Originally Posted by dfiler
I'm not confusing anything.
First of all, not all companies have shareholders. And even public companies must hedge maximization of profit against other concerns. As for ethics, sometimes profit should be sacrificed for worker safety, etc.
(Yeah, i though i was done but my ego couldn't take being called confused.
No one said that companies were required to maximize profit. If you're going to participate in the discussion, please stop mis-quoting people.
What I said was that companies are required to maximize shareholder return (technically, shareholder value). It is perfectly legal (and, in fact, often necessary) for a company to sacrifice short term profits to build greater shareholder value. For example, a company might invest a billion dollars in building a new factory. That reduces profits this year, but will improve the business in the long run.
Or a company might choose to donate to charity. That reduces current profits, but if there's a good business justification, it can improve long term value (either by attracting shareholders, getting good PR, or satisfying employees). Or a company might choose to write off poorly performing businesses. Short term, it harms profits, but long term it maximizes the company's value. And, legally, a publicly traded company is required to do that.
You are correct that my statement was too broad. Not all companies are required to maximize shareholder value. For example, a charity can be set up as a corporation. Or a privately held corporation might choose to donate an excessive share of its profits to charity to satisfy the owners' wishes. Even a publicly traded company can choose to be a major contributor to charity (like Ben and Jerry's) - as long as their business plan and 10-K statement spells out that they will be doing so. But, in general, publicly traded companies like Apple are obligated to maximize shareholder value. Doing anything else could open the board of directors up to shareholder lawsuits.