Re:Apple: where is your #AppleMoonshot? Open letter
by anigbrowl on Tuesday September 16, 2014 @03:05PM
(#8326379)
Going for a 'moonshot' is not incompatible with pursuing the interests of shareholders, as long as the potential payout is commensurate with the elevated risk. I don't see IBM being hit with class action lawsuits despite the highly speculative nature of some IBM research.
A for 'a LEGAL obligation to their shareholders to pursue profits,' this is a myth, and putting the word 'legal' in capitals doesn't enhance your argument. Officers of a company have a fiduciary duty to the corporation, and shareholders have a claim on the profits of the corporation, but no law requires that a corporation devote itself to profit above all else - and for good reason, since otherwise activist shareholders might demand that Apple cease the relatively uncertain business of making pretty computers and offer financial services instead, since finance is the single most profitable sector of the US economy.
As a shareholder, you have the right to vote in the election of directors to the board (let's skip over all the differently nuanced varieties of stock or we'll be here all day), and that's it. If you still don't like what the corporation is doing then you have a simple option: sell your shares and invest your money elsewhere.
The corporation's purpose is stated in its articles of incorporation. In Apple's case (and most companies are similar in this respect) it is as follows:
The purpose of this corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of California other than the banking business, the trust company business or the practice of a profession permitted to be incorporated by the California Corporations Code.
Now, the idea of the obligation to maximize shareholder value is often tied to an old legal case, Dodge v. Ford Motor Company, but nowadays most courts look to Shlensky v. Wrigley in which the court held that directors are obliged only to do whatever they consider to be in the best interests of 'the corporation which they serve.'
You might like to read further on the topic from Professor Lynn Stout, who is professor of corporate law at Cornell University and has written a whole book on this topic - summarized at the link below, which also includes a link to the content in pdf form.
A for 'a LEGAL obligation to their shareholders to pursue profits,' this is a myth, and putting the word 'legal' in capitals doesn't enhance your argument. Officers of a company have a fiduciary duty to the corporation, and shareholders have a claim on the profits of the corporation, but no law requires that a corporation devote itself to profit above all else - and for good reason, since otherwise activist shareholders might demand that Apple cease the relatively uncertain business of making pretty computers and offer financial services instead, since finance is the single most profitable sector of the US economy.
As a shareholder, you have the right to vote in the election of directors to the board (let's skip over all the differently nuanced varieties of stock or we'll be here all day), and that's it. If you still don't like what the corporation is doing then you have a simple option: sell your shares and invest your money elsewhere.
The corporation's purpose is stated in its articles of incorporation. In Apple's case (and most companies are similar in this respect) it is as follows:
The purpose of this corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of California other than the banking business, the trust company business or the practice of a profession permitted to be incorporated by the California Corporations Code.
Now, the idea of the obligation to maximize shareholder value is often tied to an old legal case, Dodge v. Ford Motor Company, but nowadays most courts look to Shlensky v. Wrigley in which the court held that directors are obliged only to do whatever they consider to be in the best interests of 'the corporation which they serve.'
http://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Company http://en.wikipedia.org/wiki/Shlensky_v_Wrigley
You might like to read further on the topic from Professor Lynn Stout, who is professor of corporate law at Cornell University and has written a whole book on this topic - summarized at the link below, which also includes a link to the content in pdf form.
https://blogs.law.harvard.edu/corpgov/2012/06/26/the-shareho...