I think Valve being a private corporation rather than publicly traded is a huge contributor to that. If they were publicly traded it wouldn’t matter what Gabe thought, they’d have a legal obligation to make money for the shareholders and the way that has played out has been “legal obligation to consume the company’s future for short term profit”. As a private corporation they have the ability to think about the future
That’s not a requirement of publicly traded companies. Any corporation has the same obligation to put shareholder interests first, whether it’s closely held (like Valve) or publicly traded but still under the founder’s control (like Facebook) or publicly traded with no one owner that exercises significant control (like IBM). The court case that established that corporations have a duty to shareholders above everyone else (Dodge v. Ford Motor Company) involved a closely held corporation (not public) and also confirmed that the corporation’s management can exercise its own judgment and discretion in prioritizing long term over short term gains, or vice versa.
eBay vs Newmark is the more apt reference, here. Also a private corporation, just with a profit seeking minority shareholder. The case ruled that the corporation has a social requirement to maximize that shareholder’s value in financial returns. For public corporations it’s generally held that this means profits.
What does “maximize shareholder value” mean if not profits? You can dress it up how you like but that’s the way businesses treat it.
I guess it could mean Carl Icahn buying Apple stock then threatening action against them until they paid him but that’s actually worse.
What does “maximize shareholder value” mean if not profits? You can dress it up how you like but that’s the way businesses treat it.
It doesn’t mean short term profits over long term profits, or dividends/buybacks over reinvestment, or anything like that.
The Delaware courts have repeatedly confirmed that majority shareholders, officers, and directors are allowed to do things like pay their employees bonuses, give corporate money to charity, demand less than the market-clearing, profit-maximizing prices, etc., even over minority shareholder objections that the corporation isn’t properly maximizing shareholder value.
eBay v. Newmark doesn’t change that. That was a fight about shareholder rights to buy or sell shares (or majority shareholder powers to prevent minority shareholders from acquiring or selling shares without the majority shareholders’ approval), which directly affects the value of the shares themselves (without getting into the question of the corporation’s obligation to grow that shareholder value in business operations). It’s one step removed from what we’re talking about, about the directors’ power to control shares, rather than the directors’ power to control the company.
I think Valve being a private corporation rather than publicly traded is a huge contributor to that. If they were publicly traded it wouldn’t matter what Gabe thought, they’d have a legal obligation to make money for the shareholders and the way that has played out has been “legal obligation to consume the company’s future for short term profit”. As a private corporation they have the ability to think about the future
That’s not a requirement of publicly traded companies. Any corporation has the same obligation to put shareholder interests first, whether it’s closely held (like Valve) or publicly traded but still under the founder’s control (like Facebook) or publicly traded with no one owner that exercises significant control (like IBM). The court case that established that corporations have a duty to shareholders above everyone else (Dodge v. Ford Motor Company) involved a closely held corporation (not public) and also confirmed that the corporation’s management can exercise its own judgment and discretion in prioritizing long term over short term gains, or vice versa.
eBay vs Newmark is the more apt reference, here. Also a private corporation, just with a profit seeking minority shareholder. The case ruled that the corporation has a social requirement to maximize that shareholder’s value in financial returns. For public corporations it’s generally held that this means profits.
What does “maximize shareholder value” mean if not profits? You can dress it up how you like but that’s the way businesses treat it.
I guess it could mean Carl Icahn buying Apple stock then threatening action against them until they paid him but that’s actually worse.
It doesn’t mean short term profits over long term profits, or dividends/buybacks over reinvestment, or anything like that.
The Delaware courts have repeatedly confirmed that majority shareholders, officers, and directors are allowed to do things like pay their employees bonuses, give corporate money to charity, demand less than the market-clearing, profit-maximizing prices, etc., even over minority shareholder objections that the corporation isn’t properly maximizing shareholder value.
eBay v. Newmark doesn’t change that. That was a fight about shareholder rights to buy or sell shares (or majority shareholder powers to prevent minority shareholders from acquiring or selling shares without the majority shareholders’ approval), which directly affects the value of the shares themselves (without getting into the question of the corporation’s obligation to grow that shareholder value in business operations). It’s one step removed from what we’re talking about, about the directors’ power to control shares, rather than the directors’ power to control the company.
It does mean that in many cases, or at least people are afraid enough it means that to not want to fight it.