this post was submitted on 12 Aug 2023
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How is everybody just now finding out how capitalism works? Any public company is LEGALLY REQUIRED to care only about shareholder profits. It is literally illegal for them to do anything else.
That's a widespread belief my friend, that is just not true.
Fiduciary duty is a real thing. Agent/principal relationships require the agent to try and get the maximum return for the level of risk.
Even if a CEO doesn't have a written fiduciary duty in their contract do, the company as a whole usually does.
The CEO of a public corporation reports to the board who report to index fund managers who have a agent/principal relationships with all of their investors.
Your examples are not counter points to the original claim of
The comment was basically shorthand for "a fiduciary duty exists between corporate leadership and shareholders, creating a legally-enforceable requirement that the only consideration be maximum potential return on investment for existing shareholders and risk."
It's absolutely true in practice. CEOs have gotten sued for not acting in the shareholders best interests.
And in relation to the original comment I replied to, are you truly saying that companies, esp. public companies, are not, FOR ALL INTENTS AND PURPOSES, beholden to making money for the shareholders? Any "nice" company will make less money, will not compete well, will then fail or be bought out by the less nice, more profitable company.
Im not a lawyer, but I've looked into this misunderstanding before and it stems from what constitutes "breaking one's fiduciary duty to investors. While deliberately acting against the interests of investors is illegal, ive yet to hear of a lawsuit, let alone a successful one, brought by an investor for not making all of the money. Id be interested in hearing an investment oriented lawyers perspective since from what i understand, the full extent of fiduciary duty has not been tested that way in court
Lawyer here, it is true.
Board of directors and company officers have a fiduciary duty to the stockholders and the corporate entity.
Acts done outside their authority as stated in the articles of corporations are said to be ultra vires. They are absolutely actionable.
When the directors or officers breach the fiduciary duty to shareholders, they are liable under what's called a derivative action, because it is derivative of the contract represented by the stock certificate.
This is not true.