purpose and sometimes maximising profits gets in the way of the other purposes of the business, so just because a business is for profit, does not neccessarily mean that it will seek to maximise that profit or that the owners want it to as they may be just as interested in the other purposes that the business can be put to. Money alone makes a poor measure of business as business is there to do stuff and money is just one of the processes involved.
oijaf888 13y ago
What is the timeframe for maximizing profits? If I can liquidate the entire company and maximize profits for that quarter am I required to do so? If I can avoid instigating expensive legal battles and the associated bad PR to maximize profits in the next 10 years wouldn't I be just as required to do that?
philwelch 13y ago
I think I addressed this point in another thread once: http://news.ycombinator.com/item?id=6505161 http://news.ycombinator.com/item?id=6505161
gamblor956 13y ago
The company's duty is to maximize the value of its shareholder's holdings in the company (i.e., stock). This can be done by maximizing profitability (see, e.g., Caterpillar, most publicly traded companies), but it can also be done through growth (i.e., Amazon, most startups) at the expense of maximized profitability. It's easier to maximize profitability than it is to maximize growth. This is why more companies pursue the first path.
- mgkimsal 13y ago
  "Maximum profitability" still needs a timeframe to judge against. Maximum in the next quarter? Next year? Next decade? Maximizing in short term may harm or prohibit maximizing profits in long term, which would be just as bad (or worse) for shareholders.
  - gamblor956 13y ago
    Profit in the reporting context refers to the annual measure of net income, so maximum profitability generally refers to the profit generated in a single tax year.
    - roblev 13y ago
      Most corporations try to be profitable over a long term, and there is no requirement to be "maximally profitable" in a single year or over any time period. For every corporation there are judgements over the value of investing in product pipeline, sales, marketing etc. or the value of increasing short-term profits at the expense of long-term, the value of taking a risky action that may pay-off or may bring customer anger and lost sales etc. The vast majority of single actions that a corporation takes are not mandated under some simplistic view of "maximising shareholder value".

by dd36 13y ago

moocowduckquack 13y ago

A company can have more than one purpose and sometimes maximising profits gets in the way of the other purposes of the business, so just because a business is for profit, does not neccessarily mean that it will seek to maximise that profit or that the owners want it to as they may be just as interested in the other purposes that the business can be put to. Money alone makes a poor measure of business as business is there to do stuff and money is just one of the processes involved.

oijaf888 13y ago

What is the timeframe for maximizing profits? If I can liquidate the entire company and maximize profits for that quarter am I required to do so? If I can avoid instigating expensive legal battles and the associated bad PR to maximize profits in the next 10 years wouldn't I be just as required to do that?

philwelch 13y ago

I think I addressed this point in another thread once: http://news.ycombinator.com/item?id=6505161 http://news.ycombinator.com/item?id=6505161

gamblor956 13y ago

The company's duty is to maximize the value of its shareholder's holdings in the company (i.e., stock). This can be done by maximizing profitability (see, e.g., Caterpillar, most publicly traded companies), but it can also be done through growth (i.e., Amazon, most startups) at the expense of maximized profitability. It's easier to maximize profitability than it is to maximize growth. This is why more companies pursue the first path.

mgkimsal 13y ago
"Maximum profitability" still needs a timeframe to judge against. Maximum in the next quarter? Next year? Next decade? Maximizing in short term may harm or prohibit maximizing profits in long term, which would be just as bad (or worse) for shareholders.
- gamblor956 13y ago
  Profit in the reporting context refers to the annual measure of net income, so maximum profitability generally refers to the profit generated in a single tax year.
  - roblev 13y ago
    Most corporations try to be profitable over a long term, and there is no requirement to be "maximally profitable" in a single year or over any time period. For every corporation there are judgements over the value of investing in product pipeline, sales, marketing etc. or the value of increasing short-term profits at the expense of long-term, the value of taking a risky action that may pay-off or may bring customer anger and lost sales etc. The vast majority of single actions that a corporation takes are not mandated under some simplistic view of "maximising shareholder value".