

The Myth of Shareholder Capitalism. - olefoo
http://hbr.org/2010/04/the-myth-of-shareholder-capitalism/ar/1

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mseebach
It seems the research focuses solely on untimely unseating of directors, while
completely discounting the everyday role of shareholders: determining the
value of the company and the election of directors at the annual general
meeting. Both are pretty important functions.

The fact that directors usually aren't fired mid-term is a symbol of the
system working, not the opposite. At a certain size, being public is almost
always the best way to capture the feedback of the market in the long run.

It's like democracy: we get to have a small, orderly revolution every few
years. In return we don't randomly go around killing our rulers. The result is
almost never exactly what anybody wanted, but in the long run, it's
consistently better than the alternative.

~~~
jerf
It's virtually my mantra on economic issues, but: Second-order effects,
second-order effects, second-order effects. The fact that I am not now
currently in jail does not mean the law has no effect on my life, and when you
put it that way the logical error being promoted here comes out starkly.

(I often find myself thinking this is why capitalism attracts so much enmity,
as it is a major economy system that only makes sense when you consider
second-order effects, perhaps the only such major system. Socialism and
communism all have soothing first-order stories ("Is somebody richer than you?
Take it from them, and they'll be less rich and you'll be more rich! And let's
not worry about the second-order effects of such actions! Everything will
always stay the same! Wheee!") and the problems don't arise until you consider
the second-order effects.)

~~~
pw0ncakes
_I often find myself thinking this is why capitalism attracts so much enmity,
as it is a major economy system that only makes sense when you consider
second-order effects, perhaps the only such major system. Socialism and
communism all have soothing first-order stories_

Most intelligent socialists know about the "second-order effects", to use your
terminology. Some of the effects of redistribution are good (better-educated
populace, social stability) and some are bad, depending on the extent of it
and how it is done.

~~~
jerf
I don't meet too many intelligent $ECONOMIC_MODEL proponents on the internet.
Yes, I freely include my preferred economic model there.

I have much more respect for people who hold opinions which disagree with mine
and have actually thought them out, rather than just coming to the opinions
they have because it seems... nice.

------
CWuestefeld
Short summary: it appears that courts do not treat corporate shareholders as
the ultimate authority of a corporation, deferring to the authority of the
Directors. The OP wonders why, then, the Directors behave as if they _do_
answer to the shareholders.

This is interesting, I think, because the question of fiduciary responsibility
comes up here on HN from time to time.

It seems to me that the author is starting out with the assumption that
corporations are evil, or at best amoral. If one drops this assumption, the
explanation is easy: even without courts forcing them to do so, corporate
Directors tend to _want_ to do what's best for their shareholders.

~~~
Tycho
Also the only consequence of ignoring shareholder wishes mentioned was that
occasionally a court battle ensues to oust the director - surely the aftermath
involves more than just that.

