Further more, Tim is bound by law to do what is best for the shareholders. Simply put, if Tim favored environmental concerns over profit he would be removed.
Businesses are legally bound to act in the best interest of their shareholders. This is quite an open ended precedent.
You can argue almost anything meets this criterion, in some egregious scenarios a court won't buy it, but they will give you enormous leeway.
There is a lot - A LOT - of room for ambiguity and debate on the specifics of shareholder value and "best interests." The "legal constraints to act in the best interest" is not some set of corporate rules and KPIs codified into our legal code write large. It's not about maximizing a specific KPI over a fixed timeframe.
Not to mention Sweeney is the majority shareholder in Epic's case.
Businesses are legally bound to follow the official decisions of shareholders at official meetings. Anything beyond that is merely "a good idea".
If they are legally bound, there must be either a law or contract, can you cite either?
This stupid meme needs to die already. There is no such obligation, he only has a fiduciary duty to not trash the company and spend the earnings on cocaine. "companies are legally forced to maximise profit" has never been true and this piece of misinformation has been going around for ages now.
And, insofar as such an obligation to “maximise shareholder value” might exist, that obligation doesn’t necessarily translate into “maximise profit”.
The shareholders of a theatre company might care more about breaking even while getting an interesting assortment of plays produced with a great cast than they do about making a bunch of money out of the venture, so an executive who makes a bunch of money by running productions of uninspired cash grab shows won’t actually be maximising value. Likewise, I’m sure that Rob McElhenney and Ryan Reynolds care more about Wrexham AFC’s managers getting good athletic results than they do about making a bunch of money.
And even where it does translate into "maximise profit" because it's what shareholders of a particular company may want, there is no timeframe for it, and there is no way to tell whether any particular decision by the CEO runs contrary to the goal of eventually maximising profits.
Companies can spend all their revenues plus a constant stream of new capital on growing market share or revenue, on charitable activities or the happiness of employees, on huge research and development projects or on restructuring after restructuring and still credibly claim that all of it is ultimately meant to maximise profits.
The point where CEOs and CFOs have to be careful is when the company faces solvency issues. That's where legal limits of freewheeling decision making kick in, because it's where it's no longer about shareholders but about creditors.
As long as the executives are behaving generally how the shareholders want, it's not a problem.
My (IANAL) reading of it is that maximising shareholder value is probably the law, but it's practically unenforcible. Being practically unenforcible doesn't stop CEOs and boards from using it as a guiding principle.
And that's just civil influence, there are legal mechanisms indeed in place if a CEO "trashes a company" and what that means is different depending on the company.
It's more like too hard to be proven in any way. Unless you live in an simulator it's really hard to say which set of decisions is better than another. People often say it is obvious or in hindsight but fact is there are no such hard proofs.
eBay v Newmark
Don’t fall for feelgood greenwashing.
I mean, Apple should just release a new model every five years and really get that footprint down...
Tim Sweeney founded Epic and wrote the Unreal engine himself. John Riccitiello’s whole career is in management. Even if they’re both entirely motivated by profit, they have different perspectives on how to get there.
Also, Unity is a public company, while Epic is private. Even though Tencent owns a considerable share of the company, Sweeney still holds over 50% ownership. That gives them very different incentives.
Sometimes we forget that executives are people too and they have their own personalities. Tim Cook famously[0] told climate change denialists in a shareholder meeting that “If you want me to do things only for ROI reasons, you should get out of this stock”. Sure enough, shareholders are also not solely motivated by profit, and voted with Cook on that occasion. It’s useful to remember that cynicism isn’t the same thing as realism.
0. https://www.theguardian.com/environment/2014/mar/03/tim-cook...