this post was submitted on 28 Apr 2025
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[–] partial_accumen@lemmy.world 15 points 8 hours ago (1 children)

CEOs are mandated by law to increase shareholder value as much as possible

One slight correction, this applies to publicly traded companies that appear on stock markets, yes. This isn't a requirement in privately held companies.

[–] avidamoeba@lemmy.ca 2 points 6 hours ago* (last edited 5 hours ago) (2 children)

It actually is for both. In the case of private firms, it's not necessarily to increase shareholder value, but instead to increase profits and market share due to competition. If they don't, they're outcompeted, ran out of business and/or taken over by their competitors.

Besides that, many many private firms are owned by private equity investment companies which can be even more persistent in pushing for higher profits.

[–] partial_accumen@lemmy.world 7 points 5 hours ago (1 children)

Thats a bit different. There isn't a mandate to do those things which is where OP was going. Many private companies may engage in the same behavior but there isn't a legal requirement they do so. There are companies that don't just look one quarter ahead and run their businesses for the long term customer satisfaction. I'll admit they are getting more rare though.

[–] avidamoeba@lemmy.ca 1 points 5 hours ago* (last edited 3 hours ago)

Yes but it's important for onlookers to understand this mechanism. I often hear people believing that private firms don't have to profit maximize. I used to think that too but it doesn't match reality. The competition mechanism explains what we see around us.

And of course there are exceptions depending on the exact context and market conditions of a private firm but they don't negate the mechanism under the assumptions it operates.

[–] taladar@sh.itjust.works 4 points 6 hours ago (1 children)

And if they aren't they are often sold into one of those systems once the younger generation of the family decides they have no interest in running their parents' company.

[–] partial_accumen@lemmy.world 3 points 5 hours ago* (last edited 5 hours ago)

Thats certainly possible, but there's no legal requirement they do so. With publicly traded companies the CEOs have a legal fiduciary responsibility to increase shareholder value.