Where are this university president’s lawyers when they should be telling him that the state can’t ban fliers and flags because the content of those filers and flags is offensive?
Really, it’s not that complicated. If you need an easy to remember example, just think of the one I always go back to: Nazis in Skokie.
I’M NOT INTERESTED IN INVESTING IN AN ENTERPRISE THAT DOESN’T CONSIDER THE RETURN ON MY CAPITAL TO BE ITS FIRST PRIORITY
If I invest in a company, I’m an owner. Why would I, or any other owner, countenance that company being managed in any way other than placing a return on my capital at the top of its priority list?
What I’m talking about is simply the fiduciary duty that company managers have to company owners (stockholders). This quote neatly summarizes the problem with CEOs pledging to prioritize the interests of “stakeholders” other than stockholders:
Capitalism is not named after the managers; it is named after the providers of capital, the shareholders. Its foundation is the strict and scrupulous fiduciary obligation (“the punctilio of an honor the most sensitive,” as Justice Benjamin Cardozo said in Meinhard v. Salmon), that gives credibility to capitalism by addressing the agency cost risk of entrusting money to others. Why should investors entrust their money to people who want to turn the fiduciary duty of strict loyalty into some version of “just trust me?”
EMPLOYEE/USER-OWNED BUSINESSES ALREADY EXIST, THERE’S NO GOOD REASON TO FORCE EXISTING COMPANIES TO ADOPT THOSE STRUCTURES
Cooperative associations and mutual companies are business organizations that are owned by their own employees or customers (users). There’s a good chance that you already participate in a mutual company through your insurance, as many insurance companies are mutual companies.
Since these types of business organizations already exist and are free to compete in the marketplace with investor-owned corporations, there is no compelling reason to force existing investor-owned corporations to give stock to their employees, or to force them to put employees on their boards of directors. I’m not sure what the proponents of such measures think they would accomplish, but I am sure that one of the results would be to make companies that are forced to take those measures less profitable and less able to provide good compensation to their employees.
It looks like it would be messy to eat, but that doesn’t mean I wouldn’t try it: a hunk of fried chicken sandwiched between two donuts (served hot!). According to the report I saw, it’s available on a test basis in Richmond and Norfolk, Virginia. I haven’t seen anything about when it might be available in Arizona.
From the National Constitution Center, a Constitution Day live blog.
I have written recently about the duties of corporate decision-makers. The issue was highlighted by a statement issued last month by the Business Round Table.
This post on the Columbia Law School’s blog gives the best explanation I have seen yet of the implications of the Business Round Table’s statement. Money quote:
Delaware law certainly permits boards to consider stakeholder interests and take a long-term view on how best to maximize corporate wealth. At the same time, it is clear that shareholders are the only constituency with a claim on Delaware boards’ fiduciary duties. Any evolution of corporate behavior in light of the BRT’s Statement will have to occur within the guardrails set by that reality.
And because virtually all major U.S. corporations are organized under Delaware law, their decision makers must follow Delaware law.
Via Professor Bainbridge.
Constitution Day is September 17. That’s the day in 1787 that the United States Constitution was signed by delegates to the Constitutional Convention.
Here’s a question to ponder for Constitution Day: would a federal wealth tax, suggested by some politicians, be constitutional? There are credible opinions on both sides of the question.
And while I’m on the subject of politicians’ tax proposals, it’s still crickets from that senator who said he wants a tax on unrealized capital gains. Remember I predicted that he would probably never provide the details of how his proposal would work? That’s because it won’t work.
Where, or how, does he find this stuff? Lowering the Bar found a story about a judge who, while presiding over a criminal trial, was caught driving the defendant’s Porsche, which the same judge had ordered to be seized before the trial. You can’t make this stuff up.
I should be quick to point out that this did not happen in the United States.
The judge claimed that he took possession of the car not because he wanted to use it, but because the police didn’t have a safe place to keep it. A higher court didn’t buy that explanation and suspended the judge.
JUST BECAUSE A GROUP OF CEOS SAID THAT THE INTERESTS OF OTHER “STAKEHOLDERS” SHOULD BE CONSIDERED IN CORPORATE DECISIONS DOESN’T MEAN THAT'S THE LAW
As Professor Bainbridge points out once again, the law is not what the CEOs say, or think it should be. Shareholder wealth maximization is the law. CEOs who act otherwise are endangering their own employment and the survival of their companies.
I readily concede that corporate social responsibility has its place, but only when it is consistent with the corporation’s duty to maximize the return on its shareholders’ investment.
I HAVE SAID IT BEFORE, AND I WILL SAY IT AGAIN: BUSINESSES DO NOT EXIST TO SERVE ANY “STAKEHOLDERS” OTHER THAN THEIR SHAREHOLDERS
Business corporations exist to create value for their owners by delivering goods and services. Period. I don’t care what some group of CEOs says to the contrary.
If those CEOs direct their corporations to serve the interests of parties other than the shareholders of their corporations, the market will respond negatively, and those CEOs will deserve to lose their jobs.
The contents of this blog, this web site, and any writings by me that are linked here, are all my personal commentary. None of it is intended to be legal advice for your situation.