If you build keeping independent into your plans, you’re more likely to succeed at it.
I’ve become somewhat dubious about the whole system of maximizing shareholder value. Anecdotally, companies become worse places to work (including less focus on quality) when they go public.
And I don’t believe maximizing shareholder value is a real human motivation (not compared to wanting to make good things or please people you know or be in charge of stuff), and I suspect that a system built on it leads to fraud.
There’s a fair amount of evidence that suggests that greater management ownership of a firm correlates with better performance. In other words maximizing shareholder value appears to work better as a motivation when the management are significant shareholders.
I didn’t mean that you would intrinsically want to maximise shareholder value. Simply that if you passed up business opportunities due to your ethics and you didn’t have a controlling share you might be out of a job.
This is a pretty inaccurate interpretation of what maximizing shareholder value actually means in practice. Generally corporate management are only considered to have breached their fiduciary duty to shareholders if they take actions that are clearly enriching themselves at the expense of shareholders, making an acquisition that is dilutive to shareholders for example.
It is highly unusual for corporate management to be accused of breaching their fiduciary duty by making business decisions that fail to maximize profit due to other considerations. For one thing this would generally be impossible to prove since management could argue (for example) that maintaining a reputation for ethical conduct is the best way to maximize shareholder value long term and this is not something that could easily be disproved in a court.
Activist shareholders may sometimes try and force management out due to disagreements over business strategy but this is a separate issue from any legal responsibility to maximize shareholder value. In the US this is also quite difficult (which is a situation that I think should be improved) and so is fairly rare.
Thanks. I was pretty sure that management wasn’t getting sued for failing to maximize shareholder value through ordinary business decisions—if that were possible it would be really common.
True. If you can keep independent you would be okay. If you have share holders you would be bound to maximise shareholder value.
If you build keeping independent into your plans, you’re more likely to succeed at it.
I’ve become somewhat dubious about the whole system of maximizing shareholder value. Anecdotally, companies become worse places to work (including less focus on quality) when they go public.
And I don’t believe maximizing shareholder value is a real human motivation (not compared to wanting to make good things or please people you know or be in charge of stuff), and I suspect that a system built on it leads to fraud.
There’s a fair amount of evidence that suggests that greater management ownership of a firm correlates with better performance. In other words maximizing shareholder value appears to work better as a motivation when the management are significant shareholders.
I didn’t mean that you would intrinsically want to maximise shareholder value. Simply that if you passed up business opportunities due to your ethics and you didn’t have a controlling share you might be out of a job.
This is a pretty inaccurate interpretation of what maximizing shareholder value actually means in practice. Generally corporate management are only considered to have breached their fiduciary duty to shareholders if they take actions that are clearly enriching themselves at the expense of shareholders, making an acquisition that is dilutive to shareholders for example.
It is highly unusual for corporate management to be accused of breaching their fiduciary duty by making business decisions that fail to maximize profit due to other considerations. For one thing this would generally be impossible to prove since management could argue (for example) that maintaining a reputation for ethical conduct is the best way to maximize shareholder value long term and this is not something that could easily be disproved in a court.
Activist shareholders may sometimes try and force management out due to disagreements over business strategy but this is a separate issue from any legal responsibility to maximize shareholder value. In the US this is also quite difficult (which is a situation that I think should be improved) and so is fairly rare.
Thanks. I was pretty sure that management wasn’t getting sued for failing to maximize shareholder value through ordinary business decisions—if that were possible it would be really common.
Agreed. I was explaining why I’m dubious about publicly owned companies in general.