1615
Everything's fine. Nothing to see here. (thelemmy.club)
submitted 6 months ago* by to c/fuck_ai@lemmy.world
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[–] 1 point 6 months ago (7 children)

No, not illegal, but they can be sued by the shareholder for failing to maximize value.

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  • [–] 5 points 6 months ago* (2 children)

    Sure, but since it's an unfalsifiable proposition, good luck proving it in court for any specific action.

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  • [–] 2 points 6 months ago (3 children)

    Not really, no. This is mostly a myth. Unless the executives are deliberately causing the company to lose money, they really can't be sued based on this fiduciary duty to shareholders. They have to act in the shareholders' best interest, but "shareholder interest" is entirely up to interpretation. For example, it's perfectly fine to say, "we're going to lose money over the next five years because we believe it will ensure maximum profits over the long term." In order to sue a CEO for failing to protect shareholders, they would have to be doing something deliberately and undeniably against shareholder interest. Like if they embezzle money into their own bank account, or if they hold a Joker-style literal money burning.

    If it were that easy to sue executives for violating their fiduciary duty to shareholders, golden parachutes and inflated executive compensation packages wouldn't exist. But good luck suing a CEO because he's paid too much. He can just claim in court that his compensation will ensure the company attracts the best talent to perform the best they can.

    Executives are given wide latitude in how they define the best financial interest of shareholders. Shareholders ultimately do have the ability to remove executives from their positions. This is supposed to be the default way of dealing with incompetent executives. As shareholders already possess the ability to fire a CEO at any time, there is a very high bar to clear before shareholders can also sue executives. It's generally assumed if they really are doing that bad a job, you should just fire them.

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  • [–] 1 point 6 months ago (2 children)

    Yes, that's correct, it's not an issue of legal liability, it's an issue of their interests converging. the CEO holds stock, he is a stock holder, and the execs are stock holders, they don't need any motivation to put the stocks first, they know where their interests converge, and precious few executives make more money in salary than they take away in stocks, in practicality, every corporation that offers stocks is stock focused, the is why we had daily and weekly meetings in retail stores on the absolute bottom of the ladder to talk primarily about stock prices, and why the main information displayed on price guns is the sale price/cost/ current quarter sales/last quarter sales/and last year to date quarter sales, and the sales numbers daily/monthly/quarterly are what you see posted around the office, it's always about beating last year to date numbers, and last quarter's numbers, and what always drove me fucking nuts is that the store made TWENTY TWO MILLION FUCKING DOLLARS in profit, but "your store is failing because you didn't make twenty two million and one penny. they don't care that we were making money hand over fist, because that's not the game. that game is dead. don't worry. they'll still cut payroll, and you can't like... spend that money or keep that money, but it doesn't matter. it only maters if it makes the stocks move. it's stocks all the way down. because that's where the interests converge. also as a side note, golden parachutes are an internal security measure against hostile take over, it means if someone does successfully raid your business and performs a hostile takeover, they have to pay your executives staff when they fire them and loot the company more money than the company could be looted for. it's never actually intended to be paid out.

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