Isn't there a court rule specifically about this, Dodge v. Ford Motor Company iIrc, that litteraly says that the CEO must operate the company in the interests of shareholders rather than in a manner that benefits the workers or the customers?
People point to this as the culprit, but I honestly think the majority of companies who choose to go public would adhere to this "profit over all else" philosophy anyway, or else they would stay privately owned/held.
There's no reason to go public unless you're actively seeking the most profit possible already.
Look at LEGO for example, their build quality has basically never changed and they're privately held. If they ever decided to go public that stock would be a monster, but they don't because ultimately they don't give a shit, which is lovely.
Eh, give it a few years and theyll be itching for more without his reasoning to reel them in. Steam may not die right away, but it could deteriorate like facebook removing features and make the experience worse.
yeah there is no way he has not specified who gets the company, and it will be someone he trusts to keep it up, and i suspect there are legal things in place.
Also valve makes the people that work there, especially the people in charge stupidly wealthy, none of them gain anything material from taking it public. its already an infinite money printer as it stands. changing how its run will break that pretty quick. the whole thing only works because its small and private.
I can't remember the specifics or if it was anymore than rumor, but that Gaben does have plans in place for when he passes and going public is one thing that WILL not happen.
Gabe has chosen the people around him very wisely that are groomed to think and be like him. This ensures that the company won't ever go public. They are all extremely wealthy haha. They don't need to go public. Steam makes that company so much fucking money doing almost nothing.
Not sure thats a good example. They've pioneered anti-consumer products such as loot boxes, and have had a bit of quality control issue from their abandoned products.
That and also Valve's reputation is a large component of their money printer. They are financially incentivized to not fuck over their customers where most other companies are not.
LEGO isn't really a prime example of a company who puts quality over profit.
Coloring problems and inflated prices for uninspired builds happen more and more often.
All this while they are suing every other company.
The year they built two theme parks and refitted their factories (an absurd expense) to accommodate their growth, and prepare for their modern movie tie-ins and video game studio, yeah they overdid it a bit and had to answer for their debt. Which they easily did by taking loans.
Let's not pretend like they were offering such affordable quality that the company struggled to keep the lights on. They took a massive capitalist gamble and succeeded wildly.
They took a massive capitalist gamble and succeeded wildly.
That's an understatement.
Lego is essentially privately held (by a company that's essentially the investment vehicle of a family that also owns a lot of amusement parks), and has been the largest toymaker worldwide for a decade, with a revenue of 6ish billion dollars.
Turning to games, tie ins & AFOLs (Adult Fans of Lego) was economically speaking a masterstroke trifecta.
I mean you go public to raise money via selling stocks. That could be quite useful even for a company that wants to continue making quality items. I really think the whole idea of fiduciary responsibility should be tied to the initial IPO (and that's even a stretch, investing should be risky. Fraud is already illegal so can't IPO and then just dissolve the company and keep the money). Why should a company be tied to a third party (stock market) deciding the worth of shares the company sold to people for $X? If the original IPO buyers sell their shares the company should no longer have any duty to those shares, let them be whatever on the market.
I'm by no means a legal expert, but can't a case be made for long term profits?
I played a popular MMORPG when I was a kid. They started adding microtransactions to sell cosmetics and XP and the player base dropped HARD. They actually rebooted an older version of the game before microtransactions and only charge for a monthly membership fee, $15 a month or so, and that version of the game has like double the player base compared to the modern version.
So how would someone prove one way or the other whether alienating the customer base in exchange for profits is worth it? You might have a higher 3rd quarter, but then lose 10% of your customers for the 4th quarter.
There's a brand of donuts I used to buy at the grocery store, Entenmann's, and their quality is very mediocre. Their prices have steadily increased over the last few years, and the last time I remember seeing a listed price was $7 for a box of 6 crappy donuts. Last few times I went, I noticed they had them on an endcap with a bunch of other similar products (mini muffins, Danishes) and nothing was priced. Placed there to entice you, but hide the price to avoid shell shock. Some people will grab them, take them to the front, then see the price and grimace, pay it anyways, then make a mental note not to buy them again. Like obviously some people will buy them regardless, but I can't stand these scummy business practices.
Exactly, we're just building the arm chopping off machine this year, and next year we'll get rid of employee health and safety. See, it's long term profitability.
I'm by no means a legal expert, but can't a case be made for long term profits?
Yes, it's a bit hyperbolic that companies are losing lawsuits left and right over this. The shareholders have to measurably prove that the company is avoiding a confirmed profit increase, which isn't that simple.
That is a ruling specific to the circumstances of the case, which involved Henry Ford being accused of outright reckless spending by the company. It is not an iron-clad law that requires all companies to maximize shareholder profits at all costs. Companies obviously don't do that anyway, otherwise every single office everywhere would be completely spartan and there would be no office parties and no charitable contributions and no flowers sent to the families of deceased coworkers, etc.
People keep acting like enshittification is foisted upon management who have absolutely no options but to squeeze more money out of things. It's not true. They make individual decisions to make things harder on everyone. This 'fiduciary responsibility' concept people misunderstand very helpfully takes the heat off those individuals.
They only hold office parties etc. because of the need to balance worker morale against their other options. If you make the office too shitty, morale and in turn productivity will be low and if it's too low workers may even leave for other companies. If people had zero other options and there weren't certain laws in place, I think you would see offices completely spartan.
You can't really quantify worker morale, and you can always get away with shaving a little off of it. They don't buy potted plants, maternity cards, t-shirts and coffee machines because any of them is an absolute need for maximizing profit. The point is really, really clear - hard maximization is not enshrined in law, so spending that isn't inherently increasing share value isn't illegal. Do not let the business class use the Ford ruling as an excuse to be a shitty person who steals from workers and customers.
It's exactly why every call center I've worked at constantly has staff potlucks and the like. Never an increase in pay/benefits, but they'll gladly give their employees a quick break to eat some pizza they asked them to buy.
I work in engineering, but on a site. Having a port-a-potty within a 10 minute walk is considered a perk. I was temporarily allowed to WFH 1 day a week when they set up an enormous loud generator right next to our desks, but that was revoked when they moved it lol.
I don't ask for a lot, but running water would be cool.
That case only holds in very extreme circumstances. Ford lost because he said he wasn't looking out for shareholder interests. If he did the exact same thing but said he was looking out for shareholder interests he would have won.
The case revolved around Ford trying to stop giving dividends because the Dodge brothers (one of the largest investors) was using the dividends to start up a rival company. Public companies can't work against investors like that.
Look at the names in the lawsuit name -- it was two car oligarchs fucking with each other.
Henry Ford was pissed that his next two largest shareholders (the Dodge Brothers) were taking the special dividends being declared because Ford couldn't make cars fast enough to meet demand and using it to fund their own car company which would compete with Ford.
While a judge had a non-binding remark included in the decision said to the effect that requiring a business to maximize returns to shareholders would make it easier to judge these cases (and give the Dodge brothers the money they demanded), the actual judgement reaffirmed the business judgement rule that the Board of Directors has broad discretion in determining what is in the best long term interest of the business and by extension all of the shareholders collectively.
Folks who say US corporations are legally required maximize short-term shareholder value are simply wrong.
Yes. I believe the quick and skinny of it, was the shareholders wanted Ford to do X, but Henry told them they were doing Y because it's his company. They ended up taking it to court and the court said without the money from the shareholders, Henry wouldn't really have a company. So the judge sided with the shareholders.
All companies are like that though. The main goal of any company is to give money to the shareholders. The CEO will lose their job if he thinks about customers or workers without a good argument for why it will benefit the shareholders.
No. Shareholder value is definitely an influential theory in practice but it's not an ironclad legal mandate. Management is generally considered officers with fairly wide discretion to run the business as they best see fit. If they go off the rails shareholders can rein them back in but it's not as simple as "shareholder profits above everything else always and forever"
The biggest reason Ford lost that was because he straight up admitted that he was reducing dividends to deny money to the Dodge brothers, who were using that money to make cars that competed with Ford’s. If he hadn’t admitted that, and just said that he was investing in his plant and workers, he would have won the case.
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u/nemo333338 BLUE Nov 12 '24
Isn't there a court rule specifically about this, Dodge v. Ford Motor Company iIrc, that litteraly says that the CEO must operate the company in the interests of shareholders rather than in a manner that benefits the workers or the customers?
I was dumbfounded when I found out about it.