Ever since the Ford Decision in the early 1920's,
it has been the law in the United States that a
corporation's officers have a fiduciary duty to
produce a maximum of profits. At that time, Ford
wanted to produce the Model T for, I believe $500
and the corporate board sued him on the grounds
that the market would bear a sales price of
$750. (I may be off on my figures, but that is
the ball park.) The Court agreed with the Ford
Board and against Henry Ford, so he responded by
buying the company back and marketing the Model T
at $500 and making a much bigger pile than he
would have made from selling them at $750 due to the increased volume of sales.
So, the law in the US obligates corporations to
produce the maximum profits they are capable of
producing. Failure to do so is a breach of a
fiduciary duty owed to the shareholders and each
Director can be held liable to both civil and
criminal penalties. (I am a Director for a
privately held company and, trust me, when the
owner wants to edge up to this rule, I have to
remind her of the fiduciary duty she owes
herself, and she has always come around to agree with my position.)
You might not like this holding but, then, no
legislature in the US has ever attempted to
overturn it. Corporations have a fiduciary duty
to their shareholders to make the most money they
can for distribution to their
shareholders. Makes sense to me but, then, I see
some value in this provision. In Europe, this is
not the rule, but, then, European corporations
often operate at a higher profit margin than do
US corporations -- look to Carl Zeiss as one
example, now that they are through the swamp
caused them by the government mandate that they
absorb the old CZJ entities. (Notice how easily
I return to a close-to-topic matter?)
Marc
