this post was submitted on 18 Oct 2024
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If the board doesn't maximize profit, the shareholders can sue them, so functionally they do have to.
Specifically, the Board and thus the CEO must maximize company VALUE not profit.
There are other ways to increase company value that do not necessarily result in Q/Q / Y/Y profit increases.
But in the 1970s you get a guy named Milton Friedman who comes along with the concept of shareholder value in a 1970 essay for The New York Times, entitled "A Friedman Doctrine: The Social Responsibility of Business Is to Increase Its Profits".[5] In it, he argued that a company has no social responsibility to the public or society; its only responsibility is to its shareholders.
So there's been a lot of argument against it since esp as of late, but the economic hegemony still adheres to Friedman's economic principles.
Can you name some examples? I'm not very familiar with economics.
A bigger market share (or just market size if it's something new-fangled) at the expense of current profit, because that can turn into future profits. See most modern tech companies, which make a loss but still have value. For example, Uber just made a profit for the first time, and since they're everywhere that's a great position for a shareholder. People bought in in the past in hopes that this would eventually happen.
OP is a little off, BTW. US law - and it's probably the same elsewhere - says that the C-suite has to work in the interests of shareholders, who they represent as fiduciaries. It's just that there's only a few things a million APPL shareholders have in common, so in practice that interest is value and dividends. In a privately-owned company other things might factor in, for better or for worse.
IANAL