Comment by SlightlyLeftPad
13 hours ago
Quite often a senior leadership issue because backing stuff up results in $$$ spent, which makes shareholders unhappy. And in the US at least, unhappy shareholders means lawsuits since publicly traded companies are legally bound to return growth in share price or dividends.
>Quite often a senior leadership issue because backing stuff up results in $$$ spent, which makes shareholders unhappy.
This is true. The latter half of your comment is not. At best they have a duty to shareholders. But your assertion would mean every time a company posted a loss and the price went down the execs would be in legal trouble, which is nonsense.
Shareholder nuisance lawsuits can happen basically any time the stock goes down... or doesn't go up enough, and often companies will settle instead of the expensive fighting...
There are grounds legally if shareholders can prove that the "long-term risk reduction" argument is a lie, they can sue under the Duty of Loyalty. In reality, yes, this amounts nuisance lawsuits, large settlements and disruption at the board level. In practice, this and the executive pay structures almost always incentivizes short-term decisions and these risks become problems “for the next person.”
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What?! Publicly traded companies are not “legally bound to return growth in share price or dividends.”
There are plenty of companies who pay no dividends and have not returned growth in share price. They’re still operating and no one’s coming to throw the execs in jail.
On the off chance that there is such a law, please cite it.
Not a law perhaps, but an ingrained neoliberal philosophy that is pervasive in certain management cultures in the US definitely.
Neoliberal philosophy is stable ground for a lawsuit?
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