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willbeurdaddy -> RE: what those billionaires are spending $$ on (12/31/2010 6:09:51 PM)
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quote:
ORIGINAL: AnimusRex
While the duty to maximize shareholder value may be a useful shorthand for a corporate manager to think about how to act on a day to day basis, this is not legally required or enforceable. The only constraint on board decision making is a pair of duties – the “duty of care” and the “duty of loyalty.” The duty of care requires boards to be well informed and to make deliberate decisions after careful consideration of the issues. Importantly, board members are entitled to rely on experts and corporate officers for their information, can easily comply with duty of care obligations by spending shareholder money on lawyers and process, and, in any event, are routinely indemnified against damages for any breaches of this duty. The duty of loyalty self evidently requires board members to put the interests of the corporation ahead of their own personal interest.
The first sentence is an incompete thought. the reason that maximizing shareholder value in and of itself is not legally required, since there can be conflicting ways to maximize value (eg sale or merger vs ongoing interest) it IS legally required if that is determined that a particular action is in the best interest of the corporation and its shareholders. Duty of Care and Duty of Loyalty are most certainly legally enforceable, and indeminification does not cover fraud or negligence in performing ones duties. On the Federal level the most common conflict is between fiduciary duties as a Trustee of a benefit plan under ERISA vs fidicuiary duties as a Corporate Officer ('settlor functions). Clownboys's implied claim that such laws dont exist, and whoever's claim that that the laws are routinely ignored are patently absurd.
The other primary Federal law is Sarbanes Oxley, an entire bill that is predicated on serving the interests of shareholders.
Also the state matters. Until the Gantler decision it was unclear in Delaware, for example, whether those duties applied only to Directors or also to Officers. Gantler clarified that it applies to both. California, on the other hand is much more explicit with regard to fiduciary duties and has always been clear that it applies to both.
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