Hacker News Reader

Comment by khazhoux | Hacker News Reader

> He does have a fiduciary responsibility to shareholders, even if that means making difficult staffing decisions

I feel like people over-index on the idea of "fiduciary responsibility to shareholders." I don't think most decisions a CEO makes are really done with shareholders specifically in mind. They do what is best for the company --for its health, growth, and sometimes survival-- and shareholders are just there for the ride. Certainly, there are some executive decisions where shareholders are the primary factors, but by and large I think they're an afterthought at best.

He over-hired, he lost faith in the direction of a big chunk of Meta's initiatives, and he now wants to pare back.

View on HN

I'm really tired of this mental virus that's taken over bad CEOs, the imaginary responsibility to shareholders:

https://en.wikipedia.org/wiki/Friedman_doctrine

It was actually cooked up in the 70s by Milton Friedman, and over the ensuing few decades it's gone so viral that even its opponents think it's true.

Companies have a responsibility not to just annihilate the shareholders' money for no reason whatsoever, but they have a LOT of leeway to make risky investments or go off on tangents. Executives are NOT legally or morally required to screw people over for an extra short-term buck.

> NOT legally or morally required to screw people over for an extra short-term buck

I saw nothing in the Friedman doctrine that says anything about prioritizing short term results.

But if the company doesn't do what the shareholders want, the shareholders sell, and the stock price goes down.

Friedman had a very mystical conception of the market - viewing almost as a collective intelligence - and would say in this case that its judgment of the company strategy was correct.

I haven't seen any evidence that Friedman advocated short term profits over long term results.

His view would be that if the stock price went up as a result of some action then that action would be the right one (its orthogonal to the point about short term profits).

Agreed, this is the definition of short term profits

> this is the definition of short term profits

That's not remotely true. Stock prices are based on long term fiscal results. If shareholders get a whiff of a company sacrificing long term results for short term profits, the share price tanks.

Yeah, but even here you have people parroting this line about "responsibility to shareholders to maximize profits" which is blatantly untrue. You're free to be a sociopathic monster within the limits of the law, but you aren't REQUIRED to.

If you entrust your money to someone else to invest for you, what are you expecting?

It's more about 10-Q reports than any particular philosophy. Quarterly earnings is a big deal universally for public companies.

Agreed on over-indexing on "fiduciary responsibility to shareholders," and I'll go a step further.

Founders generally do what's best for the company (or try to). There are enough infamous CEOs that clearly did what's best for themselves.

CEOs do what's best for themselves and I'm reasonably sure people with low empathy (to put it politely) are over represented among CEOs.

While I think this is true in Zuckerberg's case, he's more concerned with his legacy than his net worth.

Just a counter-point to this, throughout my career I’ve worked closely with many CEOs who I would consider high empathy. Now I would say most often what was best for the company was also best for them personally so those outcomes were fairly well aligned.

Meta revenue growth has now stalled. It's in the interest of shareholders to invest in new revenue streams, which requires people. Paring down staff is the death spiral for tech companies.

Zuckerberg can try to hoard cash to acquire the next Instagram or YouTube, but I don't think it's going to work; it's risky. That's not what Apple did. It's not what Microsoft did.

Honestly I agree, I think "fiduciary responsibility to shareholders" is kind of a funny phrase to be honest. I don't really believe most CEOs at an individual level think of shareholders much except that stock price up means good, and stock price down means bad, and sometimes they complain and we have to justify our actions and respond politely for reasons.

To me the phrase almost is a moral shorthand for capitalism. A corporation has no inherent right to life or survival instinct the way a person does, and the phrasing and pretense of "duty to shareholders" is used to give it one by proxy. Does that make sense? So rephrasing my original post, it would be something like "We all agree it's moral to seek profit, since that's the economic system that seems to work, and his actions can be seen as in line with that, so therefore if you agree capitalism makes sense, his actions are justifiable and moral".

I don't think it's even that, per se. Even putting aside profit (which possibly the CEO of Facebook can never do), it still seems like this is a straightforward case of "We think we have too many people." Profit notwithstanding, what do you do if you realize a giant chunk of your workforce is not needed?

> what do you do if you realize a giant chunk of your workforce is not needed?

It’s not like the workforce just appeared out of nowhere. They were hired by the same management who is now firing them.

Ultimately society has to choose where it wants to be on the spectrum between difficult to hire and difficult to fire, and easy to hire and easy to fire (workers can also unionize to push things further towards the “difficult” end).

And what's your opinion then?

Teams and individual were hired for projects and roles that management doesn't now think will work. Keep everyone on-board indefinitely? Doing... what, exactly?

1 year's severance should be mandatory. And 1 year of identical healthcare coverage for free.

It's a failure of management in any case. Just like returning cash via excessive dividends, it's an admission that the current management doesn't have the imagination required to use the assets at hand in a profitable way.

So many of the large companies today are one trick ponies trying to milk their singular profit center to the nth degree instead of diversifying into new niches.

Meta failed spectacularly in the direction they did try- but ultimately, like Google, even that (VR) was a way to expand their advertising business, rather than truly expand their footprint.

Apple seems the singular Silicon Valley company truly able to find new niches and expand their competencies. I do wish they'd stuck with Jobs original obstinate insistence of not paying dividends- it was a forcing function to keep them actively investing that cash into new ventures.

Fiduciary duty to shareholders doesn't mean you have to make a profit. You have to do whatever your shareholders want, and they don't have to want profit.

Shareholders are the people who own the company. The company is collectively their property.

The officers of a company (CEO, etc) are caretakers of that property on behalf of the shareholders.

If you own a Pizza Hut, and you hire someone to manage and run the store, their job is to make sure the store (and thus you) make a profit. The CEO has the same obligation to shareholders.

The bar for fiduciary misconduct is pretty high. Even $10 billion on the metaverse didn't come close to it because management could say with a straight face they believe it's the future.

Fiduciary responsibility also gives company execs a very wide berth. A ceo is more likely to be fired by the board than run afoul of their fiduciary responsibility.

Let's also not forget that Zuck has more than 50% of the votes, even while owning less than half the stock. He's accountable to literally no one.

Reply on news.ycombinator.com