Comment by noirscape
1 day ago
It's not impossible to run a publicly owned company in the US that isn't insanely hostile towards it's customers or employees... it's just really damn difficult because of bad legal precedent.
Dodge v. Ford is basically the source of all these headaches; the Dodge Brothers owned shares in Ford. Ford refused to pay the dividends he had to pay to the Dodge Brothers, suspecting that they'd use the dividends to start their own car company (he wasn't wrong about that part). The Dodge Brothers sued Ford, upon which Fords defense for not paying out dividends was "I'm investing it in my employees" (an obvious lie, it was very blatantly about not wanting to pay out). The judge sided with the Dodge Brothers and the legal opinion included a remark that the primary purpose of a director is to produce profit to the shareholders.
That's basically become US business doctrine ever since, being twisted into the job of the director being to maximize profits to the shareholders. It's slightly bunk doctrine as far as I know; the actual precedent would mostly translate to "the shareholders can fire the directors if they think they don't do a good job" (since it can be argued that as long as any solid justification exists, producing profit for the shareholders can be assumed[0]; Dodge v. Ford was largely Ford refusing to follow his contracts with money that Dodge knew Ford had in the bank), but nobody in the upper areas of management wants to risk facing lawsuits from shareholders arguing that they made decisions that go against shareholder supremacy[1]. And so, the threats of legal consequences morph into the worst form of corporate ghoulishness that's so pervasive across every publicly traded company in the US. It's why short-term decision making dominates long-term planning for pretty much every public company.
[0]: This is called the "business judgement rule", where courts will broadly defer the judgement on if a business is ran competently or not to the executives of that business.
[1]: Tragically, just because it's bunk legal theory, doesn't change that the potential and disastrous consequences of lawsuits in the US are a very real thing.
It is not broadly believed in corporate governance circles that there is a legal requirement to maximize shareholder value. Nor will you find court judgements that require it.
If anything Milton Friedman is more responsible for this idea that shareholder maximizing is the corporate goal. That is an efficient market argument though not a legal one and he framed it long after the dodge suit. He needed to frame that argument because so many firms were _not_ doing that.
But just because a Chicago school economist says something about governance doesn’t mean it’s broadly applicable in the same way an Austrian economists opinions about inflation aren’t iron rules about monetary policy.