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

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Thread: The Duty of Corporations

  1. #51
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    Re: The Duty of Corporations

    Quote Originally Posted by Harry Guerrilla View Post
    That violates the nature of a publicly held corporation.
    He's holding multiple positions with conflicting duties.
    There's nothing inherently unethical about someone serving as a CEO, chairman, and a large shareholder all at the same time. On a smaller scale, sole proprietors essentially do this all the time.

    If he has control over, the board of directors, the CEO/presidency and has the largest amount of shares, the conflict of interest can compromise his fiduciary duty to the shareholders.
    He has a legal obligation to shareholders, which they can sue to protect.
    As far as I'm concerned the corporation's only legal obligations to its shareholders should be whatever they say they are. So if the CEO wants to tell the shareholders "I promise to maximize your profits," that's fine. If the CEO wants to tell the shareholders "I promise to maximize value to the consumers and employees, and give you the leftover profits," that's fine too. If they're unhappy they can take their money elsewhere or replace the CEO.

    Edit: It's not his business, he has no right to direct it towards his personal wants, ignoring the other investors.
    I disagree. If I owned a company and offered you a 1% stake in it (with the understanding that I'd still be making all decisions about where the company's money goes, since I control 99% of the stock), what are my obligations to you? We agreed that I'd be making all the decisions, so if I want to give the profits to charity instead of paying dividends to both of us, that's not a breach of contract as far as I'm concerned. Dissatisfaction with the way a company is managed is simply a risk that shareholders take with ANY investment.

    And if he decided to not let that come up for a vote?
    Most corporate charters have regular elections for the Board of Directors (not sure if it's legally required), so chances are he couldn't have simply prevented a vote. And if they didn't have elections, well, then the dissatisfied shareholders can sell their shares.

    He also had significant control of the Board.
    That's the problem.
    Any major shareholder has significant control over the Board. That isn't inherently a problem. All else being equal, I'd much rather invest in a company where the CEO owned 51% of the stock (and therefore had significant control over the Board), than a company where the CEO owned 1% of the stock.
    Last edited by Kandahar; 10-10-11 at 06:58 PM.
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  2. #52
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    Re: The Duty of Corporations

    Quote Originally Posted by Kandahar View Post
    There's nothing inherently unethical about someone serving as a CEO, chairman, and a large shareholder all at the same time. On a smaller scale, sole proprietors essentially do this all the time.
    Sole proprietor ≠ publicly held corporation

    A sole proprietor can direct all his profits to whomever he wants, a publicly traded corporation has a fiduciary duty to the shareholders.

    Quote Originally Posted by Kandahar View Post
    As far as I'm concerned the corporation's only legal obligations to its shareholders should be whatever they say they are. So if the CEO wants to tell the shareholders "I promise to maximize your profits," that's fine. If the CEO wants to tell the shareholders "I promise to maximize value to the consumers and employees, and give you the leftover profits," that's fine too. If they're unhappy they can take their money elsewhere or replace the CEO.
    You missed the part where the other shareholders had no say and that the board would not oppose Ford.
    Further Ford and his son breached their ethical duty and started a competing "Ford and Son" company, in which they took all the best employees, in order to gain total control over the shares.

    He wanted public financing through shares but also wanted total control.
    That is unethical.

    Quote Originally Posted by Kandahar View Post
    I disagree. If I owned a company and offered you a 10% stake in it (with the understanding that I'd still be making all decisions about where the company's money goes, since I control 90% of the stock), what are my obligations to you? We agreed that I'd be making all the decisions, so if I want to give the profits to charity instead of paying dividends to both of us, that's not a breach of contract as far as I'm concerned. Dissatisfaction with the way a company is managed is simply a risk that shareholders take with ANY investment.
    This isn't a limited partnership or any other type of partnership, but more of a trust.
    The board are the trustees for the shareholders.
    It is their job to make sure that the CEO/President is doing his job at managing the company, in order to maximize value for the shareholders.

    Quote Originally Posted by Kandahar View Post
    Most corporate charters have regular elections for the Board of Directors (not sure if it's legally required), so chances are he couldn't have simply prevented a vote. And if they didn't have elections, well, then the dissatisfied shareholders can sell their shares.
    Sorry but what you're putting up here is that, there shouldn't be legal a duty to anyone and that's it's all up for grabs.
    That's more of an anarchist mantra, than one that wants a legal system to prevent fraud.

    Quote Originally Posted by Kandahar View Post
    Any major shareholder has significant control over the Board. That isn't inherently a problem. All else being equal, I'd much rather invest in a company where the CEO owned 51% of the stock, than a company where the CEO owned 1% of the stock.
    The CEO is not supposed to control the board, otherwise there are no checks in place to prevent him/her from doing stupid ****.
    Just like Congress should not be controlled by the President.
    Last edited by Harry Guerrilla; 10-10-11 at 07:09 PM.
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  3. #53
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    Re: The Duty of Corporations

    Quote Originally Posted by Harry Guerrilla View Post
    Sole proprietor ≠ publicly held corporation

    A sole proprietor can direct all his profits to whomever he wants, a publicly traded corporation has a fiduciary duty to the shareholders.
    That's a distinction without a difference as far as I'm concerned. If I run my own corporation and control 100% of the shares, I think we would both agree that I can run it however I please. But if I control only 99.9% of the shares, I have to focus on profit maximization? I essentially control just as much of the company as I did before, and should retain 99.9% of the power over it.

    You missed the part where the other shareholders had no say and that the board would not oppose Ford.
    The shareholders could replace the Board with people who would oppose Ford, if they had a majority ownership. If they had no say because they didn't control a majority of the company, then that's no different than any other sour grapes from an election. If the majority of shareholders elect certain people to the Board, that's just the way it is...it doesn't matter whether the "majority of shareholders" is 1 person or 100,000 people.

    Further Ford and his son breached their ethical duty and started a competing "Ford and Son" company, in which they took all the best employees, in order to gain total control over the shares.
    That's a separate matter, and sounds like it might indeed be unethical. Although I don't know all the details of it.

    He wanted public financing through shares but also wanted total control.
    As long as he controlled a majority of the shares, he got to make a majority of the votes for the Board of Directors. If he was unwilling to relinquish a majority of the shares, any of the minority shareholders who had a problem with it were free to sell their stock at any time.

    This isn't a limited partnership or any other type of partnership, but more of a trust.
    The board are the trustees for the shareholders.
    It is their job to make sure that the CEO/President is doing his job at managing the company, in order to maximize value for the shareholders.
    While that is the most common arrangement, I disagree that it is necessarily the ONLY arrangement. If the shareholders want to elect people who promise that their sole duty will be to maximize value, so be it. If the shareholders want to elect people who promise something else (e.g. community responsibility, or taking care of employees, or lower prices for consumers), so be it. It really doesn't affect me how the owners of a business decide that the business' money should be spent. If I'm also an owner who disagrees with the will of the majority, I can sell my stock to someone else.

    Sorry but what you're putting up here is that, there shouldn't be legal a duty to anyone and that's it's all up for grabs.
    That's more of an anarchist mantra, than one that wants a legal system to prevent fraud.
    Not at all. Any contracts should be enforced. I just question why there should be an implied contract that the company will always maximize shareholder profits. As far as I'm concerned, that's up to the shareholders (who elect the Board, which appoints the CEO) to decide for themselves.

    The CEO is not supposed to control the board, otherwise there are no checks in place to prevent him/her from doing stupid ****.
    The only way that a CEO can control the Board is if he controls a majority of the shares in the company (or at least close to a majority). And if that's the case, then I see no reason that there SHOULD be any checks in place to prevent him/her from doing stupid ****. Bad management is simply a risk that investors take, and if the majority of shareholders appoint bad management (or ARE the bad management themselves) then that's their own fault.

    Just like Congress should not be controlled by the President.
    Governments are not like corporations, in that you CHOSE to invest in the corporation and are free to sell your shares whenever you like. And in the sense that everyone's vote is (theoretically) equal in government, whereas your vote in a corporation is proportionate to your investment in it.
    Last edited by Kandahar; 10-10-11 at 07:32 PM.
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  4. #54
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    Re: The Duty of Corporations

    Quote Originally Posted by Kandahar View Post
    That's a distinction without a difference as far as I'm concerned. If I run my own corporation and control 100% of the shares, I think we would both agree that I can run it however I please. But if I control only 99.9% of the shares, I have to focus on profit maximization? I essentially control just as much of the company as I did before, and should retain 99.9% of the power over it.
    If you take on 1 additional investor, you are contract bound to that person, no matter if they have a .1% ownership or not.


    Quote Originally Posted by Kandahar View Post
    The shareholders could replace the Board with people who would oppose Ford, if they had a majority ownership. If they had no say because they didn't control a majority of the company, then that's no different than any other sour grapes from an election. If the majority of shareholders elect certain people to the Board, that's just the way it is...it doesn't matter whether the "majority of shareholders" is 1 person or 100,000 people.
    From my readings, it seems that the board was appointed by the CEO, rather than the other way around.

    Quote Originally Posted by Kandahar View Post
    That's a separate matter, and sounds like it might indeed be unethical. Although I don't know all the details of it.
    It's in the wiki link, in the OP.

    Quote Originally Posted by Kandahar View Post
    As long as he controlled a majority of the shares, he got to make a majority of the votes for the Board of Directors. If he was unwilling to relinquish a majority of the shares, any of the minority shareholders who had a problem with it were free to sell their stock at any time.
    Yes but if he purposefully devalues the investments of others, that can constitute breach of contract.


    Quote Originally Posted by Kandahar View Post
    While that is the most common arrangement, I disagree that it is necessarily the ONLY arrangement. If the shareholders want to elect people who promise that their sole duty will be to maximize value, so be it. If the shareholders want to elect people who promise something else (e.g. community responsibility, or taking care of employees, or lower prices for consumers), so be it. It really doesn't affect me how the owners of a business decide that the business' money should be spent. If I'm also an owner who disagrees with the will of the majority, I can sell my stock to someone else.
    It's not the only arrangement, but in this case, it was the primary arrangement, until ford decided he changed his mind, which alters the contract without the consent of the other investors.
    He isn't allowed to change the entire relationship on a whim, no matter his majority shareholder status.

    Quote Originally Posted by Kandahar View Post
    Not at all. Any contracts should be enforced. I just question why there should be an implied contract that the company will always maximize shareholder profits. As far as I'm concerned, that's up to the shareholders (who elect the Board, which appoints the CEO) to decide for themselves.
    If they wish to change it, it should be done through a process, instead of one person deciding for all.
    It defeats the purpose of having a publicly traded company.

    Quote Originally Posted by Kandahar View Post
    The only way that a CEO can control the Board is if he controls a majority of the shares in the company (or at least close to a majority). And if that's the case, then I see no reason that their SHOULD be any checks in place to prevent him/her from doing stupid ****. Bad management is simply a risk that investors take, and if the majority of shareholders appoint bad management (or ARE the bad management themselves) then that's their own fault.
    Bad management is one thing, arbitrarily altering the contract between the business and other investors for personal desires, is quite another.
    A company's management are not supposed to use corporate assets, which are owned in commons with other shareholders, for personal en devours.
    That's illegal at times and highly unethical.

    Quote Originally Posted by Kandahar View Post
    Governments are not like corporations, in that you CHOSE to invest in the corporation and are free to sell your shares whenever you like. And in the sense that everyone's vote is (theoretically) equal in government, whereas your vote in a corporation is proportionate to your investment in it.
    They aren't like corporations, entirely.
    You are free to choose, but the government exists to prevent/punish instances of fraud and unethical behavior by people who solicited funds from you.
    There are some ground rules everyone must follow.
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  5. #55
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    Re: The Duty of Corporations

    Quote Originally Posted by Antiderivative View Post
    I see that you don't own stocks. Stock owners do not have direct vote over who their CEO is.
    I never said that they did. Investors do have ways of redressing grievances though.
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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).

    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, I don't. I think corporations should decide who their duty is to. Some think it's only to their shareholder, others take a more consumer based approach and others go on to incorporate their personal set of ethics. It should be up to them what they want to do.

    As Mega pointed out earlier, the problem is when they affect policy at the expense of others. So the only thing that should really be examined in my mind is the relationship between corporations and government, which I believe is currently far beyond inappropriate.

    Corporations need to form their own goals by which they will live and die. That life and death should be separate from government.

  7. #57
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    Re: The Duty of Corporations

    Quote Originally Posted by theplaydrive View Post
    No, I don't. I think corporations should decide who their duty is to. Some think it's only to their shareholder, others take a more consumer based approach and others go on to incorporate their personal set of ethics. It should be up to them what they want to do.

    As Mega pointed out earlier, the problem is when they affect policy at the expense of others. So the only thing that should really be examined in my mind is the relationship between corporations and government, which I believe is currently far beyond inappropriate.

    Corporations need to form their own goals by which they will live and die. That life and death should be separate from government.
    That's definitely appropriate and I like this.

    A rational, unmoronic post.
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    Re: The Duty of Corporations

    Quote Originally Posted by coolwalker View Post
    They are not in business to react to miscreants. They are in busines to make money.
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  9. #59
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    Re: The Duty of Corporations

    Eliminate corporate personhood, and most of these problems disappear.
    “In politics, stupidity is not a handicap.” -Napoleon

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    Re: The Duty of Corporations

    Quote Originally Posted by evanescence View Post
    ..which is why corporate personhood needs to be eliminated.
    Quote Originally Posted by evanescence View Post
    Eliminate corporate personhood, and most of these problems disappear.
    This is never going to happen. When a CEO's company has done something illegal, if the CEO condoned it, knew or should have known about it, he's in jail. If a guy on the line of a pharmaceutical packaging company poisons medicine and people die, you would hold the CEO responsible? This, of course, assuming he couldn't have known about it. The corporation might be sued out of existence....the CEO might be included in the lawsuit...but unless they could prove he knew, or should have known, he's free and clear. As it should be.
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