>Publicly traded companies have a fiduciary duty to their share holders to make as much money as possible.

There has been this odd trend over the last few years of mischaracterizing what this means/what that duty translates to. People talk about it as if every CEO has to redline the company at all times and never think about longterm consequences for literally any reason. Every single cent that can be extracted right now must be extracted or the investors will rise up in all their anger crying out "FIDUCIARY DUTY!" as they drag the poor CEO off kicking and screaming.

Companies can think longterm. They're allowed to sacrifice short term profits for sustainability/longevity. I don't get where people get this idea that they can't. To me, "fiduciary duty" has become almost memetic - it's some weird hand wave-y line people throw out to excuse businesses being short-sighted, as if they never had a choice.

Whether it's a legal requirement or not, companies definitely act as if it is. Setting a company on fire to acquire short-term profits with a golden parachute guarantee is the pattern for executives of public companies under American capitalism.

Oh let me be perfectly clear here, I know that that is how things often shake out, especially in the US. What I am talking about is the way people defend businesses that behave this way.

They act as if they have no choice, that there is some legal mandate to just wring out a company all day every day and damn all consideration beyond “I can make another dollar this second.”

> Publicly traded companies have a fiduciary duty to their share holders to make as much money as possible.

I feel like this is in semi-myth territory. Yes, there have been cases where shareholders have sued company leadership because they weren't making them as much money as they could. But it's not quite as clear-cut and well-tested in the courts as you make it sound.

In fact, the case law goes firmly in the other direction.

Management has a ton of latitude to run the business as they see fit. The "remedy" for bad business decisions is supposed to be divesting and starting a competitor, not the courts.

Cases like Dodge v. Ford or Caremark are odd because the board was basically not running a business at all: Ford flat-out said he was doing something not for the business, but in support of his philanthropic beliefs. Caremark was so asleep at the helm that they racked up a quarter-billion dollars in silly fines.

Anyone can, of course, sue over anything, but if it's even vaguely legitimate (and the "facts" in Shlensky v. Wrigley are pretty bonkers, IMO), they won't win.

>Dodge v. Ford Motor Company, 204 Mich. 459, 170 N.W. 668 (Mich. 1919) is a case in which the Michigan Supreme Court held that Henry Ford had to operate the Ford Motor Company in the interests of its shareholders, rather than in a charitable manner for the benefit of his employees or customers. It is often taught as affirming the principle of "shareholder primacy" in corporate America, although that teaching has received some criticism. [Wikipedia]

Yup, but the facts of that particular case are tricky. Ford refused to issue a dividend to the Dodge brothers because

   "My ambition is to employ still more men, to spread the  
   benefits of this industrial system to the greatest possible
   number, to help them build up their lives and their homes."

This isn't a business decision; it's an ideological one.

It's been argued that if he said less ("No, just no"), or a bit more ("And this will let us recruit the best workers/expand our customer base/etc"), he would have been fine. This commentary lays that argument out nicely: https://openyls.law.yale.edu/handle/20.500.13051/603

That meme also contrasts with the rise of modern ESG, where a lot of shareholder pressure on management teams has been in the direction of making less money. There is a lot of really interesting stuff out there done in the name of ESG, EXFY being a particularly good example.

As much money as possible over what timeline? Crank profits now at the expense of the long-term business? Lose profits now to improve long-term business?

It isn't a straight-forward call to make. The current status-quo with resellers might be making money now, but there will be long-term brand damage in exchange. Will their business still be viable in 5 years if they develop a reputation for being Aliexpress lite?

If you are publicly traded and don't have leverage (e.g. different share classes with different voting rights for the founders) it's a straighforward call to make. Optimize for short term profits or be replaced by someone who will do.

> Optimize for short term profits or be replaced by someone who will do.

No. Optimize for shareholder value.

Amazon shareholders, for instance, are happy to make little in way of profit because Amazon management has shown an ability to increase the value of the enterprise.

In general though, the market is legitimately skeptical of most managers which is not a bad thing.

“fiduciary duty to their share holders to make as much money as possible” No they don’t. That’s an oft repeated myth. The have a responsibility to manage in the best interests of the business. That’s pretty vague. On purpose.

There's a "however". Actions that reduce the shareholder value without any long term prospects is something that will drive down investment and could trigger lawsuits

A lawsuit does not indicate a breach of law or anything really.

>without any long term prospects

Of course. Because by definition you’ve sacrificed the short term and the long term for nothing. But I don’t think anyone here would debate that so I’m not entirely sure what you’re getting at.

In my experience it's just a repeated line to excuse companies for not thinking longterm or about anyone/anything beyond immediate revenue. It's very silly and not what the term means at all, yet as you pointed out, we see it all the time.

> Publicly traded companies have a fiduciary duty to their share holders to make as much money as possible.

That is not accurate. They are required to operate in a manner that is satisfactory to their owners, who delegate that responsibility to the board of directors, who then set policy for management to execute.

There is no difference between a publicly traded and privately owned company in terms of the responsibilities of the management and board to their shareholders.

There are numerous incentives to maximize shareholder returns (eg taxation incentives, equity value improvement, dividends), but there is nothing in law or otherwise that applies a fiduciary duty to management or the directors of a company to maximize either dividends or capital value.

It's called the Friedman Doctrine. It is true corporations don't have a legal prescribed duty to maximize shareholder value. However, the Friedman Doctrine is, much like Moore's Law, a norm from which any deviations are considered aberrant and for which the reactions range from disappointment to frustration.

Not sure why you're being downvoted.

> If the leadership doesn't act in this manner, they will be replaced with others that will.

This is exactly what happened at Etsy when they fired the previous CEO and installed Josh Silverman.

They are being downvoted because "make as much money as possible" is not a clear cut proposition. Apple ran (runs) an expensive recycling program and investors complained that it wasn't valuable at annual meetings. Steve Jobs said "We disagree" but he wasn't replaced. Lots of companies don't maximize the dollars out of every single thing, in response to a bigger picture / longer term vision, and it's up to leadership to sell it to shareholders.

Etsy could certainly argue their bottom line in the long term will be helped by curating a higher quality marketplace and getting rid of junk sellers, if that's a problem.

Steve Jobs earned the ability to say that.

Most managers are not Steve Jobs.

Sure, but some are so pretending no company can ever push back against a short term cost cutting / revenue focus is false.

I had the same thing happen[0], but the point is that companies don't have to make as much money as possible by sacrificing everything else like brand image and human decency; anything that goes against obvious profit-increasing practices must be properly accounted for by the board giving a reasonable explanation. A hypothetical shareholder meeting: "Q: why did you reduce your cut of sales when still trending upward in user and revenue growth? A: we believe higher user growth numbers is more important in the long term and envision our revenue growth will continue to increase despite this change".

0: https://news.ycombinator.com/item?id=30893551