Statement on the Purpose of a Corporation • Hacker News Board

Re: Statement on the Purpose of a Corporation

#171

Post by farisjarrah » Mon, Aug 19, 2019, 9:20 PM UTC

pdonis wrote: post #101

pmiller2 wrote: post #90

Earlier quoted context omitted.

> Most shareholders now, in terms of percentage of voting stock ownership, are not individuals but mutual funds, who don't care what the corporation's goals are as long as its stock price and dividends meet targets; and CEOs, even if their share holdings are small as a percentage of the total, can easily get themselves special compensation packages and golden parachutes regardless of whether they improve the corporat…

> Corporations these days are simply “financial paperclip maximizers”: amoral entities that do whatever is profitable, consequences beyond the bottom line be damned. I don't think "whatever is profitable" pins it down enough. They do what is profitable on a short time scale . They don't do what is profitable over long time scales like 30 or 50 or 100 years. If they did, they would not be able to get away with, for ex…

When was this mythical time when "corporate governance worked"? Most countries are still dealing with the same problemss of long working hours, healthcare coverage, racial and gender discrimination, lack of pensions, etc.

Re: Statement on the Purpose of a Corporation

#172

Post by OscarCunningham » Mon, Aug 19, 2019, 9:20 PM UTC

anticensor wrote: post #170

OscarCunningham wrote: post #63

Earlier quoted context omitted.

In a circumstance where bosses are forced to tradeoff between these goals, how should they choose?

Preservation of company (including the ownership structure and charters) > Profit (overall from institution to dissolution) > Other benefits

Surely there need to be weightings? If any amount of profit is better than any amount of other benefits, how is the situation different to now?

Re: Statement on the Purpose of a Corporation

#173

Post by skybrian » Mon, Aug 19, 2019, 9:35 PM UTC

generaljelly wrote: post #59

FabHK wrote: post #16

Earlier quoted context omitted.

The thoughts and feelings of these CEOs mean a lot, because I am pretty sure that the current regulatory environment underdetermines the choices a corporation has (otherwise it would be General Councel and Compliance that runs companies). So, CEOs can take externalities into account when making decisions within the legally feasible.

They don't. Some San Francisco new hires for JPMorgan get paid $86,000. This is criminally underpaid. Action matters. First hand source here.

Oh come on, that doesn't sound illegal. What do you mean by "criminally?"

Re: Statement on the Purpose of a Corporation

#174

Post by egypturnash » Mon, Aug 19, 2019, 9:40 PM UTC

How many of these corporations are putting their money where their mouth is and enshrining this in their charters, bylaws, and official procedures?

How many of these corporations are putting their money where their mouth is and lobbying lawmakers to make these things mandatory for all corporations?

How many of these corporations are putting their money where their mouth is and putting money into raising the minimum wage?

Money talks, bullshit walks.

Re: Statement on the Purpose of a Corporation

#175

Post by dougmwne » Mon, Aug 19, 2019, 9:49 PM UTC

stale2002 wrote: post #142

dougmwne wrote: post #34

...it is a tale Told by an idiot, full of sound and fury, Signifying nothing. Public corporations are not going to stop being paperclip maximizers until we legally and economically force them to stop. This is absolutely nothing but an attempt to divert public anger away from any new regulation that would force companies to deliver more value to society and less to shareholders. Sadly, no different than greenwashing.

No legal changes are needed. Companies are controlled by the shareholders. Shareholders can, at any time, decide to replace the CEO with someone who will "do good" or whatever. So if people want to change a company, what they have to do is simple. Buy out the shares, and get majority control, and then make whatever changes that they want.

The sp500 market cap is 24 trillion USD. It definitely sounds easier to legislate better corporate citizens than to spend at least 12 trillion buying them out, if it were even possible.

Re: Statement on the Purpose of a Corporation

#176

Post by jopsen » Mon, Aug 19, 2019, 10:01 PM UTC

mytailorisrich wrote: post #64

wiremine wrote: post #23

You can be cynical about this, and a healthy amount of skepticism is warranted given the authorship. That said, it would be interesting (healthy?) to discuss/debate the merits of the actual statements: * Delivering value to our customers. We will further the tradition of American companies leading the way in meeting or exceeding customer expectations. * Investing in our employees. This starts with compensating them f…

In that list only the last point, delivering value to shareholders, is a purpose of a corporation. A purpose is not the same as something in its interest or that a "nice" corporation might do. For example, investing in its employees might be in the corporation's interest in order to fulfill its purpose. But a corporation is not created in order to invest in its employees... This is a PR exercise, as already commented…

> This is a PR exercise, ...

Quite possibly, but the fact that it is necessary, suggest that businesses are recognizing that there is a problem.

Words is a first step.

Re: Statement on the Purpose of a Corporation

#177

Post by vikramkr » Mon, Aug 19, 2019, 10:48 PM UTC

vasilipupkin wrote: post #158

vikramkr wrote: post #146

Earlier quoted context omitted.

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.

I'm not nitpicking, and the legal purpose of a company is not to deliver shareholder returns. IIRC, most company incorporation specify the legal purpose of the corporation to be to do the business that the corporation is made to do. Here's the excerpt from my certificate of incorporation:

"The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the Delaware General Corporation Law. "

And the same agreement vests in the officers the ability to do whatever is necessary to further that purpose. You obviously can't go against the results of a direct shareholder vote but officers have enormous leeway. If they decide to forgo profits in order to make customers happy, whether or not that is meant to drive long term growth, that is completely legal as long as there are no conflicts of interest.

Re: Statement on the Purpose of a Corporation

#178

Post by kirsebaer » Mon, Aug 19, 2019, 10:49 PM UTC

stickfigure wrote: post #136

joshuamorton wrote: post #115

Earlier quoted context omitted.

I feel like your argument about maven falls apart because google really did stop working on maven, while amazon didn't. In other words, execs said "here are our values", employees came back and said that maven didn't live up to those values and begrudgingly, kicking and screaming even, execs agreed, or at least capitulated. It would certainly be better if employees didn't have to remind executives of the values they…

You make it sound like these value judgements are obvious. There are plenty of people on HN and even inside Google that do not find anything objectionable about building weapons. Do you think Richard Feynman was a bad person because he helped build the atom bomb?

Feynman wrote about feeling terrible guilt from working on the atomic bomb.

Re: Statement on the Purpose of a Corporation

#179

Post by OliverJones » Mon, Aug 19, 2019, 10:56 PM UTC

This statement is a valid response, half a century on, to this statement by one Milton Friedman that the social responsibility of the corporation is to shareholders alone.

It's worth reading Friedman's September 1970 article. https://web.archive.org/web/20060207060807/https://www.color... It's been around since shortly after the UNIX epoch!

It's wise to read critically the motives of some of originators of the Business Roundtable statement. Nevertheless it's an important response to the Friedman Doctrine. If businesses like Jamie Dimon's even consider adopting it, it's a consequential change.

Re: Statement on the Purpose of a Corporation

#180

Post by throwaway2048 » Mon, Aug 19, 2019, 10:58 PM UTC

jopsen wrote: post #176

mytailorisrich wrote: post #64

Earlier quoted context omitted.

In that list only the last point, delivering value to shareholders, is a purpose of a corporation. A purpose is not the same as something in its interest or that a "nice" corporation might do. For example, investing in its employees might be in the corporation's interest in order to fulfill its purpose. But a corporation is not created in order to invest in its employees... This is a PR exercise, as already commented…

> This is a PR exercise, ... Quite possibly, but the fact that it is necessary, suggest that businesses are recognizing that there is a problem. Words is a first step.

If these corporations wanted to make things better, they could, today, instead we get a bunch of completely meaningless back patting, and zero action.

Words without action don't mean shit.