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.
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.
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.
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.
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.
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.
Not sure how an opinion is relevant here
Cite the statute then
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.
people use it as an excuse instead of an explanation for companies’ bad behavior
Can you link to an example of this excusing?
found in article comments