Not necessarily. IMO it highly depends whether a company’s goal is short or long term gain.

If you have a hard time competing and every day is a fight anyways, why would you act in a way that is sustainable in the long term?

If you listened to the NYT’s the Daily podcast where they interview a former Boeing quality manager/whistleblower this is clearly the picture that is painted here: Managment doesn’t give a shit if they use potentially broken or dangerous parts, they leave metal debree and garbage inside the wmhull right next to important control lines, in one case they forgot a whole ladder inside.

The 737 Max is not the illness, it is just the first visible symptom.

> IMO it highly depends whether a company’s goal is short or long term gain.

It has been the case, recently, that a company that is traded publicly cannot have a long term goal - any such goal is held in place solely by the ephemeral existence of an autocratic executive and will dissipate once they are removed or retire, instead corporations seek constantly to maximize short term gain since incentive systems like stock options and our current form of performance evaluations reinforce this strategy.

Most of the companies that have had long term clout or tried to invest in long term research have been acquired and butchered by venture capitalists for a quick payday.

Costco (NASDAQ:COST) has a policy of not hiring MBAs and generally only hiring internally. That means the managers are personally invested in the long-term viability of the company.

Such a conservative culture may one day be their downfall, but it won't hasten it as is so often the case of management culture elsewhere.

> a company that is traded publicly cannot have a long term goal

You think Apple or Berkshire Hathaway have no long term goals? Why make such sweeping statements that are easily shown to be wrong, when you can make a more nuanced and possibly true statement easily?

> Most of the companies that have had long term clout or tried to invest in long term research have been acquired and butchered by venture capitalists for a quick payday.

See, this might well be true and point to a real problem.

Though I think the notion that public markets are dumb and impatient and private markets are wise and long-term is a caricature itself.

Companies are run by people and their objectives are not and need not be entirely economic. I often hear people say "well companies are legally required to maximise return for their shareholders" but that is not at all the case.

Sure, some company management may be spurred to be good actors because they feel it will cause long term vale creation.

But then again you could just do the right thing because by and large people are not assholes.

That's why when I hear of exploitative predation by companies I get so mad: because it's ultimately exploitative predation by people. Even if the person on the phone to you / writing that code may not have enough context to understand the evil they might be doing, someone set the context that way, and in many cases it was deliberate.

> I often hear people say "well companies are legally required to maximise return for their shareholders" but that is not at all the case.

They are required to do what the shareholders want, which is usually maximizing returns.

> They are required to do what the shareholders want, which is usually maximizing returns.

I know of no such law. In which country is the the law?

In fact there is some concern by some economists that the management of public firms have too much discretion as unhappy shareholders can simply sell their shares and invest elsewhere rather than provide any direct feedback. Even when direct feedback is provided, management can and usually does ignore it, as can be seen from this week's Amazon AGM.

> In which country is the the law?

All that respect private property. The shareholders own the company, the management is essentially their employees.

The shareholders may not micromanage their company, but still management's job is to further the aims of the shareholders just as the job of elected politicians in a representative democracy is to further the aims of the people. Otherwise they get fired.

While this may not be working as well as it should, you wouldn't say a law is not the law because enforcement is spotty either.

Can you point to any law or regulation in, say, the USA that requires this, regardless of whether it is enforced or not?

Probably, if I spent the time. But then again, the fact that the owners of a company choose its management might be so obvious no lawmaker ever bothered to write it down.

The problem is in the short term numbers vs long term. In the short term taking shortcuts was beneficial because it preventing recertifications etc, but in the long term the grounding and reputation damage cost more. Moreover, everyone has to be retrained now anyway.

This is one of the biggest problems I've seen amongst corporate culture throughout my career. There was a time when companies were run with the intention of building a legacy. Now, it's all about the next quarter's earnings report, if not the next month's.

It's a shameful state of affairs, but the entire system is set up to reward this kind of behavior now.

I'd love to hear someone who understands the problem explain how we got here.

I see this trend as well. Maybe it is about growing up and seeing past things now.

I would be more interested in how we can move to more long term thinking. (Long term thinking includes the short term because otherwise the organisation might not survive. But nowadays it appears to solely be about the short term.)

Therein lies a problem that many people don't want to address

Many people don't want to address it because it isn't true. There are plenty of corporations that would not put lives on the line balanced against their bottom line. Yes, there are quite a few that do, it just does not extend to all of them, and I'd wager the larger the company the further insulated the management is and so the more likely for stuff like that to occur.

But to categorically say this about any corporation is nonsense.

These corporations are young and still have an autocratic leader that is forcing them to work against their natural value... as they age they will age like all the other corporations and come to value short term gain above everything else. This construct human beings have made has proven again and again that in the long term there is no outcome but degeneration to short term profit seeking that is what we currently deem "maximally efficient".

The emphasis on short-term shareholder value is a relatively recent trend in business culture and specifically American business culture. It's not intrinsic to the concept of the firm. However, it has become deeply entrenched not only in our business culture but also our political culture, so it would be quite difficult to extirpate.

No: this is a meme which I do not know from where comes. The aim of a corporation is to do its business, not to make money. The first is before the second.

I can tell you where it comes from.

It is basically a result of agency theory (principal agent problem) in the typical setting of economic theory (no transaction costs, bla bla bla).

The question is what a corporation should do, which aims it should strive for. That's an extremely difficult question, in particular if there are many owners ("principals", shareholders) who have different utility functions (goals), who are furthermore distinct from the CEO and managers actually running the business ("agents"), who might have their own interests (enlarging their fiefdom, job security, what have you).

The theoretical solution is to say: maximise the net present value of the firm (which goes to the shareholders, after paying debt), and then they can decide what to do with it, and pursue their own goals. Now, this makes some sense in a no-transaction cost world - if shareholders care about workers and peace and the sick, they can use the shareholder value created, and put some of it in, dunno, charity and health insurances, and what have you.

Thus, goal should be shareholder value maximisation, and to get the agents on board, you "align their interests" by incentives, specifically by giving the CEO options.

(Note that shareholder value maximisation is not the same as profit maximisation, and definitely not the same as short-term profit maximisation - the value of the shares is theoretically the sum of discounted cashflows in all eternity).

The other argument, of course, is that shareholders care only about maximisation of the value of their share, and thus a firm which does not pursue shareholder value maximisation will lose shareholders and go out of business.

Both arguments are not all bad, but of course the real world is much more complicated. Shareholders might have more goals than maximising the value of their shares (not in Econ 101, of course). A company might be in a much better position to achieve some of those aims directly, rather than via the circuitous route of handing it to the shareholder and them pouring it back into the game.

At any rate, the notion of shareholder value maximisation is not some God-given absolute truth, but one proposed solution for specific problems within a specific theoretic framework, and it's not clear at all that it's always optimal, and should not be reflexively trotted out when talking about corporations, and not serve as a defense for corporations acting badly.

The aim of a corporation is to serve the common interests of it's shareholders (you might add “as understood by it's management”); most commonly, with a widely held corporation, those common interests are limited to making money.

No: I understand it as "by its definition as corporation" (i.e. Boeing might make a lot more money if they just turned into a collection of car factories, for example -just for example-) but then it would not be Boeing.

Corporations can and do pivot their lines of business like that, and retain their identity. (Though at times they also find it useful to rebrand with a pivot.)

The poster above was half right that the incentive isn't necessarily to maximize profits, but you're more correct that our current societal rules make money the singular goal of these entities.

Why do we allow this. Why have we allowed an entity to exist that is driven so fully by greed to the disregard of all other pursuits - and understand, corporations aren't a natural existence, they are a thing constructed wholly by our societies.

No, of course not. Corporations must act within the law, and even the notion of shareholder value maximisation above all is contingent (based on specific economic theory), not necessary.