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I understand and agree with the idea that companies should maximise shareholder value, but I've never understood the argument that shareholder value is exclusively determined by profit. As I see it, the stock market consists of various firms saying "buy our stock, and we will try to achieve X with your investment", where X might be maximum ROI, but I don't understand why it has to be. If I want to found a company which has some goals other than making a profit, and so long as I am explicit about this then nobody is being cheated or defrauded, the investors are getting exactly what they signed up for.

If Tim Cook widely announces what Apple's future philanthropic principles will be, he's giving everyone a chance to decide if they want to own stock in a company which follows those principles. The market will judge that via sales and purchases of Apple stock. What could possibly be more free-market than that?

The fiduciary duty of the directors of a company entails that they make no decisions that prejudice the general shareholders of a company. The classic case is making an issue of equity that benefits only a limited group who can buy it at the expense of diluting the value of the equity of other shareholders.

The idea that (i) the entire value of a company is the NPV of future profits to the shareholders, and that (ii) this fiduciary duty is very broad and bears on all decisions made by the directors, so that any decision that might reduce return is prejudicial to the interest of shareholders, does pretty much entail what the NCPPR claim. And there have been efforts in places to expand fiduciary duty in some jurisdictions to this strong requirement. But I have the impression that lawyers generally think the idea is daft and undermines good corporate governance.

IIRC, Steve Milloy of Junk Science operates a crank activist hedge fund that attempts to undermine environmental innitiatives in the kind of way described in the article. I believe they have produced dismal returns for their investors, which suggests that they do not eat their own dog food.

It's actually a myth that a company has to maximize shareholdervalue. There is no corporate law even remotely suggesting it and it is generally a horrible idea.


I think I said that, with the caveat that different jurisdictions have varying stipulations about what the fiduciary obligations of companies are, and there has been some legal controversy about the idea over the years. There has been, unfortunately, case law that takes the idea seriously [see esp. 1].

Today, I think, it is hard to find people who think it is good for companies to be obliged to maximise shareholder value. John Kay, a British economist, journalist and author of the excellent Kay Review [2], has written very well about the problems of expansive readings of fiduciary responsibility.

[1]: Katz v. Oak Indus., Inc., 508 A.2d 873, 879 (Del. Ch. 1986) judged “It is the obligation of directors to attempt, within the law, to maximize the long-run interests of the corporation’s stockholders." In Long v. Norwood Hills Corp., 380 S.W.2d 451 (Mo. Ct. App. 1964), the court observed: “Plaintiff cites many authorities [including Dodge] to show that the ultimate object of every ordinary trading corporation is the pecuniary gain of its stockholders and that it is for this purpose the capital has been advanced.” - via http://www.professorbainbridge.com/professorbainbridgecom/20...

[2]: https://www.gov.uk/government/consultations/the-kay-review-o...

I'm sorry but that article neglects any mention of court opinions (many of which I have read, as has any law student) which interpret the law and say otherwise.

Lynn Stout, a Cornell Corporate Law Professor, seems to disagree with you: http://www.amazon.com/Shareholder-Value-Myth-Shareholders-Co...

Having never heard of Lynn Stout, her claim to fame on Wikipedia is that Supreme Court Justice John Paul Stevens cited her work in Citizens United v Federal Exchange Commission... in the dissent.

I could believe that oxygen doesn't exist, and I could probably find somebody else to agree with that, perhaps even an author or something, but if there exists a body of law that is on the books and that will punish you for violating it, the idea of shareholder primacy is very much not a myth.

Dodge v. Ford 1953: > The Court held that a business corporation is organized primarily for the profit > of the stockholders, as opposed to the community or its employees. The discretion > of the directors is to be exercised in the choice of means to attain that end, and > does not extend to the reduction of profits or the nondistribution of profits among > stockholders in order to benefit the public, making the profits of the stockholders > incidental thereto.

This all extends on precedent set way back in 1896 (though there may be earlier) in Steinway v Steinway & Sons, though in the case of Steinway, the philanthropic behavior was excused as having had pecuniary value. It's been cited since, and punishments are being levied in spite of the myth. While it may be true that there is no law codified to speak expressly on the duties of shareholder primacy, stare decisis specifically disagrees with that, and that's really all that matters.

In the real world, of course there is no duty to maximize value at all costs, and the board elects a CEO who will do a good job of balancing short-term value against long-term value, and while actions such as Cook's are likely debatable either way, if we took a more extreme example, and Cook were to give 80% of Apple's assets away to charity, he would very certainly be sued, and he would very certainly lose. If, as in Steinway, the charitable actions could be argued to lead to longer term profits, the case gets blurrier, but the idea that shareholder primacy is a myth that does not exist is simply too unqualified a statement, and too counter to the facts to be regarded with much weight.

Saying that "primacy" equals "short term profits" is also too unqualified and counter to the facts.

Which is why I didn't suggest that it was.

The claim I was responding to was this > "It's actually a myth that a company has to maximize shareholdervalue."

There's plenty of evidence that, myth or not, the courts certainly think that it's real, and if the courts think that it is, then it cannot be a myth.

That is the business version of the Nuremberg defense.

If Tim Cook would actually say "yes, our green energy project has costed us N dollars so far, and it is a good thing because that's what we do and because government actually pays us back M dollars of it with that sweet taxpayer money" - that would be free market. Well, except for the taxpayer money part, but that's hardly Tim Cook's fault. Instead, no actual information was given, and people asking wrong questions were told to shut up or get out of the investment. I'm not an Apple shareholder (except as part of broad index funds) and probably never will be, but if I were, I'd like my executive to be more open and ready to answer hard questions than that. Of course, the swooning of people who had their cause supported would probably bring Cook much more in feel-good PR than actual transparency would bring him. So, the irony is he's probably doing what's good for the ROI, but not in the way his fanboys may think or like.

> I'm not an Apple shareholder (except as part of broad index funds) and probably never will be, but if I were, I'd like my executive to be more open and ready to answer hard questions than that.

There is an interesting dynamic here however. Let's suppose arguendo that the sustainability program is money-losing in and of itself -- buying coal-generated electricity is cheaper than maintaining a wind farm (or whatever) even after the subsidies. That doesn't actually mean it has a negative ROI, because the sustainability program is good PR. It builds goodwill that spurs purchases and evangelism. And Apple needs good PR following all that business with the Chinese factory working conditions.

So now here's the trouble. If you're doing green energy for the purposes of public relations, and some troll from the burn more fossil fuels lobby starts asking you about the numbers, you can't come out and say "the numbers don't matter because it's a PR stunt" -- that wouldn't be good PR. You have to give the line about how you run a corporation with a conscience blah blah blah, because that's the line that keeps the yuppies buying Apple hardware. If you come out and say the whole sustainability initiative is to convince Green party voters to buy iPhones made in a city with soupy air in a factory with suicide nets by workers who never leave company property, or downplay the amount of money it costs you to do it, the Green party voters will hear that and not buy as many gadgets from you. The necessary line is to play up how selfless you are in doing all of this, because anything else defeats the premise.

These are climate change deniers... I don't think they are really interested in statements of fact.

Can't decide if I want to respond to this by pointing out that it is argumentum ad populum or as an ad hominem (poisoning the well) argument.

Hmmm, after much consideration, gonna go with ad hominem.

Ad hominem can be completely appropriate if you're making a point about someone's character/credibility. I don't know why people think that ad hominem means you should never make arguments "to the man."

In this case, I think he's saying that because these are politically motivated shareholders, a reasoned answer would be lost on them. Cook could have whipped out a lengthy powerpoint full of charts and figures, or he could have done the chicken dance, or whatever ... he's saying the shareholders are not asking the question in good faith.

edit - Further, saying what you would prefer Cook do if you had asked the question isn't entirely relevant, since presumably you would be asking sincerely. Cook can probably tell those guys are only there to yank his chain and make him look foolish, so unsurprisingly he was somewhat hostile in response.

What's your point?

Incidentally, what logical arguments would you recommend one use against people who have rejected science as a legitimate world view?

In a parliamentary type of meeting which share holder meetings are - move next business is one way of dumping cranks.

If the trolls whine quote Citrine (UK) or Roberts (USA) at them.

And I have used Citrine as away of keeping control of a share holder meeting.

I think you have a couple of problems.

1) You're obviously a troll with a 20 hour old account, so you feel like you need to get trolling early today.

2) You assume that people who disagree with you on some topic have "rejected science as a legitimate world view". You should try to reexamine this assumption, as you may find out it's invalid.

You can't "disagree" about climate change any more than you can "disagree" about heliocentrism. Also, notice that we can have a discussion despite the fact that you just threw out an ad hominem.

Of course, you should argue with facts and numbers only to people that agree with you. If they don't agree, it's obvious that they are stupid and evil, and thus beyond arguing. They should be just called names and told to STFU. Because nothing makes your position more compelling than refusing to address legitimate concerns - like how much the company spends on certain policy.

Maybe to see if somebody is interested in statements of fact, you should first try having the statement of fact. And not just say "well, I could drown you in facts, but since you're not worth it, I'd just resort to name calling". That looks rather unconvincing to me.

Why bother if someone else who knows more than you has tried? Clearly climate change scientists will have tried to convince them and if they can't what hope does the Apple CEO have?

Climate change scientists never tried to publish Apple financial data. And that's what we are talking about here. Nobody asked Cook to predict temperatures in Arctica in 2030. He was asked for the effect of the specific policy on company bottom line - the thing which is the job of the CEO to know. He did not give the facts, and you say that because people who asked that legitimate question are disagreeing with you on some other question it's OK to dismiss them. That's classic ad hominem, and that's exactly what's wrong with modern political discourse - instead of seeking to convince and prove, people seek to dismiss and make the opponent shut up, because there's no talking to those people anyway.

In this context, it's not an argument that Apple must win or lose. It's an inquiry that if the CEO thinks that a detailed answer is not warranted, and does not legally require further disclosure, than a CEO could legitimately decide to make a short answer. I think Cook was just cutting off an extended argument regarding climate change, a discussion that likely has low to negative value in the context of a shareholder meeting.

It is also possible that Apple might maximize profit and shareholder value by pursuing philanthropy, if customers see the charity as adding value to the products (, possibly in improved brand image).

"Future philanthropic principles" are probably not for the CEO to decide. It sounds like something for the board. However I agree that a company should be able to define its mission and include things apart from maximum profit.

However, this is not necessarily "philantropic". It's marketing, and directly connected with ROI.

If Apple had the social and environmental sense of responsibility of GoDaddy, I lot less of us would feel comfortable buying Apple products.

It's only for the board to decide if the board isn't comfortable granting that responsibility to the CEO. They obviously are. If some climate change deniers want to get buttmad about it they'd better buy a lot more stock.

The complicated part is owners who try for higher ROI buy shares away from holders with lower expectations. This is a challenge for capitalism as it encourages Tragedy of the Commons.

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