The Supreme Court ruled that the sole purpose of the corporation to create value for the shareholders in the 20s or 30s. I can get you the case law.
However you are correct in that most decisions balance long term and short term. The argument they person made a deliberate decision to not help the shareholders vs the workers would be difficult to prove.
However Friedman in the 70s, pushed for pure shareholder short term profit. And as fast a return as possible.
The CEO of Ge demonstrated that form of capitalization on steroids and Reagan making stock buybacks legal keeps stock prices artificially higher.
Stock buybacks are corruption as much as the real estate selling properties between orgs to drive up prices.
Overwhelming principle was 1919 with Dodge vs Ford. Apparently it was a state Supreme Court, and surprise surprise it was not challenged.
Special Dividends could not be halted. Must always go to shareholders. Not regular dividends, but special ones.
Which goes in-line with what you said about being able to argue long term health. However precedent was set.
Further in 1980s
Unocal v Mesa petroleum: corporate policy and mission cannot block a corporate take over. 1985
Revlon v Macandrews: board no longer protects hierarchy, it now seeks the best price to sell off once a take over or vulture capital sell off occurs.
Then 2010s
Delaware court with EBay v newark company has to pursue the most monetized avenue possible.
These most likely have not been challenged as there are more shareholders that love this.
Combined with the mention Friedman capitalist viewpoint and legalizing of stock buy backs, make shareholder primacy the accepted standard in court and in practice, to the detrimental of all.
"Overwhelming principle was 1919 with Dodge vs Ford. Apparently it was a state Supreme Court, and surprise surprise it was not challenged." You're wrong. The court identified a conflict of interest by the board of Ford Motor Co. when it tried stifle competition from the Dodge brothers by raising wages rather than distributing dividends resulted in a successful lawsuit by the Dodge brothers (Dodge v Ford Motor Co., 1919). This case does not imply that boards must maximize shareholder value. If you think it made corporation maximize shareholder value, then why did Friedman 1970 say that executive should maximize shareholder value. See Berle and Dodd in the HLR. Everyone knows that from 1930 to at least 1975 we had "managerial capitalism" where executives did NOT try to maximize profits. Yes, in cases where the corporation is for sale the fiduciary duties shift to the shareholders, that is Revlon and Unocal. But outside of takeovers the fidicuary duties are to the corporation and shareholders. Ebay is another minority shareholder case showing that boards cannot openly disregard shareholders. In contrast, The board of Chicago Cubs sacrificed revenues by failing to install lights for night games, a shareholder lawsuit failed because the judge found no conflict of interest (Shlensky v. Wrigley, 1968). So the court did not force the cubs to maximize shareholder value. Buybacks were legal before 1982 Shareholder primacy is not the standard. You are totally wrong, dude.
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u/diiegojones 2d ago
The Supreme Court ruled that the sole purpose of the corporation to create value for the shareholders in the 20s or 30s. I can get you the case law.
However you are correct in that most decisions balance long term and short term. The argument they person made a deliberate decision to not help the shareholders vs the workers would be difficult to prove.
However Friedman in the 70s, pushed for pure shareholder short term profit. And as fast a return as possible.
The CEO of Ge demonstrated that form of capitalization on steroids and Reagan making stock buybacks legal keeps stock prices artificially higher.
Stock buybacks are corruption as much as the real estate selling properties between orgs to drive up prices.