View Poll Results: Should the duty by re-examined?

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Thread: The Duty of Corporations

  1. #11
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    Re: The Duty of Corporations

    Apparently corporations are people to they have feelings, they can get married, and they go fight wars...


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    Re: The Duty of Corporations

    Quote Originally Posted by Mach View Post
    However, if you start a public business that has specific shareholder obligations, you're being essentially invested in, to maximize profits.
    If the shareholders elect a Board who appoints a CEO who has other goals, then that would indicate that either A) a majority of the shareholders disagree that the company's only responsibility is to maximize profits, or B) they have a different opinion of what will maximize profits than you do.

    It sucks if you invested in the company with the understanding that it would maximize your profits, and the company later appointed a CEO with other goals in mind...but hey, changes in management are a risk in any corporate investment.
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    Re: The Duty of Corporations

    Quote Originally Posted by tessaesque View Post
    It's funny, isn't it? A company tried to do good by the consumer and the worker and the government told them "no, no. you need to focus on benefitting your shareholders short-term."
    Well, the courts actually, which is a little bit different than the govt as normally considered in this type of discussion.

    But a good point, nonetheless.
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  4. #14
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    Re: The Duty of Corporations

    Quote Originally Posted by What if...? View Post
    Well, the courts actually, which is a little bit different than the govt as normally considered in this type of discussion.

    But a good point, nonetheless.
    What's weird to me is that lower cost, faster production, and a larger product line would have expanded profits in the long-term, even if short-term gains were stiffled or erased. The decision in this case essentially said that long-term expansion is less important than short-term profits. Hardly seems like the best mentality to promote long-term economic growth and "middle class" stability...which is what we're struggling with today, right?
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  5. #15
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    Re: The Duty of Corporations

    from Khrazy in the OP

    When the shareholders sued, the court ruled in their favor, stating Ford's duty was to profit his shareholders, not the community or his employees.

    In light of the growing gap between the wealthy and the rest of America, do you think that this idea needs to be re-examined?
    100% absolutely positively without a doubt.

    As long as the only imperative for a corporation is to make money, there will always be societal problems and fall out. We need new rules for new times and a new paradigm that takes in much more than simple greed fo a corporation or its stockholders.
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  6. #16
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    Re: The Duty of Corporations

    Quote Originally Posted by tessaesque View Post
    What's weird to me is that lower cost, faster production, and a larger product line would have expanded profits in the long-term, even if short-term gains were stiffled or erased. The decision in this case essentially said that long-term expansion is less important than short-term profits. Hardly seems like the best mentality to promote long-term economic growth and "middle class" stability...which is what we're struggling with today, right?
    According to this, the court held that Ford was arbitrarily witholding dividends. It's not like workers were being laid off or having to wait for their pay. Model Ts were on a long back order already due to their low price.

    Held. Plaintiffs are entitled to a more equitable-sized dividend, but the court will not interfere with Defendantís business judgments regarding the price set on the manufactured products or the decision to expand the business. The purpose of the corporation is to make money for the shareholders, and Defendant is arbitrarily withholding money that could go to the shareholders. Notably, Ford did not deny himself a large salary for his position with the company in order to achieve his ambitions. However, the court will not question whether the company is better off with a higher price per vehicle, or if the expansion is wise, because those decisions are covered under the business judgment rule.
    Dodge v. Ford Motor Co | Casebriefs

  7. #17
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    Re: The Duty of Corporations

    Quote Originally Posted by Kandahar View Post
    I've never understood people who think that a corporation's duty is to produce a profit for its shareholders, period. Sure, that's the duty of SOME corporations. But really, a corporation's duty is whatever it's management decides its duty is. If you don't like it, don't invest in it.

    I think of it like this: If I started my own business, and wanted to give half of my profits to charity, no one would tell me I'm wrong for doing so. If I started a partnership with four other people and we agreed to majority rule, and a majority agreed to give half of our profits to charity, we're still fine because we all agreed to abide by the majority's decision. If I started a corporation where the shareholders elected a Board of Directors that agreed to give half of our profits to charity, I think the same logic applies. Obviously a lot of the shareholders would want the corporations to take on that responsibility (or else they would've elected a different board), and the ones who don't agree are under no obligation to continue to invest in the company.
    If that's what the investors want, there's nothing wrong with that. What is wrong is the CEO taking their money with the promise of maximizing returns and using it for a purpose that the investors did not want.
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  8. #18
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    Re: The Duty of Corporations

    There is nothing wrong with corporations existing solely to make money. When it gets wrong is when they start influencing policy towards themselves to the detriment of others (which is not a legitimate use of money for a civil society as corporations are not people and should not have the power of free speech).

    Its a money in politics problem more than a corporate governance one.

  9. #19
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    Re: The Duty of Corporations

    Quote Originally Posted by DrunkenAsparagus View Post
    If that's what the investors want, there's nothing wrong with that. What is wrong is the CEO taking their money with the promise of maximizing returns and using it for a purpose that the investors did not want.
    Then the shareholders can elect a Board of Directors that fires the CEO and replaces him with someone more to their liking. Or they can simply sell their shares to other people who have less of a problem with the CEO's agenda.
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  10. #20
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    Re: The Duty of Corporations

    Quote Originally Posted by Krhazy View Post
    Right now it is understood that corporations have a duty to their shareholders, but not to their employees, consumers, or the remainder of the public (although they of course have a duty to comply with the law, which includes many regulations designed to protect employees/consumers/third parties).

    The clearest example of the warped effects of this is probably the famous case of Dodge v. Ford Motor Company.



    When the shareholders sued, the court ruled in their favor, stating Ford's duty was to profit his shareholders, not the community or his employees.

    In light of the growing gap between the wealthy and the rest of America, do you think that this idea needs to be re-examined?
    No, it does not. Forcing corporations, by law, to fulfill some imaginary responsibility to society is called Socialism.
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    At least Bill saved his transgressions for grown women. Not suggesting what he did was OK. But he didn't chase 14 year olds.

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