That is a myth. The law is actually far more complicated, at least in the U.S., and presumably elsewhere too.
Comment on Why do companies always need to grow?
MolochAlter@lemmy.world 3 weeks ago
It’s not “companies”, it’spublicly traded companies.
And the answer is quite simple really: the moment you become publicly traded your stock becomes your product, and everything else becomes a means to deliver better stock prices to your investors.
Not all companies are publicly traded, I patronise privately held companies wherever possible because as a client I’m still at the core of their business strategy, and I’m wary of the alternative.
At the end of the day, bad strategies result in bad products and services. Vote with your wallet, it’s very possible.
fodor@lemmy.zip 3 weeks ago
cdf12345@lemmy.zip 3 weeks ago
Please elaborate because everything written above is correct. Companies must maximize value.
The leading statement of the law’s view on corporate social responsibility goes back to Dodge v. Ford Motor Co, a 1919 decision that held that “a business corporation is organized and carried on primarily for the profit of the stockholders.” That case — in which Henry Ford was challenged by shareholders when he tried to reduce car prices at their expense — also established that “it is not within the lawful powers of a board of directors to shape and conduct the affairs of a corporation for the merely incidental benefit of shareholders and for the primary purpose of benefiting others.”
sigezayaq@startrek.website 3 weeks ago
I work for a privately owned company and we’re absolutely expected to grow. Being privately owned doesn’t change that.
baatliwala@lemmy.world 3 weeks ago
Right but you don’t have a basically legal obligation to if you’re private
azertyfun@sh.itjust.works 2 weeks ago
??? Of course you do. Investors don’t just buy their way into hypothetical future profits, they buy control over the company. The specifics depend, whether it’s voting shares or the looming threat of debt collection, but the courts will 100 % enforce investors’ right to demand things from companies.
Furthermore the idea that publicly traded companies have some kind of obligation to make as much money as quickly as possible is a reddit-born myth. Shareholders will bring in a CEO, who will be tasked to do whatever and can be fired from the shareholders at any time. Grievous mismanagement and intentional damage can expose a CEO to legal action, just like intentionally destroying tools can expose a worker to legal action. But a CEO acting in good faith has no other obligation than to fulfill the tasks asked of them by shareholders. The problem is that goes wrong when large shareholders plan to sell their shares and need the numbers to look a little better to sell a little higher. But this phenomenon absolutely happens with PE as well – in fact it’s arguably way worse because publicly traded companies at least have legal obligations of financial transparency. Private shareholders can do whatever the fuck they want, including secretly selling their shares to Evil Inc. for them to strip the company for parts and not a single employee has the right to even know who the majority shareholder even is, nervermind what their plan is.
sexhaver87@sh.itjust.works 2 weeks ago
Shareholder primacy wasn’t born on reddit, it was actually Milton Friedman who theorized of it, the Michigan Supreme Court who wrote it into precedence, and now American citizens who have to live under the consequences of publicly traded corporations having a distinct legal obligation (against the belief of some legal academics who argue otherwise, in bad faith nonetheless) to provide a profit for shareholders. This also applies to PE, who take this notion of a, once again, distinct legal obligation to provide profits for shareholders above all else, as what you would call a “Get out of jail free card,” i.e. fraud and thievery is completely fine if you’ve got shareholders to feed.
Shareholders: “We demand more profits, please start acting in bad faith so I may purchase another boat this afternoon”
CEO: “ok”
Alternatively:
Shareholders: “Profits, please”
CEO: “no”
Michigan Supreme Court: “The death sentence is on the table”
This is how this has played out since 1919, Dodge v. Ford Motor Co. Wax poetic about theory, in reality people are starving over the sheer necessity that the shareholders want another buck.
MolochAlter@lemmy.world 3 weeks ago
Growth and *endless" growth are not the same.
Obviously growing a business is positive in some circumstances, the point is that growth for growth’s sake becomes the name of the game once you go public, whereas when privately held the company can decide whether it makes sense to grow in that moment or focus on other goals in the short term to benefit a long term strategy.