Sounds neutral to the layman while legitimizing the "brushing under the rug" of all the sins possible without severe legal recourse. Then promptly followed by some hand waving that really puts the you-know-what in fiduciary, Mr. Potter.
Friedman's assumption was that regulations work towards social/general good so a company can just focus on maximizing shareholder value within existing law and that combination would keep everything OK. However, in practice regulation was often faulty so the maximization of shareholder value often led to many negative internal and external effects. It's like applying machine learning trained at times of plenty to times of crisis.
Or more specifically, it assumes that those two systems remain completely separate from one another.
In reality, as the system for maximizing shareholder value can interact with the system creating the regulations. Thus:
> in practice regulation was often faulty
wasn't a coincidence of a situation, but rather was a direct result of the shareholder-value-maximizing machine working towards the removal of regulations that hindered shareholder value.
This is a huge letting off the hook of the people who write the regulations. Companies always want regulations changed, because regulations are not handed down from on high as perfect stone tablets full of rules. They're sometimes bad. So there needs to be a mechanism by which companies lobby to have them changed.
If that is misused, the blame lies with the regulation writers. They get to take free money from people as taxes solely so they can be impartial and write good regulations. If they can't even do that, then why give them free money?
Originally governments didn't just give out corperations whilly-nilly so if you weren't doing something that benefited the public you just didn't get one.
Which really wasn't a big deal since you could always do business as yourself although you (and not the corporation) also got liability then.
I don't see why this matters. Whether they "give out corporations" or they regulate corporations, they can still choose to throw you in jail because they have power. Corporations should obey the law, but they should chase shareholder value.
That doesn't mean short-termism at all costs, which is what some people hear when that is said, but it means, say, if you're Disney don't release a string of movies that all lose incredible amounts of money. Or if you do, then senior management needs changing pronto.
It's really not. Profits are taxed. Losses are lost by investors. The environment should be protected by regulations, not by relying on good will. That way the boundaries are clear and companies can do what they do best: allocate resources efficiently, towards demand, within rules.
Regulations should be a backstop after decency and goodwill fails. No one facet of the structure society is made of can support all of society, there needs to be safety factors in the building materials.
I am reluctant to say I am glad a comment has been down voted, because I am wary of mob mentality, but in this case I am very glad this comment has been so thoroughly down voted.
If I remember anything from my high school social studies class, the reason was the ability to spread investment risk across multiple investors while also shielding the investors and employees from some personal legal liability. I think I even remember that companies/corporations predate stock exchanges.
> Remember that companies/corporations predate stock exchanges.
While not definitive, ChatGPT says that:
> The idea of organizing a group of people to work towards a common goal for profit or mutual benefit has evolved over centuries. The modern concept of a company, with legal structures and formalized business practices, has its roots in the emergence of capitalism during the Industrial Revolution in the 18th and 19th centuries.
Wikipedia doesn't have a history section on it's page for company, but it says this:
> By 1303, the word company referred to trade guilds. Usage of the term company to mean "business association" was first recorded in 1553, and the abbreviation "co." dates from 1769.
You can tweak your definition by the means you'd like, but I think an honest assessment would be at this point to say they were concurrent.
A company isn't the same as a corporation. A corporation is a legal privilege granted by the government to give a company legal personhood. Thus the word "corporation", from latin "corpus", signifying that the state considers this specific company to be a single, legal body.
Corporations aren't a free market concept, it's a way for the state to give special protections to certain companies that need it for some prosocial reason.
Basically, the original idea is, a corporate charter is granted to create a corporation, which acts on behalf of its shareholders (who the government trusts, have some worthy interest in mind).
Yup companies exist to make money, people work jobs to make money, investors invest to make money, we all just really love to move $s around from one bank to another or trade pretty green bills. No other reason nah.
Doesn’t this fundamentally guarantee the enshittification of every company driven this way?
If you must grow by x% every year, and infinite growth is impossible, you begin shoving more and more low quality ads into your search results, partake in more legally and ethically grey activities, and eventually rupture?
Are there any examples of large corporations that have said, “we make billions in profit each year. We’re going to focus on maintaining that enormous success. We’re not going to focus on growth.” (I can already hear the spreadsheet squinting logic about how growth is necessary for some reason)
No, I don't see that it does. Basically the idea is that a company should operate in a way that is beneficial to its owners (shareholders). This is what any sole proprietorship or partership also does. Growth is not the only way to measure that. Many companies do focus on maintaining success and return value to the owners by paying dividends. Driving the company to failure by relentlessly cutting costs in the name of "growth" is not in the interests of the owners.
> We’re going to focus on maintaining that enormous success. We’re not going to focus on growth.” (I can already hear the spreadsheet squinting logic about how growth is necessary for some reason)
Where is Xerox going to get the money to do R&D to not be obviated? Replace Xerox with any other business.
All the businesses obviated by spreadsheets, mobile networks, smartphones, GPS? Maintaining success is continuing to make bets and moving forward, and bets require money. More money means bigger bets.
Another example, you have two businesses, one with a 5% profit margin (because they feel like 5% is enough), one with a 10% profit margin. The one with 10% profit margin is going to be able to continue renovating the business, upgrading the facility, buying more land, hiring better employees with higher payrates.
What will happen to the 5% profit margin business? Do you think customers will keep rewarding them (assuming the 10% profit margin business is worth the additional marginal cost)? You can insert restaurant, hotel, retail store, etc in here.
Note that having a higher profit margin is not the only way to survive, having a lower profit margin to better compete on price and gain market share is another way too. Balancing the two and delivering the right product at the right price for your customers is the key skill, but it’s a moving target.
The issue is that this leads into Dutch Disease. When a single tulip bulb can buy you a house, why bother becoming a carpenter? Society needs carpenters way more than it needs tulip growers.
That 10% growth rate may or may not be factoring in some externalities that the 5% growth has to
I think we're broadly in agreement but I'm responding to the bit about "What will happen to the 5% profit margin business? Do you think customers will keep rewarding them?".
If you only ever reward investments with high rates of return it leads to atrophy in boring yet essential sectors of the market. Supermarkets, like you mentioned, have a very low profit margin (usually 1-3%). Can you imagine what would happen if no one was willing to invest in a supermarket?
Yes, well customers evaluate different products and services at different price points. Grocery store experiences and products are fungible enough that it drives margins down that low:
>Note that having a higher profit margin is not the only way to survive, having a lower profit margin to better compete on price and gain market share is another way too. Balancing the two and delivering the right product at the right price for your customers is the key skill, but it’s a moving target.
There are numerous reasons for companies to exist. Off the top of my head I can think of a few. To provide goods to populations. To provide services for populations. To give the owner something to do. To perpetuate themselves. To provide something to do for employees. To do something an individual can’t.
None of these require investors. There are countless businesses that can be started that don’t even require a significant outlay of capital.
On top of that there are differing philosophies that might suggest investors should be last in line for benefits from a business. I could make a strong argument that society allows businesses to exist and as such society should benefit first and foremost. Businesses typically fail to exist without employees, so I could argue employees should come before investors.
Please don’t perpetuate the naive notion that investors are somehow more important than anything else. I am a dyed in the wool capitalist and while I tend to highly value profitability, even I don’t believe shareholder value is some sacred edict.
https://en.m.wikipedia.org/wiki/Shareholder_value