Hacker News Reader

Comment by rosser | Hacker News Reader

It's as good a hypothesis as any I've heard to explain the observed behavior, and better than most.

"On the gravestone of capitalism it will say: 'Too much was not enough'." – Volker Pispers, German Comedian

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.

Some say ...

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.

> 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.

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, ...)

> 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. 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.

Those who ignore history etc etc. go back to the 70's and 80's and you will find investor lawsuits over boards being financially negligent with investor money. That is one of the reasons we find ourselves in this mess today.

this is a total myth that is somehow oft-parroted on the internet.

directors/officers of a corporation have a fiduciary duty to its stockholders. this is three-pronged: good faith, loyalty, due care.

there is no such 'maximize profits' mandate in common law. See business judgment rule and Directors' duties.

if these don't clarify things, please ask questions.

1: http://en.wikipedia.org/wiki/Business_judgment_rule

2: http://en.wikipedia.org/wiki/Directors%27_duties

edit: another poster (netcan) gave a great explanation in a sibling thread- https://news.ycombinator.com/item?id=7129582

>>legally enforced and encoded definition of what capitalism must do.

Well then certainly you can point us to the law that legally encodes a definition of capitalism and provides a regulatory regime that provides relief when someone practices "unorthodox capitalism."

There are two standards for a corporate executive to consider: 1) What the majority of the shareholders say 2) What a court would rule if a minority of the shareholders decided to sue the executive on the grounds that they (and presumably the majority stake) are depriving the minority shareholder of profits they have a legal fiduciary responsibility to provide.

What you are speaking about is #2. There is a high bar for such lawsuits, but there is a legal standard.

http://www.professorbainbridge.com/professorbainbridgecom/20...

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).

Please, please, please: can we retire this meme already?

Reply on news.ycombinator.com