[uuddlrlr]

>I don't think Facebook is constitutionally able to give up ad revenue gains

This "fiduciary duty" meme really needs to die.

Seriously the idea of fiduciary duty [to maximixe profit] is dystopian, corporations don't fuck us over because they have to they do it because they can.

Edit: clarify

[throwawaycuriou]

I also blinked at that. But then took it to mean constitutionally in a pure sense - whether they can keep a strength of belief enough to follow through. Unrelated to 'The Constitution' from a US citizen's point of view. Although now I'm pondering just how misplaced and powerful our reverence of that cobbled together document is.

[MandieD]

It’s basically a peace treaty. There are things about it that I think are incredibly counterproductive to democracy (and they were designed to be so!), but I shudder at the thought of rolling the dice on scrapping or heavily re-writing it.

[thatguy0900]

It seems like the government agencies are more than comfortable ignoring it anyway, frankly.

[carbonguy]

You are correct, that is the sense that I meant it. I'll edit my comment to clarify.

[uuddlrlr]

Thanks for clarifying! The constitution is pretty far from fiduciary duty legally, so I apologize for not interpreting it more charitably.

(In general the maximize profit meme does need to die tho)

[dnautics]

The "fiduciary duty meme" is exactly what GP did not mean as per their disclaimer. Constitutionally in this sense means "as a result of it's constitutive makeup", i.e., it's culture, hierarchy, incentive structures, employees, managers etc.

[sundarurfriend]

> The "fiduciary duty meme" is exactly what GP did not mean as per their disclaimer

which was added thanks to your parent comment.

[mattkrause]

Indeed! It's not even really true: I did some digging in this thread. https://news.ycombinator.com/item?id=23393674

The relevant legal standard is "Don't abuse the company for your own ends", not "you must do everything to get as much money as quickly as possible, consequences be damned!"

[AlexandrB]

It's especially dubious in Facebook's case because Mark Zuckerberg controls the majority of voting shares. If he wanted to run the company straight into the ground I doubt anyone could stop him.

[FormerBandmate]

Mark Zuckerberg could not make his salary $800 billion, or donate the entire company to charity. That’s what that means, nothing about business decisions

[alasdair_]

>Mark Zuckerberg could not make his salary $800 billion

This would be an interesting test case. The limits on what he can or cannot do are remarkably ill-defined.

[nradov]

Mark Zuckerberg couldn't donate Facebook the corporation to charity, but he absolutely could donate all of his personal Facebook shares to charity. If he did that then the charity would have a controlling stake.

[threatofrain]

I don't think you can sell shares to the public and then deliberately screw over your shareholders. If Zuckerberg acted terribly then he may be exposed to liability.

[munk-a]

That's a question of malicious intent - if he intended to directly cause damage to specific shareholders than yea - they'd have a case. General idiocy isn't going to fall into that category though - shareholders all voluntarily bought their shares.

[anonporridge]

The problem is that the "maximize profit" meme is VERY fit in the evolutionary world of memes.

Those organizations and people that adopt the meme become more powerful and choke out all those entities that don't.

You can't just choose not to pursue profits at any cost if there are ANY competing entities out there that choose to do so.

[6gvONxR4sf7o]

I dont buy that. Lots of other factors beat out efficiency and execution. Sure, it’ll give you a statistically better shot at doing well, but you won’t die without it.

[GauntletWizard]

Our current ecosystem is such that you either get big enough to gobble up all real competitors, or you're consigned to irrelevance.

Why that is is where the fundamental disagreement is. One of the proposed reasons is too much regulation, the other is too little. It's (in my opinion) probably both - too much poorly applied, and not enough where it's needed.

[rvense]

It is a strange phenomenon, in that it is so nonsensical, yet so ingrained and self-perpetuating in a way. I can actually agree that it qualifies as a "duty", because it's something the people who make up the corporation honestly feel morally bound to. The idea seems to have become sort of a load-bearing neurosis in the Modern Yuppie. If and when we, by some act of cultural psychiatry, remove it entirely, that's a lot of personalities that are going to just crumble, and I don't know if there are enough hiking trails in California for the finance dude(tte)s in sillycon valley set to all find themselves again...

[wyre]

They have a legal obligation to maximize shareholder profits. See Dodge v. Ford Motor Co.

https://en.m.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co.

[Frondo]

The very article you cited disagrees! You said they have "an obligation to maximize shareholder profits" while the linked article says they have to "operate in the interests of the shareholders." Those are two very different things!

Hunt around for just a few minutes on the google search, "do corporations have a legal obligation to maximize share value," and you'll see that what you said is the myth that gets repeated -- this one link probably summarizes the argument against the myth in the most neutral way:

https://skeptics.stackexchange.com/questions/8146/are-u-s-co...

[likpok]

Later caselaw (note that that case was from 1919) gives directors widespread latitude to decide what "benefiting the corporation" means.

The second paragraph gives two such cases: AP Smith Manufacturing Co v. Barlow and Shlensky v. Wrigley.

[cma]

This actually just makes it worse if (plausible) Zuck is a sadist.

[dragonwriter]

No they don’t, except maybe in Michigan (Dodge v. Ford is a Michigan Supreme Court ruling from 1919, applying Michigan state law; as your own article states: “In the 1950s and 1960s, states rejected Dodge repeatedly”, so assuming that Dodge v. Ford represents anything other than a quirk of Michigan law [and potentially an outdated one even there] is...unfounded on the evidence you have provided.)

[mattkrause]

Dodge v. Ford was basically a perfect storm of saying just the wrong amount.

To summarize the case, Ford was sitting on a huge amount of cash. Some shareholders, in particular the Dodge brothers, wanted it paid out as dividends. Ford said no, and specifically:

"My ambition is to employ still more men, to spread the benefits of this industrial system to the greatest possible number, to help them build up their lives and their homes"

Had he said less, or even nothing, that would have been fine. Management is entitled to make whatever business-related decisions they see fit (the "business judgement" rule). If the Dodges disagree with those decisions, they can sell their shares and reinvest the money elsewhere.

Had Ford said more "...and we think doing so will grow the market for our cars", "help us retain our skilled and motivated workforce" or something else vaguely related to success of Ford Motor Company, that also would have been fine.

Unfortunately, what Ford said fell into a gap where it was clear that what he was doing was not a business decision; he was using the shareholders' money for his own personal ends, charitable though they may be. Shlensky v. Wrigley is an interesting comparison. The Cubs refused to have night baseball games due to some...idiosyncratic beliefs about the "true nature" of the sport. This reduced their potential profits, but was nevertheless okay because chasing after the "purists" OR going for mass-market appeal are both reasonable business decisions.

(This is not my argument; it's made in this article: https://digitalcommons.law.yale.edu/fss_papers/1384/)

[6gvONxR4sf7o]

Even then, you could say what he said today and be fine, as I understand it.

[mannerheim]

They have a legal obligation to maximise shareholder value, but what that entails courts will generally leave up to the discretion of the company's executives. In fact, the very first paragraph says precisely that:

> At the same time, the case affirmed the business judgment rule

What is the business judgement rule?

> The business judgment rule is a case law-derived doctrine in corporations law that courts defer to the business judgment of corporate executives.

In other words, if the CEO of a company says that he did something because e.g. he believed it was better for the long-term health of the company, the court will generally take his word for it, barring evidence of deliberate malfeasance.

What one cannot do is as Ford did, which was to deliberately try and hurt other shareholders.

[wyre]

Thanks! I understand it now.