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Comment by tome | Hacker News Reader

Their job, legally defined, is to create value (aka profit) for its shareholders.

This is a meme I see a lot, but never with any evidence. That the board has a fiduciary duty to the shareholders I can understand. That it would have a legal obligation to create value, well, I think that would be hard to define, and I have never seen any evidence for the existence of this obligation.

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In the context of a publicly traded company this is the definition of fiduciary. The company has sold stock to investors with the sole purpose of increasing the value of the stock. Therefore, it is up to the board to make decisions that reflect this duty.

You can argue about the timeline (short versus long-term growth), but you can't say that there isn't a legal obligation to attempt to increase value.

> "The company has sold stock to investors with the sole purpose of increasing the value of the stock."

I know they're not popular, or exciting like a stock value swing, but dividends still exist, right?

You're right... I should have said something like "increasing shareholder value though the increase in value of the stock or profit distribution via dividends".

I actually think that more companies should give dividends.

I can see why companies like to have billion dollar war chests, but at some point you have to wonder when enough is enough. I mean, even Microsoft was forced to start paying dividends. Then again, their stock price has been pretty flat for the past few years, so that might be the only reason to hold it.

But making a stock a stock that can pay out dividends versus a stock that cannot pay out dividends is also increasing the stock's value.

the line you see over and over again in IPO filings is "shareholder value" and not "value of the stock" so dividends fall into the former category.

See Google's S1 (IPO) filing for reference: http://www.sec.gov/Archives/edgar/data/1288776/0001193125040...

You need to take a look at Dodge v. Ford to see the evidence: http://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Company

Not to say it's interpreted correctly, but that is where the 'meme' stems from. If people quoted primary sources this might be more widely understood.

It may be true that it is a company's legal responsibility to serve its shareholders first, but that's not the way it should be. With this mentality, corporations will minimally follow the law (if the fine is less than the profits, the corporation may be legally required to break the law!) and do whatever they can in their own interests. Society as a whole would benefit massively if caring for others and society in general was regarded as a good thing.

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