Looking for business gurus...

Maybe if you provide some specifics of your project you'll get a response.

I'm not a business guru, btw.

Good luck.

Yeah, I can hook you up via email with a mega guru if you're talking manufacturing (no service industry stuff). He'll want precise questions - just a warning He's my bear of a dad

Why don't you just ask the questions here? That's what it's for after all.

RobinGBrown said:

Why don't you just ask the questions here? That's what it's for after all.

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Agreed. It's not like we're going to steal your premise - we are overloaded with Works In Progress already.

If the piece of the question that you posted was central, then you would want to consult an expert in corporate law. If it is general around that, then remember that corporations are persons before the law.

Dario D. said:

Is there anyone here who understands the business world, and essential concepts of corporate law, etc, who I can talk to via email? (my email is my first name @deefrag.com)

There are just a couple concepts I have to get straight (some of which have been strangely fruitless in trying to research online), for an important personal project.

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I'm a corporate lawyer, but I'm not going to give out my personal email. We can discuss it here on the board. If you've decided not to post your text here, then I can't help you.

I run a company in Australia and consult to other organisations. I'm not terribly familiar with US corporate law, but on the subject of ethics, corporate responsibility, and corporate contracts in Australia I have a fair bit of knowledge.

Dario D. said:

...or, are you implying that you would only want to discuss the issue out in public?

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The problem is when a lawyer is having a private one-to-one conversation about a specific legal scenario ... they are basically giving legal advice.

You add all the disclaimers you want, but it can be perceived badly by professional indemnity insurers, etc.

Not only that, but by providing the information in an open forum, the person giving the information helps many people - not just one.

Good luck !

Mac

I'm with Mac on this one. IdeaGirl is completely right to require all discussion to be public in order for her to help. That way, all benefit.

I'm not quite sure what you are after here, but, no US corporations are not required by law to make money. There are laws against mishandling of shareholders funds, not making profits is in no way illegal.

The basic premise seems to be that 'The LAW is that corporations MUST seek to increase shareholders profits'.

That premise is utter nonsense. That might be the purpose of many corporations - but there is no law that says the corporation MUST have that purpose.

In fact, there are plenty of examples of US corporations that don't seek to increase shareholder profits.
For example, USB-IF is a corporation. Its aim is to provide support for USB technologies.

It is one of many organisations that aren't profit driven but chose to be organised as a corporation for the sake of simplicity.
(For example, if I'm one of the guys organising the USB standard I'd much rather that a disgruntled user sue the USB-IF corporation rather than me personally. A corporation provides a handy way to help that happen.)

This kind of thing is Company Law 101.

Mac
(PS: Why fact check? The project is to compile the writings of a strange individual who, by your own admission has ludicrous and barely understandable rants. Surely the interest in that kind of writing is that it is expected to be utter nonsense - so if you remove the nonsense you'll remove the interesting bits.

BTW - one the the results of 'rant' style writing is this exact fallacy he's fallen into. The writer goes from a generally true statement. eg: 'Corporations exist to maximise shareholder profits'. That's the aim of MOST corporations.

He then takes it to an absurd extreme with 'Corporations BY LAW MUST maximise shareholder profits' - which is totally wrong)

Dario,

You, and your ranter, fail because you fail to define your terms. "Corporation" exists in many different forms. Subchapter S, 1031, non-profit, 501(c)3 are some examples of corporate structures with wildly differing objectives according to tax law. Then there are holding companies, shell corporations, limited liability corporations, and trusts. All of these forms of business organization can be treated as 'corporations' under US law, but they are formed for wildly differing purposes, from protection of assets from taxation to shielding of personal assets from lawsuits, to charitable efforts, to straight business for profit.

Next, you fail to address the ownership issue. When Google was a private corporation, owned fully by the founders, well, that was that. They alone charted the course of the company (or hired those who did). As long as they followed US corporate law, they could do anything they damn well pleased. Like Jerry Jones and the Dallas Cowboys. It's his team, he can do what he wants.

Once you have an IPO, you now have a lot of owners. They are called "shareholders". It doesn't matter if they own a share for ten minutes, they still have a property right in the firm. Therefore, they have an interest in the running of the firm. They elect the board of directors, through whom they express their desire for running the firm. Now, granted, 100 shares of IBM doesn't give you a large voice in that firm, but you are still interested in IBM making a profit, getting your share of profit (dividend), and having the firm being worth more (higher share price)

What I see from your friend is a desire to curtail these rights, all in the pursuit of some magical form of economic justice. I profoundly disagree with this. Corporate life is a form of creative destruction. Companies like K-Mart came about to provide a low-cost alternative to the Sears and Montgomery Wards. K-Mart was, in turn, undercut by Walmart. Walmart is getting gigged by the Internet. And so forth. Forcing corporations to charge prices that do not exceed some arbitrarily set profit margin removes one of the tools the corporations use in competition with each other.

And who watches the watchers? Who amongst us is smart enough to set exactly the right profit margin? I know, Obama, but I mean in the real world. Nobody. Not even the CEO of Walmart. It is a constant balancing act. Excess profits are the fuel in the tank of the corporation, allowing expansion, arts sponserships, research and development, charitable outreach efforts, merit pay, advertising, and so forth. You limit a company to a 2% margin (just to throw out a number), and poof, there goes the Little League sponsorship, the tractor trailers of supplies given away during Katrina, and the raises for the workers.

No, your friend sounds bitter and angry and ill-versed in capitalism. I would suggest he begin reading Rich Dad, Poor Dad, by Robert Kiyosaki, immediately.

Dario D. said:

"Corporations abuse the public interest because the law tells them their only legal duty is to maximize profits for shareholders."

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Like any article or statement, it needs to be taken in context.

The laws (simplified obviously) means that the corporation must act in the 'interests' of the shareholders. In most scenarios the interests of the shareholders is to have maximum profits. Because that's the most common type of corporation in day-to-day business, it's often handy just to assume it for the sake of discussion.

You could argue that he should have said "Corporations [[who have shareholders whose only interest is maximum profits]] abuse the public interest because the law tells them their only legal duty is to [[act in the interests of the shareholders by]] maximising profits for shareholders" ... but that would have been somewhat unwieldy !!

The most common example where shareholder's don't always want maximum profits are body corporate type corporations - where the shareholders who live in the building might want extra money spent to make life better, but the shareholders who just have it as an investment property would to save money at every turn.

Mac

Dario D. said:

LOL, surely, SURELY it's not necessary to put it that way.
Mac H. seems to have figured it out; there's no need to borrow from the typical "internet sociopath" personality to express disagreement.

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I see. Since you do not address the substance of my post, but go straight to the ad homenum toolbox, I deduce that further time spent explicating business guru-dom (as an entrepreneur, shareholder, and employee, all in different contexts) is not worth the effort.

Dario D. said:

So, to be clear, what you're saying is: The law doesn't tell a corporation to try to "make money"... UNLESS that's the corporation's stated purpose. (ie, a purpose like "maximizing profits for shareholders", or something to that effect)

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Not really.

In ye olde days corporations had to have a stated purpose - it was buried somewhere in the 'corporate constitution' which is basically the boring document which describes how often you have board meetings and other tedious information.

However, that isn't the case anymore. The 'stated purpose' was always a problem because companies change direction. For example Nokia used to make gumboots. Then they changed to making mobile phones. Even if they had kept the 'purpose' of the company vague (eg: 'make stuff' or 'sell stuff') they could still get caught out - because they might choose to make money licensing out mobile phone technology instead of making mobile phones, for example. Even vaguer still ('Make money') could be a problem - because it might make sense to spin off a new company with the same shareholders for a new market and wind down the old one - which they would be forbidden to do if they were forced to 'make money' ! (eg: A company restructures to move overseas for tax reasons - and basically leaves a shell behind with a small amount of cash to manage warranty returns and other obligations they can't avoid)

That's why corporations don't need a 'stated purpose' anymore. So if company management decided not to make money anymore and to take another path there isn't really a specific law they would be breaking. They are actually free to do whatever they list in their constitution rulebook (which they wrote themselves!).

There is an overarching obligation to 'act in the interests' of shareholders - but that is about as close as the law gets to defining exactly what the company is obliged to do.

The confusion is that:
a - Since a company is obliged to act in the interests of shareholders - and -
b. *IF* the shareholders are interested only pursuing money

.... then the company is effectively obliged to pursue money.

This isn't really handled by the courts or law, though, so it seems bizarre to focus on it. It is mainly handled by the free market - as long as the shares are publicly traded then if the management decides not to make money the shareholders will sell their shares.

The few cases where people complain that management isn't trying to make money aren't usually about publicly traded companies.

For example - imagine I own 60% of a company "Big A Films" that just made a $100 million feature film. You own 40% of the company. We vote on a decision and decide to sell the TV rights of the film to "Small B TV" for $1. (You object, but oddly enough the decision was 60:40 to sell)

When you wonder why I insisted on such a bizarre approach you discover that the person who owns 80% of "Small B TV" just happens to be my sister.

That's the kind of area where you would take the company management to court over whether they were fulfilling their 'obligation' to 'make money'.

In general, however, it isn't really a legal issue.

Mac

And, what about those cases where shareholders aren't solely interested in making maximum profits? Ethical funds, or shareholders voting to use organic supplies, fair-traded products, or alternative energy sources? There seems to be a minority of shareholders who aren't in it solely for the most money, but also for the control of how the money is made.