# Changing laws regarding investors and companies (US) **URL:** \ **Category:** Great Debates\ **Created:** [July 15, 2010, 9:01am UTC](https://boards.straightdope.com/t/changing-laws-regarding-investors-and-companies-us/546760 "2010-07-15T09:01:49Z")\ **Posts on this page:** 8\ **Page:** 2
**Author:** ![Nobody](https://avatars.discourse-cdn.com/v4/letter/n/94ad74/32.png) [@Nobody](https://boards.straightdope.com/u/Nobody)\ **Post date:** [July 15, 2010, 8:51pm UTC](https://boards.straightdope.com/t/changing-laws-regarding-investors-and-companies-us/546760/21 "2010-07-15T20:51:44Z")
> [@Bricker](#): > > This is not a correct set of statements. > > It’s true that the officers and directors of a company owe a _fiduciary duty_ to the investors, the stockholders. But that’s not the same thing as saying they must “…do everything they can to give you maximum return on your investment.” It means they must not act against your financial interests. But a company can decide, for example, to contribute to charity, in the interests of making the world a better place, being a good corporate citizen, or whatever other altruistic goal moves the board of directors, and not breach their fiduciary duty to their shareholders. > > In fact, a moment’s thought would make this clear: you know, or should know, that right now many companies donate to charity or sponsor charitable causes. If it were true that they could be sued for not doing “…everything they can to give you maximum return on your investment…” then how do you imagine such corporate charity could exist? I’m thinking about things like, in [this thread](http://boards.straightdope.com/sdmb/showthread.php?t=466619&highlight=buyout+purchase) posted a couple of years ago about Microsoft trying to buy out Yahoo and Yahoo saying no. Although the official reason was that Yahoo wanted $37 a share and Microsoft was only offering $33, some other good reasons were given why it might be a bad idea, and yet as this post puts it: > [@Why did Yahoo! turn down Microsoft's purchase offer?](https://boards.straightdope.com/t/why-did-yahoo-turn-down-microsofts-purchase-offer/447968/10): > > Realistically, though, whether the Yahoo managers and executives want Microsoft to take over their baby is irrelevant. Their first responsibility is to get the most money for the shareholders. It doesn’t matter what would happen to Yahoo after a buyout. If it would increase shareholder value then it must be done. Microsoft could buy it and things could go great. Or Yahoo could be like all the other companies Microsoft buys up and then puts out of business, but it seems like the fate of the employees doesn’t matter as long as the shareholders are happy. At least that’s the way it appears to me. ---
**Author:** ![Ruminator](https://avatars.discourse-cdn.com/v4/letter/r/b9bd4f/32.png) [@Ruminator](https://boards.straightdope.com/u/Ruminator)\ **Post date:** [July 15, 2010, 8:58pm UTC](https://boards.straightdope.com/t/changing-laws-regarding-investors-and-companies-us/546760/22 "2010-07-15T20:58:05Z")
> [@Nobody](#): > > , but it seems like the fate of the employees doesn’t matter as long as the shareholders are happy. You have to remember that it plays both ways. Employees are not required to care about the fate of companies either. Fair is fair right? Or should we pass a law requiring employees to “care” about companies? ---
**Author:** ![Nobody](https://avatars.discourse-cdn.com/v4/letter/n/94ad74/32.png) [@Nobody](https://boards.straightdope.com/u/Nobody)\ **Post date:** [July 15, 2010, 9:14pm UTC](https://boards.straightdope.com/t/changing-laws-regarding-investors-and-companies-us/546760/23 "2010-07-15T21:14:31Z")
> [@Ruminator](#): > > You have to remember that it plays both ways. > > Employees are not required to care about the fate of companies either. > > Fair is fair right? > > Or should we pass a law requiring employees to “care” about companies? Companies laying off workers is a lot more hurtful to the workers than some workers quitting a job is to a company. Yes, sometimes layoffs have to be done, I’m aware of that. And let’s look at it this way, shareholders aren’t required to care about the fate of a company either. Why should the company be required to care about the fate of the shareholders? ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [July 15, 2010, 9:20pm UTC](https://boards.straightdope.com/t/changing-laws-regarding-investors-and-companies-us/546760/24 "2010-07-15T21:20:45Z")
> [@Nobody](#): > > Companies laying off workers is a lot more hurtful to the workers than some workers quitting a job is to a company. Yes, sometimes layoffs have to be done, I’m aware of that. > > And let’s look at it this way, shareholders aren’t required to care about the fate of a company either. Why should the company be required to care about the fate of the shareholders? I have seen articles quoting studies saying that companies with large layoffs do worse than companies who do not use this strategy. I haven’t seen the studies, but I assume they corrected for financial health at the time of the layoffs. Thus, a company who does layoffs and one who doesn’t do layoffs can both claim to be increasing shareholder value. In the short term, layoffs increase stock price, but if this is not true in the long term, we again have the dilemma that there is no way of knowing what maximizes stockholder value. Practically speaking, I think your proposal is already the case. Plenty of CEOs have destroyed shareholder value (one is now running for Senator from CA) and have both been kept and and given bonuses. Being fired (like our Senate candidate) is so rare that it is big news. ---
**Author:** ![Ruminator](https://avatars.discourse-cdn.com/v4/letter/r/b9bd4f/32.png) [@Ruminator](https://boards.straightdope.com/u/Ruminator)\ **Post date:** [July 15, 2010, 9:32pm UTC](https://boards.straightdope.com/t/changing-laws-regarding-investors-and-companies-us/546760/25 "2010-07-15T21:32:21Z")
> [@Nobody](#): > > Companies laying off workers is a lot more hurtful to the workers than some workers quitting a job is to a company. Aha! So you **do** admit that companies can get their feelings hurt of employees leave! We’re getting somewhere. Seriously, when I quit my first job, the company tried to guilt-trip me into staying. I’m thankful there wasn’t a law on the books requiring me to sacrifice my goals for the agenda of the company. > [@](#): > > Why should the company be required to care about the fate of the shareholders? Is that a trick question? What do you mean by “company” required to care for shareholders (the owners)? Can we substitute “managers” for “company” to make your statement clearer? In other words, you’re saying why should managers care about the owners? Well, I guess they wouldn’t be hired by the owners unless the managers had responsibilities and obligations to the owners. Or are you under the impression that employees pool their money together to hire the managers and board of directors? ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [July 15, 2010, 9:44pm UTC](https://boards.straightdope.com/t/changing-laws-regarding-investors-and-companies-us/546760/26 "2010-07-15T21:44:07Z")
> [@Ruminator](#): > > Aha! So you **do** admit that companies can get their feelings hurt of employees leave! We’re getting somewhere. > > Seriously, when I quit my first job, the company tried to guilt-trip me into staying. I’m thankful there wasn’t a law on the books requiring me to sacrifice my goals for the agenda of the company. I hate to break this to you, but companies have no feelings. Your manager might have felt he seriously screwed up by having you leave, and even his manager might have, but your company as an entity didn’t care. > [@](#): > > Is that a trick question? What do you mean by “company” required to care for shareholders (the owners)? Can we substitute “managers” for “company” to make your statement clearer? In other words, you’re saying why should managers care about the owners? Well, I guess they wouldn’t be hired by the owners unless the managers had responsibilities and obligations to the owners. > > Or are you under the impression that employees pool their money together to hire the managers and board of directors? When is the last time that the actual owners of a large publicly traded company directly hired anyone? Senior managers hire junior managers. A committee of the Board hires the CEO, and the Board was selected by the former CEO. Sure, the shareholders vote, but if you treat that seriously you must also think that Cuba has fair and open elections. ---
**Author:** ![Ruminator](https://avatars.discourse-cdn.com/v4/letter/r/b9bd4f/32.png) [@Ruminator](https://boards.straightdope.com/u/Ruminator)\ **Post date:** [July 15, 2010, 9:55pm UTC](https://boards.straightdope.com/t/changing-laws-regarding-investors-and-companies-us/546760/27 "2010-07-15T21:55:11Z")
> [@Voyager](#): > > I hate to break this to you, but companies have no feelings. I see all these TV commercials from companies saying they care. You’re telling me otherwise? What next? Santa Claus don’t exist? You are cruel to the bone. > [@](#): > > When is the last time that the actual owners of a large publicly traded company directly hired anyone? At one time, that “large” company was a “small” company. The owners directly hired the managers and everyone else. As the company grew larger, the owners delegated hiring others as a consequence of scaling up in size. Just because the hiring is later done by proxy doesn’t mean there isn’t an unbroken chain of ownership from the first owners to the present owners. The role of ownership is a consistent view all the way through the history of the company. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [July 15, 2010, 10:10pm UTC](https://boards.straightdope.com/t/changing-laws-regarding-investors-and-companies-us/546760/28 "2010-07-15T22:10:37Z")
> [@Ruminator](#): > > I see all these TV commercials from companies saying they care. You’re telling me otherwise? What next? Santa Claus don’t exist? You are cruel to the bone. Heh. I had a very similar experience to yours, so I know what you are talking about. > [@](#): > > At one time, that “large” company was a “small” company. The owners directly hired the managers and everyone else. As the company grew larger, the owners delegated hiring others as a consequence of scaling up in size. Just because the hiring is later done by proxy doesn’t mean there isn’t an unbroken chain of ownership from the first owners to the present owners. The role of ownership is a consistent view all the way through the history of the company. I used to work for the Bell System, and that thread was pretty damn tenuous at the end. If you work for a company that gets acquired, it gets broken entirely. [Previous page](https://boards.straightdope.com/t/changing-laws-regarding-investors-and-companies-us/546760.md?page=1)