shareholder capitalism is a noxious falsehood that has very unfortunately been enshrined in our current interpretation of the law.
this should not be regarded as a baseline truth nor a desirable transitional state. it is a bad idea that we must not succumb to.
companies are multi-faceted entities with many different stakeholders. the workers are a 100% necessary stakeholder and the company cannot operate without them.
The ideology of generating shareholder profit "has caused immeasurable harm"? Really? The author is casting aside decades of economic growth, peace, and innovation.
> New policies could ensure that all the stakeholders who collectively generate a corporation’s prosperity then benefit from its wealth.
I don't agree with this slight-of-hand. Employees are stakeholders, sure; they will lose their job if a company goes under, and may not get a promotion if growth at the company stops. But they are NOT owners of the company in equity terms.
This view of capitalism is relatively recent in origin. Prior to the adoption of the "shareholder value is the only purpose of a company" nonsense by Wall Street in the 1980s, it was understood that companies have obligations to their employees and their country.
Just because you can do something doesn't mean that you should and certainly doesn't mean it is right to do so.
2) Employee (non primarily stock compensated) pay, benefits, and well-being.
3) Society.
American capitalism has embraced #1 to the exclusion of all else, enabled by lax labor laws, corporate tax loopholes, and lower capitol gains taxing. ¯\_(?)_/¯
I’m fairly sure there’s no legal requirement for a company to put shareholders first. I’ll sound a bit Marxist for a moment and say that we’ve just so internalized capitalist propaganda that we collectively seem to believe that now.
Huh? Shareholder primacy might be a good idea, but it's an aspiration at best.
In practice, companies are run for the benefit of their managers.
Especially when they talk about something like 'stakeholder capitalism', because it's inevitable the managers that decide which stakeholders to listen to and how to balance their interests.
> Oddly, no previous management research has looked at what the legal literature says about the topic, so we conducted a systematic analysis of a century’s worth of legal theory and precedent. It turns out that the law provides a surprisingly clear answer: Shareholders do not own the corporation, which is an autonomous legal person. What’s more, when directors go against shareholder wishes—even when a loss in value is documented—courts side with directors the vast majority of the time.
> Companies are run to benefit the capital that funded them, employees are just an expense.
Nope. Shareholders are just another stakeholder, just like bond holders, suppliers, employees, etc. There is no legal requirement to prioritize capital.
It's worth mentioning on a post like this that there is no legal (or historical) basis for the idea that maximizing shareholder value is the primary concern of a corporation. See these two sources:
According to far too many, a corporation's sole duty is to the enrichment of its shareholders. I speak not of an ideal capitalism, but of capitalism as it is practiced.
I think you're getting downvoted because you seem to endorse the most parasitic form of capitalism.
First off: it's not a company's responsibility to increase shareholder profit. It very much depends on the view of the people involved. But you're completely right when you think that greedy people can push in that direction and that a legal framework is the only way to keep that in check and make sure companies pay their dues to society. Social democracy still seems the only way to strike a proper balance between exploitation and lack of incentive.
Historically, corporations were understood to be responsible to a complex web of constituencies, including employees, communities, society at large, suppliers and shareholders. But in the era of deregulation, the interests of shareholders began to trump all the others. How can we get corporations to recognize their responsibilities beyond this narrow focus? It begins in remembering that the philosophy of putting shareholder profits over all else is a matter of ideology which is not grounded in American law or tradition. In fact, it is no more than a dangerous fad.
The Myth of Profit Maximizing
“It is literally – literally – malfeasance for a corporation not to do everything it legally can to maximize its profits. That’s a corporation’s duty to its shareholders.”
Since this sentiment is so familiar, it may come as a surprise that it is factually incorrect: In reality, there is nothing in any U.S. statute, federal or state, that requires corporations to maximize their profits. More surprising still is that, in this instance, the untruth was not uttered as propaganda by a corporate lobbyist but presented as a fact of life by one of the leading lights of the Democratic Party’s progressive wing, Sen. Al Franken. Considering its source, Franken’s statement says less about the nature of a U.S. business corporation’s legal obligations – about which it simply misses the boat – than it does about the point to which laissez-faire ideology has wormed its way into the American mind.
The history of incorporation suggests the contrary. This attitude is backed up mainly only by 1980s-onwards neo-proprietarian ideology/faith/apologia.
> This is a legal fiduciary duty.
Much like use of fiduciary in the usual sense: not screwing over your shareholders is, yes. Not choosing the plan to maximize the right outcomes ("quality attributes" other than profit exist) after the right length (short or long?) time not being the best one? No.
This idea that companies should be all about shareholder value is so recent, but it seems to have infected minds so thoroughly that people even assume there are laws enforcing it.
To quote the US Supreme Court: "Modern corporate law does not require for-profit corporations to pursue profit at the expense of everything else, and many do not."
this should not be regarded as a baseline truth nor a desirable transitional state. it is a bad idea that we must not succumb to.
companies are multi-faceted entities with many different stakeholders. the workers are a 100% necessary stakeholder and the company cannot operate without them.
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