[magduf]

>It is overly reductionist to say that a company exists solely for the benefit of the shareholders.

It's not reductionist at all; that's exactly how it is in a purely capitalist system, and how it is in America. It's different in other countries, like European ones and Japan, where companies really do have a responsibility to employees and society at large, but in America they don't have any such responsibility, no matter how much you would like it to be otherwise.

[skybrian]

It's reductionist because it assumes management has no choice in how to run their business and US corporations are basically all the same.

This is clearly, obviously not the case. There are many ways to make money and the management of a company has a lot of freedom to choose how to go about it. Different companies have quite different strategies and cultures. Some treat their employees much better than others. Pretending they're all the same is sort of like saying it doesn't matter who wins in an election.

What we can say is that when new management takes over, sometimes things change quite drastically. But this isn't deterministic and so you can't conclude all that much just from knowing the theory of shareholder value.

[magduf]

>Different companies have quite different strategies and cultures. Some treat their employees much better than others.

Yes, but you can find clear trends when you look at different groups, such as American corporations vs. European ones, and if you do that, you can see that employees, on average, are treated much worse at American companies. While there are some success stories in America, such as Costco (which is pretty famous for paying and treating employees very well, considering the jobs there are generally low-skill and don't require college degrees), the American system rewards companies that don't treat employees well and they tend to do better when competing with companies that do.

[skybrian]

This is roughly my understanding as well, but when we start talking about averages and trends across many industries and countries, I think personal observations might not count for much. Very few people have that wide range of experience.

[Hydraulix989]

That’s right, the truth hurts. Here in America (especially in California) employment is at-will, and companies act in their shareholders’ interests. It is MUCH more difficult to fire employees in Scandinavia and in Asia where employees have much more rights, and there are legal protections in place. I see that you downvoted this 100% factual parent post because it goes against your rosy moral picture about how you feel America should work.

[WhiteSource1]

Except for one thing: Engaged employees increase shareholder value

[magduf]

That may be, but it is important? What's most important is executive compensation. From everything I've read, executives at American corporations get far more compensation and big golden parachutes than their European counterparts. So obviously, the American system is working much better for the people who really matter.

[dwaltrip]

What is your point here? Obviously shareholder value is one of many things that matter. I vehemently disagree that executives are the ones who truly matter.

Executives may often have excessive power and influence, sure. And there is much room for improving how the system affects all individuals. Is this what you are trying to imply?

[magduf]

No, shareholders don't matter at all, only executives and their compensation and golden parachutes. If this weren't the case, companies wouldn't be rewarding these executives so richly while allowing them to do things which harm shareholder value in the long term.

You can disagree all you want, but executives actually run the corporations, and their boards of directors (stacked with other executives who are buddies of theirs) don't care what you think, and will continue to run these companies for the benefit of the executives rather than the shareholders.