Gamers have gotten quite lucky so far that the company that has been in the position to turn the screws and establish a monopoly has been content to only make gobs of money, instead of trying to make all the money like pretty much every other entertainment industry.
Yeah, the reason why Valve can do that is that they are not a publicly traded company but a privately owned one. Gabe Newell doesn’t have a fiduciary duty to any shareholders, so they don’t have to squeeze every penny from their users or abuse their quasi monopoly.
The whole idea of investments always going up is an absurd idea that needs to go. At this point I infinitely prefer a private company over a publicly traded one.
It’s a bit of an inherent issue sadly, if your goal is to multiply money why would you invest in a company whose profits stay the same over one whose go up? And you have no reason to care if the company eventually dies as a result, you just move your money into the next one.
And most people investing money will be doing so with the only purpose of multiplying that money, as it’s mostly banks and similar institutions. In theory if the main investors of a company want it to prioritize user experience over profits, the companies’ duty to its shareholders would also be to ensure good user experience. But that’s never going to happen.
One of the big reasons many companies go public is it’s naturally a really nice retirement package for the owners of the company. The owners of the company may have put so much time and money into building the company that they don’t have sufficient retirement savings, so by going public they turn a portion of their ownership into a boatload of cash as well as a boatload of wealth that can be leveraged, then simply elect a new CEO, retain their significant voting power on the board so they aren’t entirely abandoning their baby and then peace out
The idea that publicly traded companies have a duty to maximize shareholder value is a myth, and anyone privileged enough to sit on a board of directors likely knows this. See this article for an explanation. Every time a board squeezes a company for short term profits at the cost of long term good will, long term profits, etc., that is because they chose to do so.
It’s not a myth, it’s called Fiduciary Duty. The board, officers, and executives of a public company have a legal responsibility to put the financial interests and well-being of the company above other personal interests. The article you linked doesn’t deny this, and it also isn’t discussing the legal definition of it. It’s discussing what you might call “toxic fiduciary duty”, or more or less the Ferengi Rules of Acquisition. It’s the idea that profit is the primary motive and should always trump all other considerations.
Fiduciary duty is important to create a concrete stance against corruption and misuse of the company’s assets for personal gain. But when taken to an extreme, it becomes toxic and has negative consequences for the company. Employee wages are probably the most obvious example. There has to be a balance between underpaying and overpaying. If you chronically underpay, the best employees will seek more gainful employment elsewhere and the company will suffer from a poorly qualified workforce. If you overpay, like 100% revenue share with employees, the company will cease to make a profit and will be unable to function. A balance has to be struck to retain the best talent in order to drive success for the company; that is the point of the article you linked.
TL;DR extremism is always bad
(Please don’t mistake this for a pro-capitalism rant, there’s nuance to be had here)
It isn’t. If it were, that would mean that in practice, board members act to maximize shareholder value because they are legally obligated to do so, and that simply isn’t true.
In practice, board members and C-suite employees are incentivized to maximize shareholder value. They are not legally obligated to do so.
Fiduciary duty is a legal requirement, meaning that if you don’t fulfill your fiduciary duty, you’re liable. But nobody has been successfully sued for not maximizing shareholder value when their actions were in line with the business judgment rule (“made (1) in good faith, (2) with the care that a reasonably prudent person would use, and (3) with the reasonable belief that the director is acting in the best interests of the corporation”). Successful lawsuits regarding breach of fiduciary duty (in the context of corporate law) require the defendant to have acted with gross negligence, in bad faith, or to have had an undisclosed conflict of interest.
The closest instance of legal precedent that I know of (aside from “” of course) that eBay v. Newmark (Craigslist), which Max Kennerly took as meaning that corporations are legally required to maximize profits. In this case, Craigslist was found to have violated their fiduciary duties to eBay because Craigslist, in Max’s words, “tried to protect the frugal, community-centric corporate culture that was a hallmark for their success.”
Except, if you actually read the case notes, it’s clear that the issue wasn’t that Craigslist wasn’t maximizing their profits, but that they were diluting the percentage of stocked owned and flexibility of selling those stocks of other stockholders. The issue wasn’t that Craigslist wanted to spend half their profits supporting charities or anything like that - no, it was that they were trying to artificially limit, thus directly devaluing, the shares they had already sold. In other words, I agree that this was a case about minority shareholder oppression as opposed to being an edict to maximize profits / shareholder value.
And other than people threatening legal action, the most recent case we have (other than eBay v. NewMark) in favor of shareholder primacy is 124 years old - Dodge v. Ford. But the opposite is true:
Shareholder primacy is clearly unenforceable on its own term because the business judgment rule would defeat any claims based on a failure to maximize profit. 40 Corporate managers formulate business strategy. A rule‒sanction is antithetical to the core concept of the business judgment rule. In over one hundred years of corporate law, there is not a case where a state supreme court imposed liability for breach of fiduciary duty on the specific ground that the board, in managing operational matters, failed to maximize shareholder profit, though it made the decision informedly, disinterestedly, and in good faith.41 That case does not exist. In fact, many cases show just the opposite. Courts have held that shareholders cannot challenge a board’s decision on the specific grounds that, for example: the company paid its employees too much; 42 it failed to pursue a profit opportunity;43 it did not maximize the settlement amount in a negotiation;44 it failed to lawfully avoid taxes.45 There are classic textbook cases where courts have rejected attempts of shareholders to interfere with the board’s decisions on the argument that their views of business or strategy would have maximized shareholder value.46
The belief that a corporation is legally obligated to maximize shareholder value isn’t just wrong; it also:
Implies that no other model is feasible
Removes accountability for the negative effects of such policy from the people who are responsible for perpetuating them
Reinforces the fallacy that this should be resolved through legislation
Gamers have gotten quite lucky so far that the company that has been in the position to turn the screws and establish a monopoly has been content to only make gobs of money, instead of trying to make all the money like pretty much every other entertainment industry.
Yeah, the reason why Valve can do that is that they are not a publicly traded company but a privately owned one. Gabe Newell doesn’t have a fiduciary duty to any shareholders, so they don’t have to squeeze every penny from their users or abuse their quasi monopoly.
The whole idea of investments always going up is an absurd idea that needs to go. At this point I infinitely prefer a private company over a publicly traded one.
It’s a bit of an inherent issue sadly, if your goal is to multiply money why would you invest in a company whose profits stay the same over one whose go up? And you have no reason to care if the company eventually dies as a result, you just move your money into the next one.
And most people investing money will be doing so with the only purpose of multiplying that money, as it’s mostly banks and similar institutions. In theory if the main investors of a company want it to prioritize user experience over profits, the companies’ duty to its shareholders would also be to ensure good user experience. But that’s never going to happen.
deleted by creator
It’s not even an “idea”. They legally have to do whatever they can to make it go up. It’s idiotic and poisonous.
Epic is also private though I agree with your sentiment 100%
Why any company I ever control will NOT be publicly traded. It’s a literal deal with the devil.
One of the big reasons many companies go public is it’s naturally a really nice retirement package for the owners of the company. The owners of the company may have put so much time and money into building the company that they don’t have sufficient retirement savings, so by going public they turn a portion of their ownership into a boatload of cash as well as a boatload of wealth that can be leveraged, then simply elect a new CEO, retain their significant voting power on the board so they aren’t entirely abandoning their baby and then peace out
The idea that publicly traded companies have a duty to maximize shareholder value is a myth, and anyone privileged enough to sit on a board of directors likely knows this. See this article for an explanation. Every time a board squeezes a company for short term profits at the cost of long term good will, long term profits, etc., that is because they chose to do so.
It’s not a myth, it’s called Fiduciary Duty. The board, officers, and executives of a public company have a legal responsibility to put the financial interests and well-being of the company above other personal interests. The article you linked doesn’t deny this, and it also isn’t discussing the legal definition of it. It’s discussing what you might call “toxic fiduciary duty”, or more or less the Ferengi Rules of Acquisition. It’s the idea that profit is the primary motive and should always trump all other considerations.
Fiduciary duty is important to create a concrete stance against corruption and misuse of the company’s assets for personal gain. But when taken to an extreme, it becomes toxic and has negative consequences for the company. Employee wages are probably the most obvious example. There has to be a balance between underpaying and overpaying. If you chronically underpay, the best employees will seek more gainful employment elsewhere and the company will suffer from a poorly qualified workforce. If you overpay, like 100% revenue share with employees, the company will cease to make a profit and will be unable to function. A balance has to be struck to retain the best talent in order to drive success for the company; that is the point of the article you linked.
TL;DR extremism is always bad
(Please don’t mistake this for a pro-capitalism rant, there’s nuance to be had here)
All of that is true, but it doesn’t contradict my point. Fiduciary duty isn’t a duty to maximize shareholder value.
It literally is in practice.
It isn’t. If it were, that would mean that in practice, board members act to maximize shareholder value because they are legally obligated to do so, and that simply isn’t true.
In practice, board members and C-suite employees are incentivized to maximize shareholder value. They are not legally obligated to do so.
Fiduciary duty is a legal requirement, meaning that if you don’t fulfill your fiduciary duty, you’re liable. But nobody has been successfully sued for not maximizing shareholder value when their actions were in line with the business judgment rule (“made (1) in good faith, (2) with the care that a reasonably prudent person would use, and (3) with the reasonable belief that the director is acting in the best interests of the corporation”). Successful lawsuits regarding breach of fiduciary duty (in the context of corporate law) require the defendant to have acted with gross negligence, in bad faith, or to have had an undisclosed conflict of interest.
The closest instance of legal precedent that I know of (aside from “” of course) that eBay v. Newmark (Craigslist), which Max Kennerly took as meaning that corporations are legally required to maximize profits. In this case, Craigslist was found to have violated their fiduciary duties to eBay because Craigslist, in Max’s words, “tried to protect the frugal, community-centric corporate culture that was a hallmark for their success.”
Except, if you actually read the case notes, it’s clear that the issue wasn’t that Craigslist wasn’t maximizing their profits, but that they were diluting the percentage of stocked owned and flexibility of selling those stocks of other stockholders. The issue wasn’t that Craigslist wanted to spend half their profits supporting charities or anything like that - no, it was that they were trying to artificially limit, thus directly devaluing, the shares they had already sold. In other words, I agree that this was a case about minority shareholder oppression as opposed to being an edict to maximize profits / shareholder value.
And other than people threatening legal action, the most recent case we have (other than eBay v. NewMark) in favor of shareholder primacy is 124 years old - Dodge v. Ford. But the opposite is true:
The belief that a corporation is legally obligated to maximize shareholder value isn’t just wrong; it also:
I said in practice, not in law
Just pointing out I’m a different person lol
Yeah I’m not really to call Valve a good guy company, but I might be willing to call them the least bad company