the one used by bootlickers to defend every bad thing the company does
Sounds like a good reason radically restructure (if not entirely dismantle) those companies.
We should make medicine to treat sick people. We should build houses to shelter the unhoused. We should grow food to feed the hungry.
The fact that most companies currently responsible for food and housing and medicine are primarily motivated by shareholder value instead of effective community service represents a structural conflict of interest.
This. Isn’t that neoliberalism? We outsource everything to companies in the name of efficiency?
Yep and many times it does NOT work. In the UK Margaret Thatcher pushed heavily into neoliberalism and the current gov is still pushing it and it’s led to public transport not being reliable (not punctual and expensive) rivers being filled with shit because the water companies are not keeping rivers clean, people being denied welfare support because the task of assessing it has been moved to private firms who give bonuses for failing people.
It’s not an argument so much as a factual statement about the legal structure of corporations today. They’re legally required to prioritize shareholder interests above literally everything else.
We need new laws that change this structure and require corporate boards to have more nuanced priorities. Additionally, corporate personhood should be completely done away with.
Additionally, corporate personhood should be completely done away with.
Either that, or they need the same accountability as natural persons, not just the benefits.
I think this is a commonly repeated but warped view of executive responsibility in a corporation. You could prioritize shareholder interest by chopping up and selling off successful parts of a corporation to get incredible quarterly results for a quarter or two, but quickly the corporation would dissolve due to a lack of an ability to make money. You could argue the CEO made the right call because shareholders made a lot of money in those quarters therefore he did what’s in their interest but at the same time he/she collapsed the entire company in order to do it, which isn’t in anyone’s interest. Prioritizing long-term growth can benefit shareholders even further than burning bright and burning out fast.
Prior to the last several decades, this is how companies operated, with an eye for long-term growth, but in recent history, this has shifted more toward short-term gains which has only benefitted the 1% of the 1%, while the rest of us suffer with inflation, recessions, unemployment, and an evaporating middle class.
They’re legally required to prioritize shareholder interests above literally everything else.
I wouldn’t say legally required. It is in the best interest of the C suite to appease the shareholders because shareholders are the ones that say how much they get paid or if they even have a job there.
Major shareholders sign term sheets which always govern the terms of who is prioritized with profit, major decisions or in any economic event. Breaking term sheets is breaking a contract which is illegal in the sense it has legal consequence for not being adhered to. Especially if it involves a public company and is under SEC jurisdiction.
Do these term sheets specify the timeframe in which the profit is to be judged? A company could lose money for a few years on paper investing into some new business venture, then yield lots of profit in the last year.
If the law says the shareholders can fire you for not maximizing their returns, then it’s by law.
There are many ways to measure ‘maximizing returns’ though which leaves a lot of room for interpretation.
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Cite the statute then
I wouldn’t say legally required.
Did you read that?
This case is frequently cited as support for the idea that corporate law requires boards of directors to maximize shareholder wealth. However, one view is that this interpretation has not represented the law in most states for some time.
Among non-experts, conventional wisdom holds that corporate law requires boards of directors to maximize shareholder wealth. This common but mistaken belief is almost invariably supported by reference to the Michigan Supreme Court’s 1919 opinion in Dodge v. Ford Motor Co. — Lynn Stout
Dodge is often misread or mistaught as setting a legal rule of shareholder wealth maximization. This was not and is not the law. Shareholder wealth maximization is a standard of conduct for officers and directors, not a legal mandate. The business judgment rule [which was also upheld in this decision] protects many decisions that deviate from this standard. This is one reading of Dodge. If this is all the case is about, however, it isn’t that interesting. — M. Todd Henderson
people use it as an excuse instead of an explanation for companies’ bad behavior
Can you link to an example of this excusing?
It’s not so much an argument as a definition.
What’s the actual question you’re trying to answer?
Just trying to push his political views as a question
Companies are made for all sorts of reasons. Yes, cash flow is important, but that’s not the only reason they exist. A lot of CEOs actually believe in their own products.
I like to repurpose that argument and leverage it to argue that sectors that are essential to basic human needs (food, shelter, education, healthcare, infrastructure, utilities including the internet) have no other option than to be socialized. If a sector is properly socialized, they wouldn’t even have the option of being corrupted by profit motives that seek to create artificial scarcity around and withhold goods and services that would otherwise keep a society functioning in a sustainable way.
True but so general a statement as to be meaningless.
Chiefly used to muddle a debate.
“companies exist to make money” is a definition.
I don’t think anybody should use it as an argument… Maybe part of an argument, but not the argument itself. It doesn’t even make a particularly compelling thought terminating cliche.
A functional thought terminating cliche: “hate the player, not the game”
Not sure if the phrase is used elsewhere, but on the Citations Needed podcast they call this the “normative-descriptive switch.” Basically instead of making a counter argument, you just describe a norm. Example:
A: I think airlines should be punished for losing luggage.
B: It’s common for airlines to lose people’s luggage.
It’s so simple and stupid, but I rarely see it called out.
Yeah but airlines don’t exist to lose people’s luggage. Doesn’t really fit this question. Companies do, indeed, exist to make money.
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I think the really interesting on is The Friedman Doctrine.
They’re certainly not in the business of losing money on purpose. But I think I’m the terms of arguing this point for the sake of it, they’re trying to gloss over something shitty.
They’re certainly not in the business of losing money on purpose.
Not on purpose, unless they are a non profit
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So do thieves.
I agree. And that’s why private companies should be outlawed.
I don’t think much about it while I’m on a vacation that was paid for by investing in private prisons
