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Comment by slg | Hacker News Reader

It is reminiscent of the old story about an AI that is put in charge of optimizing widget production and ends up killing all life in its pursuit of raw materials to build more widgets. Unrestricted capitalism is like an AI that is never taught that it shouldn't harm humans. It just keeps on vacuuming everything up that provides even the tiniest increase in marginal profit.

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I'm not surprised this was downvoted. It is, however, inherently true.

American corporations are legally required to maximize shareholder return. The entire public company system in the US is a paperclip maximizer that is designed to vacuum up every bit of economic value available on the face of the earth and give it to shareholders.

With 80% of all US stock value owned by 10% of Americans[0], the emergent goal of the economy is to suck up every available cent and give it to people like Bezos and Zucker------.

For people like Bezos and Zucker------, that's a good thing. For the rest of us? Not so much.

[0] https://www.washingtonpost.com/posteverything/wp/2017/03/02/...

The first conception of a entity that is legally bound to continue growing in perpetuity, beyond the point of of prudence or reason, was, in retrospect, the final straw that put capitalism beyond redemption. It is quite literally a cancer on society, growing until it starves out the host.

> American corporations are legally required to maximize shareholder return.

This is a myth.

https://skeptics.stackexchange.com/questions/8146/are-u-s-co...

This summary, authored by a law professor, takes a different view:

https://www.professorbainbridge.com/professorbainbridgecom/2...

That doesn’t seem like the conclusion of that article to me. For example, the author writes:

“The court may hold forth on the primacy of shareholder interests, or may hold forth on the importance of socially responsible conduct, but ultimately it does not matter. Under either approach, directors who consider nonshareholder interests in making corporate decisions, like directors who do not, will be insulated from liability by the business judgment rule.[9]”

This thread https://news.ycombinator.com/item?id=23393674 has a lot of quotes from primary sources and legal analysis, and reaches a similar conclusion: directors can largely do as they please.

No, it doesn't.

Acting in shareholders interest is not strictly equal to optimizing shareholder returns.

That argument is :-o levels of bad.

"If the legal obligation to maximize profit for shareholders existed we would have to develop a good definition of how is is to be measured."

Translation of this bad argument: "Everyone uses words differently, so laws are impossible."

We have almost a century of stockholder lawsuits, some successful, to show how ridiculous this argument is.

That's not the argument made in that post, AFAICT?

It’s odd that this question which specifically refers to “legal obligations” appears on skeptics.stackexchange.com and not law.stackexchange.com. But the accepted answer hints at the true position when quoting another source that says “the business judgment rule ensures that, contrary to popular belief, the managers of public companies have no enforceable legal duty to maximize shareholder value.” That is, as pointed out in a less-upvoted answer [1], there is indeed a legal duty to act in the (financial) interest of the company and its shareholders, but courts allows for some risk-taking and for value to be realised over a long period, so you can’t prove a breach of the duty solely by reference to share prices.

[1] https://skeptics.stackexchange.com/a/25118/19389

In my view corporations are meant to do what their owners want them to do. It just so happens that the vast majority of shareholders want the company to give them as high a return as possible.

However this does not need to be the case. If the owners/shareholders want they can demand the company to be responsible for the environment, to be socially responsible as well, or to do basic research instead of maximising short term profits. It just requires the majority of shareholders to want that, and right now this still isn't the case.

This is actually something I picked up from reading Milton Friedman's books, where a corporation exists to do the will of the owners/shareholders. Maybe I read it wrong but that's what I understood it as.

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