Fiduciary Responsibility

[GWestphal]

Is it a companies fiduciary responsibility to make money for investors at the expensive of the companies morals/mission and at the expense of the quality of a product? i.e. shipping jobs overseas, using cheaper components, etc

 

[lotus503]

Is it a companies fiduciary responsibility to make money for investors at the expensive of the companies morals/mission and at the expense of the quality of a product? i.e. shipping jobs overseas, using cheaper components, etc

Yes, however engaing in some of those pratices may not serve long term objectives and can actually have a negative impact on shareholders long term.

Good CEOs know this and thats why they wont sacrifice quaility as an example for short term profits because it can errode long term profitablity.

Big problem with business today I feel is that a lot of of boards and CEOs care about short term results for bonuses.

I think when Microsoft was having serious anti trust issues they were being fined something like a million a day by the government. But they continued to engage in those practices because it was still profitable even paying a million a day in fines.

 

[Craig234]

It is - which is why we need the people represented by the government placing regulations on the corporations.

But corporations are now pretty shameless about lobbying to take government away from the people to remove any limits.

 

[LunarRay]

Is it a companies fiduciary responsibility to make money for investors at the expensive of the companies morals/mission and at the expense of the quality of a product? i.e. shipping jobs overseas, using cheaper components, etc

A board of directors owe a legal duty to act in good faith, provide full disclosure, deal fairly and an undivided loyalty to the corporation and of course, to the shareholders. Directors must positively renounce anything that is unfair or conflicts with the above.

The Directors delegate to the Officers the day to day operations of the company but remain seized of the actions of the officers.

Even the shareholders have a fiduciary responsibility but mainly to the minority shareholders if there exists a majority bloc.


Most all Corporate Charters (the mission) contain a specific mission along with a broad one (... and any other opportunities or objectives that present themselves).

All public companies have a Strategic and Operating Plans that are blessed by the Board. The Operating Plan is usually the first year of the Strategic Plan.
Contained in these Plans are the intended operations and objectives along with all the who what where when and how... along with the financial impact of all this.
IF there is a material deviation to a plan then the board must be consulted. Ergo, given the board has this fiduciary relationship to the corporation AND the stock holders it MUST act in their best interests... Moving overseas or using substandard parts MUST pass that scrutiny....

 

[JEDIYoda]

It is - which is why we need the people represented by the government placing regulations on the corporations.

But corporations are now pretty shameless about lobbying to take government away from the people to remove any limits.

Why should the people have anything to say about what privately owned corporations do or don`t do?

 

[JS80]

Why should the people have anything to say about what privately owned corporations do or don`t do?

Because liberals know what's best for all of us.

 

[Dulanic]

Because liberals know what's best for all of us.

As do corportations.

 

[Fern]

Is it a companies fiduciary responsibility to make money for investors at the expensive of the companies morals/mission and at the expense of the quality of a product? i.e. shipping jobs overseas, using cheaper components, etc

No.

Here, read what the term means:

A fiduciary duty (from Latin fiduciarius, meaning "(holding) in trust"; from fides, meaning "faith", and fiducia, meaning "trust") is a legal or ethical relationship of confidence or trust between two or more parties. Typically, a fiduciary prudently takes care of money for another person.

Fern

 

[DaveSimmons]

Why should the people have anything to say about what privately owned corporations do or don`t do?

Clean air, soil and water. Food that is safe to eat. Products that don't injure or kill their users. Drugs without undisclosed side effects, that actually have a positive effect.

Or are you a "The Market will correct all those problems, once the survivors or their heirs act with their Second Amendment firearms" true believer?

 

[child of wonder]

Big problem with business today I feel is that a lot of of boards and CEOs care about short term results for bonuses.

I feel the same way.

My company engages in this short sightedness as well and it's downright sad to watch.

 

[sactoking]

Is it a companies fiduciary responsibility to make money for investors at the expensive of the companies morals/mission and at the expense of the quality of a product?

No, because that's not the definition of fiduciary duty, as fern pointed out.

However, reading intent into the question, I would surmise you're asking "Is it a corporation's duty to maximize share price and dividend payout ("shareholder income") at the expense of everything else?"

My answer is no, but corporations often end up at the incorrect, corrupted answer of 'yes' for two reasons. First, I say the answer is no because corporations have a duty to maximize shareholder value, not shareholder income. Shareholder value is a nebulous term that can be measured by income, goodwill, name recognition, market share, or a myriad of other things. Unfortunately, the idea of shareholder value has been corrupted to mean shareholder income for two simple reasons:
1) "Value" is itself a nebulous term; two reasonable people might not agree on the definition. Even if they did agree, they might not value some aspect the same. Money by means of share value and dividends has through time become the lowest common denominator in defining value.
2) Executives are often not given a chance to create real value. Given that money has unfortunately become the defining measure of value any executive that does not maximize money is quickly shown the door. This leads to excessive short-term thinking whereby not only is long-term profit abandoned but other measures of value which might only be realized on a log horizon are completely ignored.

In this day and age you really only see true definitions of 'value' employed by corporations which are closely-held or have some other method of restricting shareholder activism that works against their long-term interests.

 

[BoberFett]

Clean air, soil and water. Food that is safe to eat. Products that don't injure or kill their users. Drugs without undisclosed side effects, that actually have a positive effect.

Or are you a "The Market will correct all those problems, once the survivors or their heirs act with their Second Amendment firearms" true believer?

The problem with regulation is that there is never enough; you can never stop all bad behavior, you can only punish it. The possible amount of regulation is nearly infinite, while the ability to comply is inversely proportional to the amount of regulation. In addition, regulation is a barrier to entry, protecting entrenched players and solidifying money and power at the top (which is ironic, considering that pro-regulation progressives hate power consolidation) ensuring that new competitors and new ideas never enter the market.

Zero regulation isn't good, but neither is the direction we're heading.

 

[Yreka]

Big problem with business today I feel is that a lot of of boards and CEOs care about short term results for bonuses.

In other words, they're putting the "douche" in fiduciary ?

 

[manimal]

I feel the same way.

My company engages in this short sightedness as well and it's downright sad to watch.

Unless compensation changes this isnt going to change.