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Statement on the Purpose of a Corporation

businessroundtable.org

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Re: Statement on the Purpose of a Corporation

#151

Post by gist »

AtlasBarfed wrote: post #13

Wake me up when I can use such a statement as a means to legally coerce corporations into compliance with existing laws, to say nothing of the exigent environmental threats facing the world. Literally every CEO would laugh at this statement in the privacy of their office, while they engineer stock manipulation to trigger their stock options and retire in 5 years. It's like an ethics in business class at MBA schools.…

> Literally every CEO would laugh at this statement in the privacy of their office, while they engineer stock manipulation to trigger their stock options and retire in 5 years.

It's coming from (see the members) presumably the most secure and profitable corporations out there. While perhaps some have issue most are not anywhere near the 'every man for himself' thinking that gets companies into trouble.

Look there are many things a super profitable corporation can do to enhance their image in the eyes of employees and customers.

But the truth is if you are going to take an airline flight or buy a dishwasher most consumers (or most business customers if a business sale) will not decide based on values such as this.

Ditto for most stock investors. They will go for the best return not the best company values. And you know if you need someone to operate on your brain or a Physician very generally you want the best results not someone with the best personal values.

Re: Statement on the Purpose of a Corporation

#152

Post by defterGoose »

cs702 wrote: post #17

This new purpose stated by the CEOs of America's largest corporations is a welcome change to the corporate ethos that has prevailed in the US since the "greed is good" days of the 1980's. It is also a preemptive response to the growing popularity of politicians like Bernie Sanders and Elizabeth Warren.

Ah, interesting, hadn't read it like that; just another instance of meaningless corporate double-speak. I guess they think unlimited political donations aren't going to do the job this time. I hope they're right, and I hope the progressives are able to take them to task.

Re: Statement on the Purpose of a Corporation

#153

Post by kyshoc »

vikramkr wrote: post #144
whatshisface wrote: post #78

Earlier quoted context omitted.

Why would all of these CEOs from random companies even be in the same room? In a free market leadership doesn't exist that high, companies aren't supposed to coordinate at that level.

In a truly free market, companies aren't supposed to do anything and are more than free enough to coordinate at any level they want if it is beneficial to them with the only checks on coordination and all being game theory situations about the value of the profits that come from breaking away from and undercutting the cartel versus the ensuing loss of profits from the price war or from "punishment" by other cartel me…

> In a truly free market, companies aren't supposed to do anything [...] In a regulated market though...

Free market !== unregulated market.

In order for an unregulated market to be a free market, perfect competition is required[0], otherwise you get market failure.

In the real world, we use laws to discourage behavior that leads to market failure.

[0]: https://en.wikipedia.org/wiki/Free_market#Perfect_competitio...

Re: Statement on the Purpose of a Corporation

#154

Post by [deleted] »

cs702 wrote: post #17

This new purpose stated by the CEOs of America's largest corporations is a welcome change to the corporate ethos that has prevailed in the US since the "greed is good" days of the 1980's. It is also a preemptive response to the growing popularity of politicians like Bernie Sanders and Elizabeth Warren.

[deleted]

Re: Statement on the Purpose of a Corporation

#155

Post by vikramkr »

kyshoc wrote: post #153
vikramkr wrote: post #144

Earlier quoted context omitted.

In a truly free market, companies aren't supposed to do anything and are more than free enough to coordinate at any level they want if it is beneficial to them with the only checks on coordination and all being game theory situations about the value of the profits that come from breaking away from and undercutting the cartel versus the ensuing loss of profits from the price war or from "punishment" by other cartel me…

> In a truly free market, companies aren't supposed to do anything [...] In a regulated market though... Free market !== unregulated market. In order for an unregulated market to be a free market, perfect competition is required[0], otherwise you get market failure. In the real world, we use laws to discourage behavior that leads to market failure. [0]: https://en.wikipedia.org/wiki/Free_market#Perfect_competitio...

Right, and in addition free markets != anything seen in reality. There's no such thing as perfect competition or a real life free market since the textbook definition of a free market requires both no monopoly power and no government intervention. Basically none of your nice econ 101 graphs of perfect competition and everything apply in any sort of meaningful way because of all the absurd assumptions necessary to make them work. If there are two bakers that are producing identical bread in every way, they still wont be in perfect competition since one of them will be physically closer to you which makes for decreased travel time.

Re: Statement on the Purpose of a Corporation

#156

Post by jforman »

rgacote wrote: post #88
rectang wrote: post #25

Earlier quoted context omitted.

> Curious where people thing they are wrong or incomplete. Enforcement.

And case law.

Case law is on the side of corporations having no generalized duty to maximize profit on a day-to-day basis, for what it's worth. Corporations can exist for any number of reasons and the fiduciary duty is much more limited than people generally expect.

My wife wrote a law journal article on this but it isn't digitized unfortunately.

Re: Statement on the Purpose of a Corporation

#157

Post by pmiller2 »

pdonis wrote: post #128
pmiller2 wrote: post #125

Earlier quoted context omitted.

> They don't do what is profitable over long time scales like 30 or 50 or 100 years. We’re facing down the imminent collapse of civilization due to climate change on a 30-50 year scale. Does it even make sense to consider the long term anymore?

> We’re facing down the imminent collapse of civilization due to climate change on a 30-50 year scale. No, we're not. We have lots of ways to adapt, just as humans have adapted to climate change in the past.

That’s the kind of short sighted thinking that’s going to kill most of us. I say most, because, while I expect humanity will adapt, civilization as we know it may not.

Re: Statement on the Purpose of a Corporation

#158

Post by vasilipupkin »

vikramkr wrote: post #146
Ididntdothis wrote: post #65

Earlier quoted context omitted.

As far as I know the purpose of a corporation is to conduct lawful business. I don’t believe the law says anything about shareholder returns.

The law definitely doesn't, otherwise it would be illegal to do things like donate to charity as a corporation. If all shareholders get together and vote unanimously to take all the money in the corporation and give it away, then they can totally do that. If the law mandated maximizing shareholder returns then shareholders would no longer be free to instruct the entity they own to do what they want it to if it confli…

Ok, you are nitpicking. The legal purpose is to advance the interests of shareholders. Sure, shareholders can give away all the money and earn zero returns ( presumably they would register a non profit if they wanted to do that ) but it would be illegal to do something that shareholders didn’t agree to. Did shareholders of the signatories agree to forego profits in order to make customers happy ? Of course not.

Re: Statement on the Purpose of a Corporation

#159

Post by vasilipupkin »

joshuamorton wrote: post #123
vasilipupkin wrote: post #56

Earlier quoted context omitted.

Soviet Union had show trials and U.S. has show letters. The legal purpose of a corporation is to generate returns for shareholders. If training employees and helping customers advances that goal, then corporations should do it. Otherwise - no. Goes without saying that corporations should maximize shareholder value using legal means only.

> The legal purpose of a corporation is to generate returns for shareholders. This is legally incorrect. It's a meme that should die. This idea is based on the assumption that not acting to maximize shareholder value is defrauding investors. But this isn't at all true. Corporations are free to do whatever they want, as long as they're transparent about doing so. Or to make the same point in the opposite direction: co…

No, if it’s secutities fraud it’s illegal. Unethical and illegal are not the same thing. A corporation cannot do what it wants, but it can do what shareholders want.

Re: Statement on the Purpose of a Corporation

#160

Post by joshuamorton »

vasilipupkin wrote: post #159
joshuamorton wrote: post #123

Earlier quoted context omitted.

> The legal purpose of a corporation is to generate returns for shareholders. This is legally incorrect. It's a meme that should die. This idea is based on the assumption that not acting to maximize shareholder value is defrauding investors. But this isn't at all true. Corporations are free to do whatever they want, as long as they're transparent about doing so. Or to make the same point in the opposite direction: co…

No, if it’s secutities fraud it’s illegal. Unethical and illegal are not the same thing. A corporation cannot do what it wants, but it can do what shareholders want.

> No, if it’s secutities fraud it’s illegal.

Right, and acting unethically can be securities fraud. Hence illegal. Even if the unethical thing is on its own not illegal, and in pursuit of higher short term profits.

>A corporation cannot do what it wants, but it can do what shareholders want.

Yes it can, as long as it makes sure to inform shareholders of what it intends to do. As long as shareholders have information with which to make an informed decision, it doesn't matter what that information is.

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