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The Duty of Corporations

Should the duty by re-examined?

  • Yes

    Votes: 12 42.9%

  • No

    Votes: 16 57.1%
  • Total voters
    28
Kandahar said:
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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That's how the system works now. I have no problem with this. The CEO is beholden to the shareholders. If he goes against their wishes, he will be replaced.
 
apdst said:
Right! It's the decision of management, not the government.
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I may be splitting hairs.......the Board of Directors work for the shareholders, management works for the BOD.....shareholders set the direction and the goals and they rely on the BOD to carry out the plan.
 
MaggieD said:
You already did that when you posted this:



I almost sent milk through my nose.
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that made me laugh.

what did I say in that post that was wrong?

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.
 
apdst said:
No, it does not. Forcing corporations, by law, to fulfill some imaginary responsibility to society is called Socialism.
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Socialism, as I understand it, is a system where the state owns all resources and attempts to distribute them according to its own determination of what would be most socially beneficial.

I don't believe that our sole choice is between the current system and socialism. That is far too simplistic, and it is a shame that debate is so often articulated as an extreme black or white choice.

It's also a shame when people constantly resort to strawman arguments. For instance, there is nothing in the OP that advocates "forcing" corporations to do anything. If anything, currently they are forced to act in certain ways out of deference to shareholders.
 
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DrunkenAsparagus said:
That's how the system works now. I have no problem with this. The CEO is beholden to the shareholders. If he goes against their wishes, he will be replaced.
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I lol'd. Who is going to replace him? His incestuous BOD?
 
haymarket said:
that made me laugh.

what did I say in that post that was wrong?

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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Because, I swear, Haymarket, I think you're pretty cool -- even though we don't often agree, especially when talking unioneze. But when I read that, I though, OMG! Now I understand! He's a closet Socialist. Hard to believe I can actually like a guy who's left of left....but there's somethin' aboutcha', Haymarket. ;)

In fairness, I'd sure be interested in a few of the new rules you might propose...
 
Krhazy said:
Socialism, as I understand it, is a system where the state owns all resources and attempts to distribute them according to its own determination of what would be most socially beneficial.
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You do realize that's exactly what you're advocating?? Exactly?? Oh! Except the state would just "control" the resources rather than own it. Unless it's GM.
 
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Krhazy said:
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?
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No.

What's the point of being a shareholder, if your ownership interests aren't recognized?
It makes no sense.
 
MaggieD said:
Because, I swear, Haymarket, I think you're pretty cool -- even though we don't often agree, especially when talking unioneze. But when I read that, I though, OMG! Now I understand! He's a closet Socialist. Hard to believe I can actually like a guy who's left of left....but there's somethin' aboutcha', Haymarket. ;)

In fairness, I'd sure be interested in a few of the new rules you might propose...
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I don't know about proposing any new rules ... as in laws ..... but I do very much would advocate that every company and employer in the land take into consideration a variety of factors in making decisions over and above the narrow question of maximizing profit.

Among the thing I would want them to consider is the effect of all their decisions upon society and all those in society and what is good for society and all those in it. I would ask them to weigh the narrow interests of their corporation with the interests of the wider society and all in it and to take all that into consideration.

There may be business people who do that today. But all need to do it.
 
The OP left out a very important sentence from his link, The Court was called upon to decide whether the minority shareholders could prevent Ford from operating the company for the charitable ends that he had declared.

Basically, the Dodge brothers used 10% of their share to strong-arm Ford. If the Dodge brothers didn't like Ford's actions, then they could have simply pulled their stock out and invested elsewhere. Instead, the minority shareholders used the state to get want they want. Wow, that sounds like some crazy socialism - using the state to force a corporation into an action that they didn't want to take.
 
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MaggieD said:
You do realize that's exactly what you're advocating?? Exactly?? Oh! Except the state would just "control" the resources rather than own it. Unless it's GM.
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How exactly does eliminating a duty that requires companies to favor one group of people at the expense of others constitute controlling a company's resources? IMO, that's called freedom.

You are assuming that I am suggesting we reverse the duty. I certainly haven't suggested that, although I left the question open for people who might. I would suggest we leave it up to corporations, and not burden them with the threat of lawsuit if they decide to expand or cut prices. The "that's socialism!" knee-jerk reaction is similar to the liberal "that's racist!" reaction, and worrisome.
 
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Antiderivative said:
I lol'd. Who is going to replace him? His incestuous BOD?
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Yes, or the investors will demand there is a change. If not, the investors will take out their money, or they will sue and probably win. This actually happens quite a lot.
 
Kandahar said:
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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2 things to note.

Henry Ford was the largest shareholder and he had considerable control over the board of directors.
Those 2 things would limit the power of the other shareholders from replacing him and represents a conflict of interest with the different positions he retained.
 
Viktyr Korimir said:
Corporations aren't people. They don't have duties. They're not capable of performing duties. They are, at best, tools for creating money for their owners and employees; they're incapable of doing anything else and it is foolish to expect them to.
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..which is why corporate personhood needs to be eliminated.
 
Krhazy said:
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?
Click to expand...

Sorry but I don't think it is understood that corporations don't have duties to employees, consumers and the public. We cannot start with that premise and have a reasonable discussion. I think the biggest problem we are having right now are with financial corporations which basically move money around as opposed to companies which make and sell products or provide services. I think the latter are more responsible in general. We need to stop lumping all corporations together.

But sure, I think a re-examination is in order.
 
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Antiderivative said:
Instead, the minority shareholders used the state to get want they want. Wow, that sounds like some crazy socialism - using the state to force a corporation into an action that they didn't want to take.
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I believe that misses the entire point.

The minority shareholders used the state to get justice in court, with regards to what Ford was contractually required to provide them. That's the purpose of government/justice for all. That's exactly WHEN a minority should have power, when it's legally in the right!

That's a fundamental objective of most relevant definitions of libertarianism (tea party) for example:
Libertarianism - Wikipedia, the free encyclopedia
--advocate a state which is limited to protecting its citizens from aggression, theft, breach of contract, and fraud.
 
Harry Guerrilla said:
2 things to note.

Henry Ford was the largest shareholder
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Then I don't really see a problem with him using his influence to steer his company in the direction he wanted to take it. If a majority of the shareholders (even if that's just one person) want the company to fulfill other obligations besides merely giving them a profit, I don't see anything illegitimate about that. It's their call.

and he had considerable control over the board of directors.
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The other shareholders (if they commanded a majority of the shares) could have simply replaced the Board of Directors with people he DIDN'T control, if they were unhappy with Henry Ford. And if they didn't command a majority of the shares, well, they could have simply dumped their shares if they weren't satisfied.

Those 2 things would limit the power of the other shareholders from replacing him and represents a conflict of interest with the different positions he retained.
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I think a CEO who is also the largest shareholder is the opposite of a conflict of interest...indeed, I would be very wary about investing in a company where the management didn't have skin in the game. There are certainly some conflicts of interest surrounding issues such as CEO compensation and whatnot, but those conflicts are mitigated if the CEO is also a large shareholder.
 
Kandahar said:
Then I don't really see a problem with him using his influence to steer his company in the direction he wanted to take it. If a majority of the shareholders (even if that's just one person) want the company to fulfill other obligations besides merely giving them a profit, I don't see anything illegitimate about that. It's their call.
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That violates the nature of a publicly held corporation.
He's holding multiple positions with conflicting duties.

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.

Edit: It's not his business, he has no right to direct it towards his personal wants, ignoring the other investors.

Kandahar said:
The other shareholders (if they commanded a majority of the shares) could have simply replaced the Board of Directors with people he DIDN'T control, if they were unhappy with Henry Ford.
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And if he decided to not let that come up for a vote?

Kandahar said:
I think a CEO who is also the largest shareholder is the opposite of a conflict of interest...indeed, I would be very wary about investing in a company where the management didn't have skin in the game. There are certainly some conflicts of interest surrounding issues such as CEO compensation and whatnot, but those conflicts are mitigated if the CEO is also a large shareholder.
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He also had significant control of the Board.
That's the problem.
 
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Kandahar said:
......
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Just a few reasons why the courts would "pierce the corporate veil."

Wiki said:
Absence or inaccuracy of corporate records;
Concealment or misrepresentation of members;
Failure to maintain arm's length relationships with related entities;
Failure to observe corporate formalities in terms of behavior and documentation;
Failure to pay dividends;
Intermingling of assets of the corporation and of the shareholder;
Manipulation of assets or liabilities to concentrate the assets or liabilities;
Non-functioning corporate officers and/or directors;
Significant undercapitalization of the business entity (capitalization requirements vary based on industry, location, and specific company circumstances);
Siphoning of corporate funds by the dominant shareholder(s);
Treatment by an individual of the assets of corporation as his/her own;
Was the corporation being used as a "façade" for dominant shareholder(s) personal dealings; alter ego theory;
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http://en.wikipedia.org/wiki/Piercing_the_corporate_veil
 
They are not in business to react to miscreants. They are in busines to make money.
 
Mach said:
I believe that misses the entire point.

The minority shareholders used the state to get justice in court, with regards to what Ford was contractually required to provide them. That's the purpose of government/justice for all. That's exactly WHEN a minority should have power, when it's legally in the right!

That's a fundamental objective of most relevant definitions of libertarianism (tea party) for example:
Libertarianism - Wikipedia, the free encyclopedia
--advocate a state which is limited to protecting its citizens from aggression, theft, breach of contract, and fraud.
Click to expand...

Your condescending attitude is duly noticed. I know what libertarian is about, and you are not supporting it. You are supporting authoritative statism. Plus, the tea party is not libertarian.

The company was primarily in the ownership of Ford. If Ford wanted to make a long-term investments into his company, community, and employees, then he should have been able to. If the Dodge Brothers did not like that, then they have the right to pull out. However, the Dodge Brothers instead used their minor voice to force the primary owner to do something against his will.

Libertarianism are supposed to be against aggressive and coercive actions of the state, not for it.
 
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DrunkenAsparagus said:
Yes, or the investors will demand there is a change. If not, the investors will take out their money, or they will sue and probably win. This actually happens quite a lot.
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I see that you don't own stocks. Stock owners do not have direct vote over who their CEO is.
 
Antiderivative said:
Your condescending attitude is duly noticed. I know what libertarian is about, and you not supporting it. You are supporting authoritativeness.

The company was primarily in the ownership of Ford. If Ford wanted to make a long-term investment into his company, community, and employees, then he should have been able to. If the Dodge Brothers did not like that, then they have the right to pull out. However, the Dodge Brothers instead used their minor voice to force the primary owner to do something against his will.

Libertarianism are supposed to be against aggressive and coercive actions of the state, not for it.
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Incorrect.
When a company becomes publicly held, the ownership interest resides with all the shareholders.
Only in some circumstances can their ownership be overruled, like in cases of a takeover, but the shareholders must be paid fair market value.

If Ford didn't want to lose total control, he should of never went public.
 
Harry Guerrilla said:
Incorrect.
When a company becomes publicly held, the ownership interest resides with all the shareholders.
Only in some circumstances can their ownership be overruled, like in cases of a takeover, but the shareholders must be paid fair market value.

If Ford didn't want to lose total control, he should of never went public.
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Ford held 58% of the shares. He was by far the largest controlling shareholder. If the Dodge Brothers didn't like Ford's decisions, then they should have bought more controlling shares or cashed in and took their money elsewhere.

The Dodge brothers were never held hostage. They were free to take their money and leave.
 
Antiderivative said:
Ford held 58% of the shares. He was by far the largest controlling shareholder. If the Dodge Brothers didn't like Ford's decisions, then they should have bought more controlling shares or cashed in and took their money elsewhere.

The Dodge brothers were never held hostage. They were free to take their money and leave.
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The Dodge brothers were part of the original investors, but that does not negate the fact that the board has a legal obligation to care for the interests of all shareholders.
It's their fiduciary duty.

Wiki said:
Henry Ford turned the presidency of Ford Motor Company over to his son Edsel Ford in December 1918. Henry, however, retained final decision authority and sometimes reversed his son. Henry started another company, Henry Ford and Son, and made a show of taking himself and his best employees to the new company; the goal was to scare the remaining holdout stockholders of the Ford Motor Company to sell their stakes to him before they lost most of their value. (He was determined to have full control over strategic decisions.) The ruse worked, and Henry and Edsel purchased all remaining stock from the other investors, thus giving the family sole ownership of the company.[SUP][18]
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[/SUP]
Wiki said:
When Edsel, president of Ford Motor Company, died of cancer in May 1943, the elderly and ailing Henry Ford decided to assume the presidency. By this point in his life, he had had several cardiovascular events (variously cited as heart attack or stroke) and was mentally inconsistent, suspicious, and generally no longer fit for such a job.[SUP][82][/SUP]Most of the directors did not want to see him as president. But for the previous 20 years, though he had long been without any official executive title, he had always had de facto control over the company; the board and the management had never seriously defied him, and this moment was not different. The directors elected him,[SUP][83][/SUP] and he served until the end of the war. During this period the company began to decline, losing more than $10 million a month ($126,990,000 a month today). The administration of President Franklin Roosevelt had been considering a government takeover of the company in order to ensure continued war production,[SUP][48][/SUP] but the idea never progressed.
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Henry Ford - Wikipedia, the free encyclopedia


Both the board and Ford himself, violated their ethical and fiduciary duty to shareholders on multiple occasions.
There was plenty of legal precedent to sue.
 
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