this post was submitted on 02 May 2024
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This is a myth. (Moreover, it's an American myth.) People need to stop repeating it.
The linked article does nothing to characterize the “myth” you imply.
The article simply states that corporations have to represent the “best interests” of shareholders, that “shareholder value” is a common proxy, and that “value” can be many things because different shareholders have different values.
So, shareholders can tell companies to have a different mandate. Sure. That does not eliminate the default which is that the mandate is to make money. About the only default caveat is that it needs to be “sustainable” value which gives management flexibility to act with a longer term view when thinking about brand, reputation, supply-chain stability, employee relations, regulatory risks, legal risks, the environment, and other things that may not directly make money or even cost money in the short term.
All that said, if a company decides ( without direction from shareholders ) to reduce profits voluntarily, they should expect shareholder action in the form of non-confidence ( getting voted out of management ) or even legal action.
If shareholders have not communicated other “best interests”, their best interest is maximizing the value of the shares. That is almost always going to translate to maximizing profit.
I am not taking a moral position or preference on any of the above. Let’s just not be dishonest by suggesting that management obligations to maximize shareholder value is a “myth”. It is not.
Sure, in theory the shareholders could buy shares and insist that the company focus on something other than maximizing shareholder profit.
But in the real world, that's so rare as to be effectively non-existent.
The core argument is that capitalism pushes for this outcome, which your link actually confirms. I also find it a bit odd to claim that "x is a myth" and link to an opinion piece article as if it's a peer reviewed study.
It's a link to an article about a legal case where the courts specifically stated this was not the case. In the legal realm, that is the equivalent of a peer review. And absolutely, unfettered capitalism pushes towards this outcome. That doesn't make it a legal requirement.
Who said it was a legal requirement?
So root comment did.
Needs = laws?
They'll oust a CEO who doesn't fill that need. No legal action required.
Ah, I see you read the article. Now we're back at the start and you can continue to go in circles without me.
Huh? You claimed that "need" = "law" -- which is clearly nonsense.
That's where we are.
They don’t have to, but they do anyway.