[lesuorac]

But there's no concrete definition of fiduciary!

One can easily argue that by having flat pricing they're doing their fiduciary responsibility because it's setting the company up to succeed in the long run through strong consumer trust.

One can argue that by having regional pricing they're doing their fiduciary responsibility because it's setting the company up to succeed by having success in more markets.

The takeaway from Dodge vs Ford [1] is that not fiduciary duty means dollars at any cost. It's that you need to have a reason that is good for the shareholders. If you don't bother to claim it's good for the shareholders then you're not doing your fiduciary duty.

[1]: https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co.

[mattkrause]

Yes! Dodge v. Ford is a tough one because Ford explicitly announced that he was using the company's money to advance his own philanthropic aim. That's essentially theft: it's the company's money, not his.

However, as long as management is running the company as a company (and not, say, the director's personal slush fund), the courts give them incredibly wide latitude. They're won't second-guess whether it was "correct" to prioritize long-term growth or short-term profit-taking, as long as either is vaguely in the company's interests.

A parallel case, Shlensky v. Wrigley, has absolutely bonkers facts. Wrigley wouldn't install electric lights at his ball field, clearly due to some...idiosyncratic...beliefs about how baseball "ought to be played." However, unlike Ford, Wrigley left open the possibility that this was also a business decision too: perhaps changing the neighborhood would drive people away, or the lights would cost too much to operate. Consequently, the court found in his favor even though one gets the sense they were not totally convinced it was a sensible business decision.

Longer thread with references and quotes here: https://news.ycombinator.com/item?id=23393674

[wongarsu]

And the VC world is full of examples where shareholder want the company to prioritize marketshare or riding certain hypes or other activities that increase company valuation within the shareholder's investment horizon. In most VC funded startups maximizing revenue would be a violation of your fiduciary duty

[fluoridation]

"Shareholder primacy" implies that at any time a decision needs to be made that puts the interests of shareholders against those of anyone else, the shareholders' should take priority. Since pricing affects revenue and revenue affects shareholders in some way, pricing should be structured such that revenue is maximized. So it doesn't need to be the maximum price possible, but it does need to be whatever price yields the greatest revenue.

[hnthrowaway121]

But surely it’s debatable whether increased short term revenue benefiting shareholders this year is better or worse than longer term plays with the chance of higher returns later, or that avoiding some sources of revenue for ethical reasons protects the brand’s reputation and image in the market.

[fluoridation]

If a decision puts at odds the interests of two different sets of shareholders at two different points in time, why should the interests of the more distant one be given priority over those of the current one?

[cedilla]

There's no reason to speculate about who the future shareholder will be, nor is there any good reason to just assume that favouring short-term gains will favour the current shareholders more. It's also unknown if a shareholder would prefer long-, mid- or short term gains.

Favouring short term gains over anything else is obviously wrong – Amazon could sell AWS for 5 billion dollars tomorrow, but I don't think you'd argue that this would be in their interest at all, even though it's just giving priority to current shareholders over more distant ones.

[fluoridation]

>nor is there any good reason to just assume that favouring short-term gains will favour the current shareholders more

The reason is that it's a situation that's bound to happen. If I plan to be invested in a company for a specific length of time (for whatever reason) any decisions that benefit the company beyond that term do not benefit me. If those decisions actually harm the company in the short term then they work against my interests.

>Amazon could sell AWS for 5 billion dollars tomorrow

AWS isn't a product, it's capital. It'd be like a factory selling its machines. You only liquidate capital if you need cash right away, precisely because capital is worth more than its flat monetary value.

[cedilla]

Why would the future value of the company not benefit you? Do your shares get stolen or cease to exist? I assumed you were to sell them.

[bee_rider]

The current stakeholders probably have an interest in the company not going out of business long term as well.

Anyway, what’s the level of evidence required to sue somebody for working against the interest of their shareholder? I’d expect it to be something along the lines of: the CEO knowingly and maliciously worked against their interest… I mean, we can’t have made being bad at your job illegal, right?

The market is pretty clever, so there is at least room to believe that any move that plausibly would help long-term company health should also help short-term stock prices, right?

[fluoridation]

>The market is pretty clever, so there is at least room to believe that any move that plausibly would help long-term company health should also help short-term stock prices, right?

I don't know about that. Are the most valuable companies those planning for sustainable returns over many decades? It seems to me the stock market is just a hype machine where anything past 5 years just doesn't exist, and CEOs operate accordingly.

[lesuorac]

Why are they different shareholders?

Trivially, the company can expect that it's current shareholders will hold the stock for a long time and so there's no reason to "juice" the current price at the cost of future price.

But also simply, making long term plans is easily arguable to be in fiduciary duty as a future shareholder would be willing to pay more to the current shareholder for a company in good health.

[fluoridation]

>Why are they different shareholders?

My question is about those cases when they're different.

>But also simply, making long term plans is easily arguable to be in fiduciary duty as a future shareholder would be willing to pay more to the current shareholder for a company in good health.

The future is uncertain. The future company may be in worse health even with this forward-thinking decision, for any number of reasons. One in the bag is worth two in the bush and all that. So as long as we consider fiduciary duty a valid priority, how can we argue against immediate extraction of value over all other concerns?

[mattkrause]

The timeline (short vs. long ) doesn't matter at all.

The current shareholders have chosen the management (e.g., by voting for the Board) and are consequently agreeing to follow their plan. If you don't like that plan, you have other remedies: sell your stock, run for a seat on the board, etc.

As you note, the future is uncertain, so courts don't want to be in the business of second-guessing facts and competencies.

[jszymborski]

Right, but destroying customer trust will also destroy shareholder interests