6 ms·

What is considered "sufficient" profit, anyway?

by kiba 13y ago

pekk 13y ago
Suppose that no amount is sufficient. That means every business is a failure to fill an infinitely large stomach.
- rosser 13y ago
  It's as good a hypothesis as any I've heard to explain the observed behavior, and better than most.
  - 178 13y ago
    "On the gravestone of capitalism it will say: 'Too much was not enough'." – Volker Pispers, German Comedian
    - moocowduckquack 13y ago
      Should you wish to bring down capitalism, your plan should have the feature of being immensely profitable in the short term. Then the transnational investment arm of a major banking conglomerate will steal your idea and go off and do it for you and you can put your feet up.
      - davidgerard 13y ago
        Some say ...
  - eli_gottlieb 13y ago
    By definition, the legal obligation of a business company is to maximize its profits, preferably while not getting caught breaking any laws. That is not a hypothesis. That is the legally enforced and encoded definition of what capitalism must do.
    - eru 13y ago
      The duty of the business is to the shareholders, yes. But the shareholders can vote on any goal they feel like (including making profit, of course).
    - Xylakant 13y ago
      > By definition, the legal obligation of a business company is to maximize its profits, preferably while not getting caught breaking any laws. That is the legally enforced and encoded definition of what capitalism must do. [citation needed]. There is no law that I can think of that forces me, as a business owner to maximize my profits nor does any law prescribe the golden path for achieving said maximum. Generally speaking my business can incur losses as long as I find people willing to pay the money - either through loans, donations, whatever other means. I'm free to run my company as I wish as long as I get the majority of shareholders to agree. There is one caveats that applies: If I run out of money, my company goes bankrupt. If I willfully or negligently damage the company by e.g. performing illegal acts and thus damage the property of other shareholders I might be liable. Paying decent wages certainly does not fall into this category. Capitalism does not require companies to become bad actors. It certainly provides a lot of incentives to do so, but it's still the actors decision. Blaming any "legally enforced and encoded definition" is blame shifting.
      - tomp 13y ago
        Generally speaking, most of the biggest and most profitable businesses don't have a single owner, but are instead traded on stock markets. People who own the shares are not people who run the company. The managers, people who run the company, have an obligation to maximize the profits (in US, and probably UK), otherwise the shareholders can sue them for loosing their money, even if they did the morally right thing. In Germany, however, profit maximization is not the only goal, but businesses can consider other stakeholders as well (employees, community, environment, ...)
        Xylakant 13y ago
        > The managers, people who run the company, have an obligation to maximize the profits (in US, and probably UK), otherwise the shareholders can sue them for loosing their money, even if they did the morally right thing. Nope. You certainly got it wrong. See the linked posts from https://news.ycombinator.com/item?id=7129788 https://news.ycombinator.com/item?id=7129788. One of the potential source for that confusion might be that directors decisions can be challenged on the presumption that they are wasteful, but you'd have to prove that paying a decent wage is wasteful which is a very hard hurdle to overcome. Bad faith may be another option - but that's a different story. Being traded on the stock market provides a lot of incentive to maximize profits since more profitable companies trade better - but it's not a legal requirement.
hueving 13y ago
The people in control of the company have a legal duty not to waste shareholder money. Giving everyone a raise without a good reason would get them in hot water. There would need to be a fact-based reason to give that raise out to the entire workforce. For example, workers would need to be leaving for better jobs, or the workers would have to go on strike.
- netcan 13y ago
  I hope this doesn't sound too harsh, but I think this comment is a case of "enough knowledge to be dangerous." Companies certainly do have a duty to shareholders. That's absolutely true and breaches in duty should be taken seriously. A common issue where this responsibility needs to be better policed is lopsided risk decisions where in many cases executives can make large bonuses and on rare occasions they don't make a bonus while shareholders lose big - a complicated mess of scheming and tricky incentives that can in extreme cases amount to theft. This is the main type of abuse that these legal duties are meant to prevent. They do so imperfectly, but that's a different discussion. "This company pays a fair wage and maintains a high standard of labour conditions. These are core values of this company and an important part of how we do business." The above statement is completely legitimate position for a company to take and absolutely does not count as wasting shareholder money.* These are not new legal concepts. They have many years of legislation and litigation behind them.
- jacalata 13y ago
  I have frequently heard this statement, but just as frequently heard people say its a myth. Do you have any citations for it, such as a case where a board was sued for paying wages too high?
  - vellum 13y ago
    A union sued Goldman Sachs, "alleging the firm's notorious pay structure is grossly unfair to its shareholders". http://www.law360.com/articles/154407/ibew-fund-sues-goldman-over-pay-practices http://www.law360.com/articles/154407/ibew-fund-sues-goldman... They didn't win. http://courts.delaware.gov/opinions/download.aspx?ID=161650 http://courts.delaware.gov/opinions/download.aspx?ID=161650
aestra 13y ago
The goal of the business is to "grow," make more money than you did last year. That's a measure of "success."

What is considered "sufficient" profit, anyway?

by kiba 13y ago

What is considered "sufficient" profit, anyway?

pekk 13y ago

Suppose that no amount is sufficient. That means every business is a failure to fill an infinitely large stomach.

rosser 13y ago
It's as good a hypothesis as any I've heard to explain the observed behavior, and better than most.
- 178 13y ago
  "On the gravestone of capitalism it will say: 'Too much was not enough'." – Volker Pispers, German Comedian
  - moocowduckquack 13y ago
    Should you wish to bring down capitalism, your plan should have the feature of being immensely profitable in the short term. Then the transnational investment arm of a major banking conglomerate will steal your idea and go off and do it for you and you can put your feet up.
    - davidgerard 13y ago
      Some say ...
- eli_gottlieb 13y ago
  By definition, the legal obligation of a business company is to maximize its profits, preferably while not getting caught breaking any laws. That is not a hypothesis. That is the legally enforced and encoded definition of what capitalism must do.
  - eru 13y ago
    The duty of the business is to the shareholders, yes. But the shareholders can vote on any goal they feel like (including making profit, of course).
  - Xylakant 13y ago
    > By definition, the legal obligation of a business company is to maximize its profits, preferably while not getting caught breaking any laws. That is the legally enforced and encoded definition of what capitalism must do. [citation needed]. There is no law that I can think of that forces me, as a business owner to maximize my profits nor does any law prescribe the golden path for achieving said maximum. Generally speaking my business can incur losses as long as I find people willing to pay the money - either through loans, donations, whatever other means. I'm free to run my company as I wish as long as I get the majority of shareholders to agree. There is one caveats that applies: If I run out of money, my company goes bankrupt. If I willfully or negligently damage the company by e.g. performing illegal acts and thus damage the property of other shareholders I might be liable. Paying decent wages certainly does not fall into this category. Capitalism does not require companies to become bad actors. It certainly provides a lot of incentives to do so, but it's still the actors decision. Blaming any "legally enforced and encoded definition" is blame shifting.
    - tomp 13y ago
      Generally speaking, most of the biggest and most profitable businesses don't have a single owner, but are instead traded on stock markets. People who own the shares are not people who run the company. The managers, people who run the company, have an obligation to maximize the profits (in US, and probably UK), otherwise the shareholders can sue them for loosing their money, even if they did the morally right thing. In Germany, however, profit maximization is not the only goal, but businesses can consider other stakeholders as well (employees, community, environment, ...)
      - Xylakant 13y ago
        > The managers, people who run the company, have an obligation to maximize the profits (in US, and probably UK), otherwise the shareholders can sue them for loosing their money, even if they did the morally right thing. Nope. You certainly got it wrong. See the linked posts from https://news.ycombinator.com/item?id=7129788 https://news.ycombinator.com/item?id=7129788. One of the potential source for that confusion might be that directors decisions can be challenged on the presumption that they are wasteful, but you'd have to prove that paying a decent wage is wasteful which is a very hard hurdle to overcome. Bad faith may be another option - but that's a different story. Being traded on the stock market provides a lot of incentive to maximize profits since more profitable companies trade better - but it's not a legal requirement.

hueving 13y ago

The people in control of the company have a legal duty not to waste shareholder money. Giving everyone a raise without a good reason would get them in hot water. There would need to be a fact-based reason to give that raise out to the entire workforce. For example, workers would need to be leaving for better jobs, or the workers would have to go on strike.

netcan 13y ago
I hope this doesn't sound too harsh, but I think this comment is a case of "enough knowledge to be dangerous." Companies certainly do have a duty to shareholders. That's absolutely true and breaches in duty should be taken seriously. A common issue where this responsibility needs to be better policed is lopsided risk decisions where in many cases executives can make large bonuses and on rare occasions they don't make a bonus while shareholders lose big - a complicated mess of scheming and tricky incentives that can in extreme cases amount to theft. This is the main type of abuse that these legal duties are meant to prevent. They do so imperfectly, but that's a different discussion. "This company pays a fair wage and maintains a high standard of labour conditions. These are core values of this company and an important part of how we do business." The above statement is completely legitimate position for a company to take and absolutely does not count as wasting shareholder money.* These are not new legal concepts. They have many years of legislation and litigation behind them.
jacalata 13y ago
I have frequently heard this statement, but just as frequently heard people say its a myth. Do you have any citations for it, such as a case where a board was sued for paying wages too high?
- vellum 13y ago
  A union sued Goldman Sachs, "alleging the firm's notorious pay structure is grossly unfair to its shareholders". http://www.law360.com/articles/154407/ibew-fund-sues-goldman-over-pay-practices http://www.law360.com/articles/154407/ibew-fund-sues-goldman... They didn't win. http://courts.delaware.gov/opinions/download.aspx?ID=161650 http://courts.delaware.gov/opinions/download.aspx?ID=161650

aestra 13y ago

The goal of the business is to "grow," make more money than you did last year. That's a measure of "success."