Working Conditions in China...

[Joel Goodman]

Right, long term or short term, whatever the focus may be, they're maximizing their profits.

No to beat this dead horse too much but I was talking about short term profits vs long term health and profitability. The current financial crisis is filled with examples. Too much debt, risky leverage, tricky accounting, too little investment in the future, etc. all to pump up the short term profit (or the appearance there of). One of the reforms proposed for investment banks was not to base compensation on short term profit, as it encouraged reckless behavior.
Another example of this is that it's easy to increase short term profits by firing staff -- but long term (if done recklessly) you destroy the value of the company. No investment in the future sometimes translates into no future.
My local paper was purchased mainly with debt and although profitable, is unable to service the debt, even with massive firing of reporters. It in Chapter 11 and is a shadow of it's former self.

[Eric DeSilva]

I call baloney and agree with Greg.

You would be wrong, plain and simple, but that is because I didn't say that the fiduciary obligation was to "maximize profit at the expense of everything else." Fiduciary obligations include things like self-dealing, usurpation of corporate opportunities--they don't have anything to do with this whole slash-and-burn-profits-above-all-else concept you are bringing into the picture.

Management teams have the ability to articulate and put into action management strategies that they believe are appropriate. Pointedly, there are non-profits and corporations where the corporate purpose includes advancing some social value proposition. But, even in the normal context of profit-maximizing behavior, I can easily see justifying a social value proposition as a benefit to a corporation because there is a perception consumers will support that forward-minded thinking. Patagonia, for example, buys more expensive raw goods because it is attempting to create a supply chain that inculcates certain values. They believe it is the right thing to do and that there is a market for doing so, and their profits tend to indicate they are right.

The point is that if a management adopts a particular business strategy that proves to be poorly thought out, usually the appropriate way to redress grievances with that strategy is for the Board to replace management. Or, failing that, for the shareholders to elect new directors, who then replace the management. It does not, in most cases, follow that poor business decisions = lawsuit; 20/20 hindsight is good at revealing poor business choices, but that doesn't mean those decisions were objectively bad at the time they were made. The area that gets uglier is where the decisions were objectively bad when they were made. Or where things like "tricky accounting" were used. There, people can get sued.

[Dennis Peacock]

Well, the horse is finally dead, dried up, and gone away.

This is one of those threads that could be never ending and it's everywhere but on a specific topic.
Thread is now closed.