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johan_larson | 1 year ago

Yeah, it's not hard to find knowledgeable commentary to the effect that the duty of directors to act in the interests of the shareholders does not mean a simple-minded duty to maximize profits. The interests of shareholders are complicated, and boards can make nuanced decisions about short-term vs long-term profits, risks, reputation, and such things that are difficult to capture using financial reports.

Here's a Cornell law school prof saying just this. https://www.nytimes.com/roomfordebate/2015/04/16/what-are-co...

"There is a common belief that corporate directors have a legal duty to maximize corporate profits and 'shareholder value' — even if this means skirting ethical rules, damaging the environment or harming employees. But this belief is utterly false. To quote the U.S. Supreme Court opinion in the recent Hobby Lobby case: 'Modern corporate law does not require for-profit corporations to pursue profit at the expense of everything else, and many do not.'"

"Serving shareholders’ 'best interests' is not the same thing as either maximizing profits, or maximizing shareholder value. 'Shareholder value,' for one thing, is a vague objective: No single 'shareholder value' can exist, because different shareholders have different values. Some are long-term investors planning to hold stock for years or decades; others are short-term speculators."

"More to the point, corporate directors are protected from most interference when it comes to running their business by a doctrine known as the business judgment rule. It says, in brief, that so long as a board of directors is not tainted by personal conflicts of interest and makes a reasonable effort to stay informed, courts will not second-guess the board’s decisions about what is best for the company — even when those decisions predictably reduce profits or share price."

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