> they are legally obliged to do for their shareholders
Isn't that an "old wives tale" that doesn't have any basis in reality?
Isn't that an "old wives tale" that doesn't have any basis in reality?
Of course it is debated and different in different jurisdictions, as it is common law and not a specific statute. But ambiguity in law means execs lean towards the safe decision. Shareholders can go a long way with a legal threat that never sees trial.
Translating "best interest" to "maximize profits" is the stretch though. The shareholders define what is their best interest. Shareholders aren't faceless demons. They are you and me.
The main interest of a shareholder is return on investment. And that's fine. The problem is that if you don't have enough competing entities in a market, these shareholders of the few companies that still exist hold disproportionate power that can and will be misused to make any attempt at new, reasonable competition infeasible.
It's really not that hard to understand.
No, it's not fine. Legally, maybe, but not morally fine. I don't understand how everyone is ok with this system which seems to be selecting for the worst humans.
Wait. If you invest your money into something, do you not expect a return?
ensuring the system does not degenerate is the job of regulators.
Of course, regulation is needed to stop a bad board.
Your couple Tesla shares doesn’t make you a “shareholder” as being discussed here. The shareholders that sue boards are shareholders who, if they sold, would disrupt share price notably.
These are not people, they don’t think morally the way people do. These are not demons, they are not evil themselves - these are more like machines, algorithms tuned to maximize profit. This structure is our paper-clip optimiser, already in place much before the AI revolution. If there is a devil, they are the ones behind setting up this entire system, not a player in it.
That's because he had the explicit goal of starving out the Dodge brothers who owned a competing automotive manufacturer. If it was just about the pay of employees the suit likely would have failed. You cannot prejudice minority shareholders even if they own competing companies.
You are correct. Nobody has ever been able to point to a law requiring companies to maximize profits for shareholders at all costs.
In fact, there are thousands and thousands of companies that exist with a primary purpose of doing things other than making money for their shareholders.
Any "legal" obligation to "maximize shareholder value" started out as a way to excuse the greed of other people, but falls flat upon even cursory examination.
Having a fiduciary duty to act in shareholder's interests (a very common sense rule) is a long way from "maximizing shareholder profits at all costs", even if those sometimes align.
https://en.wikipedia.org/wiki/Activist_shareholder
I am not excusing greed. I am just saying that if shareholders are focused on financial gain the corporate management is obliged to deliver. Not all shareholders are greedy. But overwhelmingly they are.
Would you be surprised to learn that there are shareholder groups that use their equity claims to pursue environmental, DEI or other goals that benefit society?
>Not all shareholders are greedy. But overwhelmingly they are.
Not even close. The vast majority of shareholders own stock through ETFs and pay no attention to the finances (or politics) of the companies they own.
The fiduciary rule is to prevent executives from running the company in their interest, as opposed to the interests of the silent shareholders who actually own the company.
Right, but many would sell their ETFs and buy others if they suddenly started to deliver below market returns.
Actually the difficulty with sustainable investments shows how difficult to rely on shareholder's values to goad corporates in the "right" direction: unless the risk is clear, present and impossible to disguise there is just enormous resistance to interfere with profitable opportunities.
Now in the context of digital information oligopolies good luck convincing shareholders that their big tech darlings are detrimental for the future of digital society.
[1] https://www.pionline.com/esg/blackrock-voted-against-record-...
Closer to the topic, think also about the "furore" and supposed panic at Google that they are not capitalizing (literally) on their AI leadership.
My impression is that the "sustainability agendas" these asset managers were pursuing turned out to be er... mostly bullshit.
Along the lines of companies "green washing" stuff that was not in fact green. Also stuff marketed as "socially progressive" as a sales tactic.
PS. For the record and while tangential to the digital monopoly discussion, it is still a good thing that we got the ESG and greenwashing debacle. Just a few years ago nobody but the perennial "tree huggers" was even talking about sustainability. Now it is a much more broad based discussion although obviously it has not landed anywhere yet. I wish people would also take regulation of the digital sphere more seriously as it is the backbone on which we will solve all these other problems.