I guess it depends on what jurisdiction you’re in huh
Comment on Raspberry Pi is now a public company
megopie@beehaw.org 4 months agoThis is a common misconception based on an argument put forward my Milton Friedman. It’s based on legal cases where CEOs were taken to court for knowingly defrauding shareholders for their own personal gain (say, selling all of a companies assets of the company to a different company the ceo owns privately for a single dollar).
Friedman argued that these cases set precedent that meant all CEO were legally obligated to maximize shareholder value and could be held legally accountable for not doing so. Friedman was wrong about this, like many other things he said, as he was not a lawyer, nor a particularly good economist. No CEO has even been successfully sued for “failing to maximize shareholder value” despite some people taking Friedman’s work to heart and trying to do so.
ryannathans@aussie.zone 4 months ago
off_brand_@beehaw.org 4 months ago
It comes from the case against Henry Ford after he saw his company was making gobs of cash and decided to give some of that to his employees. Shareholders successfully sued him to stop this on the grounds that he has a fiduciary duty to shareholders.
en.m.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co.
As with anything legal, there is nuance, but the basic assertion that there is fiduciary duty to shareholders is not wrong.
megopie@beehaw.org 4 months ago
He was sued for miss use of company profits, not for failing to maximize profits.
He took profits and payed outside the normal pay structure. This is not a case of him failing to maximize shareholder value or maximize profits, but failure to pay dividends with money that should have gone in to them.