What is Reddit's opinion of
The Shareholder Value Myth: How Putting Shareholders First Harms Investors, Corporations, and the Public?
From 3.5 billion Reddit comments
By popularity on Reddit, this product is:
13 reviews of this product found across Reddit:
> Their legal obligation, as a publicly traded company, is to put the company's, and by extension the shareholders', finances as their top priority. Their number one job is to make as much money as possible, which is why you see so many short sighted decisions and companies being run into the ground for a quick buck.
This is not exactly true in a legal or technical sense. It's certainly a convenient/hand-wavey rationalization for greedy/local-optimum seeking behavior, though.
https://www.amazon.com/The-Shareholder-Value-Myth-Shareholders/dp/1605098132
That isolating unique instances of shareholders banding together to force a large firm into action isn't the day-to-day reality of the decision making process inside those firms.
Lynn Stout from the Cornell law school written tirelessly about the subject, and has published a few books on it. Her biggest being: <em>The Shareholder Value Myth: How Putting Shareholders First Harms Investors, Corporations, and the Public</em>.
To speak more holistically about it, the average joe has been tried in the phrase "duty to shareholders" as it appears in pop culture frequently. So everyone grows up thinking yeah if these companies fuck up WE'LL GET THEM.
The "duty to shareholders" provisions in practice are vague at best, and just lip service at worst. A classic argument a corporation could use to divert short-term profits into R&D would be to simply say that the diversion creates long term brand value. Done.
On the other side when they divert R&D (or lack of R&D) into realizing short term profits, there are equally simple arguments.
All this is to say that the idea of shareholders taking a company to court under this phrase of "duty to shareholders" is naïve. Yes, there is an officially codified duty corporations have to shareholders, but the reality is that this doesn't play out how citizens believe.
Shareholder primacy is a myth. Corporations have obligations to their workers and communities as well.
https://www.amazon.com/Shareholder-Value-Myth-Shareholders-Corporations/dp/1605098132/ref=nodl_
I tend to consider the Harvard Business Review a credible source most of the time.
https://hbr.org/2014/06/the-price-of-wall-streets-power
" The financial sector’s influence on management has become so powerful that a recent survey of chief financial officers showed that 78% would “give up economic value” and 55% would cancel a project with a positive net present value—that is, willingly harm their companies—to meet Wall Street’s targets and fulfill its desire for “smooth” earnings."
"Executives often explain their deference to Wall Street by saying they have a “fiduciary duty” to maximize shareholder returns. That’s been an article of faith since 1970, when Milton Friedman wrote in the New York Times that executives’ only responsibility was maximizing profits. The problem, however, is that it’s not true. Whatever your beliefs about the moral responsibilities of executives, a fiduciary duty is a specific legal obligation, and law professor Lynn Stout has shown that as a matter of law American executives simply do not face any such requirement. "
"In a financialized economy, the financial tail is wagging the economic dog. An IMF study found, for example, that while a strong financial system is crucial to a country’s early and intermediate-stage growth, once the sector becomes too large—when private-sector credit reaches 80% to 100% of GDP— it actually inhibits growth and increases volatility. In the United States in 2012, private-sector credit was 183.8% of GDP. "
There's a book about this concept? Cool.
ref. link: http://www.amazon.com/The-Shareholder-Value-Myth-Shareholders/dp/1605098132
They have an obligation to the shareholders, but not to return capital to the shareholders. Now, laws in France may be different, but I doubt that they are. Companies generally have an obligation to maximize profits for the benefit of the company.
Read the below articles and come back to me on your thoughts.
^Where the author clearly explains what the company directors are there to do...
My favorite line from the last one, "Shareholder are not bosses of corporate executives. They are diffuse and large in number, and if you got them all in a room to tell the corporate executive what to do, you’d be more likely to see fisticuffs than agreement."
And a much longer academic paper from Harvard.
http://scholar.harvard.edu/files/dobbin/files/2005_ppst_corpmal_zorn_0.pdf
And finally, a book you should read, if you don't read any of the other links. I have read this book and recommend that everyone read it, at least to expand your views even if you don't agree.
http://www.amazon.com/The-Shareholder-Value-Myth-Shareholders/dp/1605098132
STOP! The shareholder value myth is FALSE.
The shareholder value myth is a zombie that has taken dozens of shotgun blasts to the head, but refuses to die and needs to be put back into the ground from whence it came.
CEOs and boards act on behalf of shareholders and have some obligations, but not much more than any other employee has to their boss. Corporate chiefs are largely free to steer the business in the direction they want, so long as they are not committing blatant fraud and enriching themselves at the expense of shareholders. If shareholders don't like it, well, that's what at-will employment is for.
The myth of a legal obligation to maximize shareholder value arose as part of the financialization of the economy in the go-go, greed-is-good 80's. Ivy League business schools pushed this obligation so hard that it started to be taken as an absolute.
Here are some eye-opening resources on this topic:
And ofc. shareholder value, specifically, is a notoriously unreliable measure of the success of a business:
http://www.amazon.com/The-Shareholder-Value-Myth-Shareholders/dp/1605098132
http://www.wsj.com/articles/william-galston-shareholder-value-is-hurting-workers-1418169901
http://www.businessinsider.com/shareholder-value-is-ruining-america-2013-5
No, you're wrong. Shareholders DO NOT own the corporations. Berle and Means 1932 explained it and Lynn Stout 2012 does as well. The answers assume that shareholders own the corporations, but legal scholars have shown that this is wrong for large public corporations. Berle and Means 1932 explained it and Lynn Stout 2012 does as well. Given that shareholders DO NOT own the corporations, do you have any other reasons for buybacks. Thanks. https://www.amazon.com/Shareholder-Value-Myth-Shareholders-Corporations/dp/1605098132 http://scholarship.law.cornell.edu/cgi/viewcontent.cgi?article=1833&context=facpub
> The law requires
From your link:
>> There is no legal "law" of such
The article is 100% correct in the assertion that the directors of a corporation are not legally required to maximize shareholder profits.
If you want to know more, your homework is to read The Shareholder Value Myth (written by a professor of Business Law at Cornell) - and here's an overview of that book from the Harvard law blog.
Thanks for the question. They would be collectively owned, like in a non-profit. Please see https://www.amazon.com/Shareholder-Value-Myth-Shareholders-Corporations/dp/1605098132
The post is correct from my understanding. It is true, legal scholars who are the experts regarding ownership ALL seem to agree that the shareholder DO NOT own the corporate assets, the profits, or the corporation in any way shape or form. Ciepley 2013 makes a similar argument noting that the gov't creates the corporation and the board sells shares after formation, making the shareholders merely CUSTOMERS of financial instruments. It is true that shareholders have political influence over the board through their right to vote, like employees and others do. Academics, like Bebchuk, have shown that the shareholders right to vote has little influence over board elections, in the past. The poster is correct to reference Stout 2012 https://www.amazon.com/Shareholder-Value-Myth-Shareholders-Corporations/dp/1605098132
Popular alternatives to The Shareholder Value Myth:...
Investment Banking: Valuation, Leveraged Buyouts, and Mergers and Acquisitions
The Little Book of Valuation: How to Value a Company, Pick a Stock and Profit
