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this post was submitted on 20 Oct 2023
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Where’d did this “legal responsibility to maximize profit” bullshit come form?
There is no such law, an no entity to enforce the responsibility.
~Court precedent. Shareholders have sued and won for corporations "failing to uphold fiduciary responsibilities" and other similar bullshit. So, now it's baked into corporate culture.~
Update: See reply below. Courts have upheld that corporations have no requirement to seek profits over all else.
That's actually not the case.
"courts have consistently refused to hold directors liable for failing to maximise shareholder value"
"In 2014, the United States Supreme Court voiced its position in no uncertain terms. In Burwell v Hobby Lobby Stores Inc., the Supreme Court stated that “Modern corporate law does not require for profit corporations to pursue profit at the expense of everything else”. "
Just more corporate propaganda, that's all.
https://legislate.ai/blog/does-the-law-require-public-companies-to-maximise-shareholder-value
Holy shit! That's good to know. Thank you.
The entity is the civil court system, and while there is no law written "no company can work in a way that doesn't maximize profit", upon taking investment, it's typical that companies, the fiduciary, come under the expectation that they'll be working for the sake of their beneficiary's interests. In public companies, this interest is clear-cut. Investors want dividends and to see the value of the company increase. This is typically done through maximizing of profits.
So while it's not explicit that they must forever maximize profits, companies can be successfully sued for not doing so.
Learn more:
Companies have also been sued for not maximizing profits and won the case. "Best interests" can mean a lot of things. It can mean short term profit for one shareholder, long term profit for another, and stable, guaranteed profit for a third.
Then stop calling it a law.
Nobody called it a law. It's a legal responsibility, and it is law, but it is not "a" law.
It's frustrating but very much a real thing. You might google "fiduciary duty to shareholders." Basically, once a company is public, the board has to act in the best interests of the shareholders (which means maximizing returns and/or shareprice.)
This is terrible for the world but pretending it doesn't exist doesn't help.
That's not true. Courts have specifically ruled that maximizing returns is NOT required. The companies do have to consider the best interests of the shareholders, but that does not strictly mean maximizing profits:
https://www.nytimes.com/roomfordebate/2015/04/16/what-are-corporations-obligations-to-shareholders/corporations-dont-have-to-maximize-profits
I would re-read that article a bit more closely. The point they're making is that recently there have been developments such that maximizing profits is not seen as the SOLE principle behind decision making above all else.
For example, they cite Hobby Lobby which has Christian practices that doubtless cut into profits but are allowed as part of the company's mission.
But my apologies, a more accurate phrasing would've been duty to shareholders and the company.
Still, unless Apple has a really interesting company charter, annoying a capricious manufacturer of almost everything the company needs that is ALSO one of the world's largest markets, well, not that tough a multi billion dollar decision.
Duty ≠ law
Duty is a legal concept, silly Billy.
You can commit a crime by violating a duty. A common one of which you've probably heard is "duty of care" I.e., a doctor can be charged with a crime by not fulfilling their duty of care to a patient.
https://www.forbes.com/advisor/legal/personal-injury/breach-of-duty/
I almost want to look up confidently incorrect. Just maybe learn from this and try googling when you are unfamiliar with a term, you look less silly!
Show me what law enforcers a company to profit.
You're getting confused or you might not actually understand how companies work, so I'll break it down.
There is no law forcing a company to profit. (Though Companies are generally formed for that purpose.) A private organization could do whatever it wants within legal bounds. (This is how non profits, charitable foundations etc exist.)
But, what happens next is many companies go "public" by selling shares. In essence, they put a percentage of themselves on the market and people by shares in that company, such that they, legally speaking, own a tiny percentage of that company. Part of that purchase is that the company now has a fiduciary duty to the shareholders. As noted before, a duty is a legal concept like assault, negligence etc. And I explained fiduciary duty earlier, you can look through.
Here is kind of a classic example of a company losing a case because its directors breached their fiduciary duty to minority shareholders:
https://casetext.com/case/ebay-domestic-holdings-v-newmark
Thank you. We’re done now.
lol I'm almost impressed by the brute force of your refusal to comprehend.
It's uhhh, impressive.
By your logic/refusal to understand how simple things work, a doctor has no duty to help you, no company is at fault if its products harm you and a lawyer can do whatever they want to maximize their own profit.
Show me the “legal responsibility to maximize profits” in the law books and the police codes used to enforce said laws or STFU.
You know what? Nevermind.
You mean like I already did?
Why do you think people buy shares? Just fans of three digits and numbers that change?
Edit: Italicized the relevant section to make things easier for you.