> Companies are required to maximize their profits,

This meme needs to die.

http://www.washingtonpost.com/blogs/wonkblog/wp/2013/09/09/h...

"There are no statutes that put the shareholder at the top of the corporate priority list."

"Nor does the law require, as many believe, that executives and directors owe a special fiduciary duty to shareholders."

It needs to die.

Edit: And there are many, many other places you can find support for this.

Shareholders can and have replaced the Board of Directors of public companies, based on their lack of faith in the company's ability to maximize profits. The Board of Directors is in charge of hiring and firing for the senior executives. The Board of Directors and Senior Executives know this, and aren't stupid.

All that has to happen is that shareholders (which are often other corporations) need to act RESPONSIBLY, and you're right, this meme will die. I expect the sun to go red giant, first, though.

If you are seriously suggesting that Tim Cook would have been ousted had Apple not gone down this road, I think you and the rest of the world are just going to have to agree to disagree.

You misunderstand. Tim Cook wouldn't have gotten the job in the first place if the board had thought he would shy away from such a decision.

Unless pg is right, and this will actually hurt aap's share price. And pg is not always wrong.

I predict it isn't going to do anything to hurt share price.

Yeah, it would be crazy to think that a corporation like Apple would ever replace their CEO.

I'm reminded of the phrase, Those who do not read history are doomed to repeat it.

Actually I think that article points out my take on the matter. For most corporations, its duty is to maximize shareholder value; the problem is that too many people have forgotten what that actually means.

There may not be statutes but there absolutely is case law. In fact, I'm sure there are indirect statutes. There's just no way that the purpose of a for profit company is not to maximize profits to the owners of that company. There may be reasonable debate about where best to deploy capital but those decisions should be justified.

The company's duty is to maximize the value of its shareholder's holdings in the company (i.e., stock). This can be done by maximizing profitability (see, e.g., Caterpillar, most publicly traded companies), but it can also be done through growth (i.e., Amazon, most startups) at the expense of maximized profitability.

It's easier to maximize profitability than it is to maximize growth. This is why more companies pursue the first path.

"Maximum profitability" still needs a timeframe to judge against. Maximum in the next quarter? Next year? Next decade? Maximizing in short term may harm or prohibit maximizing profits in long term, which would be just as bad (or worse) for shareholders.

Profit in the reporting context refers to the annual measure of net income, so maximum profitability generally refers to the profit generated in a single tax year.

Most corporations try to be profitable over a long term, and there is no requirement to be "maximally profitable" in a single year or over any time period. For every corporation there are judgements over the value of investing in product pipeline, sales, marketing etc. or the value of increasing short-term profits at the expense of long-term, the value of taking a risky action that may pay-off or may bring customer anger and lost sales etc.

The vast majority of single actions that a corporation takes are not mandated under some simplistic view of "maximising shareholder value".

What is the timeframe for maximizing profits? If I can liquidate the entire company and maximize profits for that quarter am I required to do so? If I can avoid instigating expensive legal battles and the associated bad PR to maximize profits in the next 10 years wouldn't I be just as required to do that?

I think I addressed this point in another thread once: http://news.ycombinator.com/item?id=6505161

A company can have more than one purpose and sometimes maximising profits gets in the way of the other purposes of the business, so just because a business is for profit, does not neccessarily mean that it will seek to maximise that profit or that the owners want it to as they may be just as interested in the other purposes that the business can be put to.

Money alone makes a poor measure of business as business is there to do stuff and money is just one of the processes involved.

How about blaming both. These positions don't seem exclusive.