Companies to be run to benefit all, not just shareholders

[mondograss]

In the age of social media and consumer led boycotts, I'd argue that doing the right thing and maintaining a good public image is maximising shareholder value, not diminishing it. But that depends on how long a view you want to take. Certainly there's plenty of companies out there that seem happy to do what makes them the most money today and to hell with the future. In reference to Beagles post above, I'd argue that Synlait are an example of the worst of both worlds. They made an incredibly rash decision to go into Pokeno without properly sorting the covenants issue.

[jimdog31]

I believe the ESG pendulum has swung to far to the left. Some companies, and a recent excellent case study is Synlait, have taken it upon themselves without shareholder approval to elevate people and the planet to the same level as shareholders and in doing so expended vast management resources of over 30 staff for more than a year achieving this accreditation. They fiddled endlessly while Rome burned and their debt level's blew out badly and they exposed shareholders to untoward legal and operational risk with Pokeno.

The risk is if companies start off on missions that are tangential or worse still incongruent to the primary purpose shareholders created them for with their risk capital, shareholders interests will become subservient to the whims and wishes of boards and senior management with their own socialist or ideological agenda's.

I say, sure, be kind to the environment, comply with all environmental and employment laws and ensure all stakeholders receive fair and equitable treatment but lets not ever forget that shareholders stumped up with their own risk capital to further the interests of the company to maximize profit so those shareholders who own the company can make their own decisions about what altruistic endeavors they wish to pursue and not have directors and management making ad hoc decisions outside of their mandate on shareholders behalf.

Shareholders deserve the respect as the one's who invested their own risk capital to be the ones to make their own decisions about who to bless with their dividends. When directors and management make major decisions on shareholders behalf to expend vast resources on some pet socialist or environmental project they are exceeding their authority and I for one will not support any company that treats shareholders so disrespectfully.

Agreed. Didn’t theo have a similar approach at fonterra?

[Bjauck]

....
Shareholders deserve the respect as the one's who invested their own risk capital to be the ones to make their own decisions about who to bless with their dividends. When directors and management make major decisions on shareholders behalf to expend vast resources on some pet socialist or environmental project they are exceeding their authority and I for one will not support any company that treats shareholders so disrespectfully.

It is the shareholders risk capital. However at the same time it is the government and the legal system that gives them the framework, including limited liability, with which their investment can be put to public commercial use to earn them profits.

Shareholder capital is deriving benefit from organised society; shareholders should also share the cost in keeping society organised and harmonious. They should also share the cost that their company's activity has on society and the environment.

[Beagle]

It is the shareholders risk capital. However at the same time it is the government and the legal system that gives them the framework, including limited liability, with which their investment can be put to public commercial use to earn them profits.

Shareholder capital is deriving benefit from organised society; shareholders should also share the cost in keeping society organised and harmonious. They should also share the cost that their company's activity has on society and the environment.

A company pays 28% tax, one of the higher corporate tax level's in the OECD. Companies already pay more than their fair share of contributing to a fair society for all. Corporate tax rate in America for example is just 21%. Most companies see the resource management act is extremely odious and exhaustive. Reform is desperately needed in my opinion.

[artemis]

Profitable companies generate revenue for the taxpayer and for other businesses through employees and their own purchasing. Always possible to argue they should pay more, which they will of course if increasingly profitable. IMO if companies decide to hook into the social and environmental issues du jour they should be completely transparent as to the costs of the owners. Then owners can decide to sell up if they don't agree.

There seem to be plenty of advocates for companies to embrace climate change, diversity, affirmative action, protections for the new or unwary. Potential and existing investors can hook into those and make their decisions. Or choose to divert divvies or capital gains into issues they believe in. Some do of course.

Did I mention personal responsibility? Not in so many words ...

[peat]

start a charity.. thats what they are for.
I'm not even a fan of company sponsorship tbh but it is more of an appropriate way to 'do good'. Comes out of the marketing budget.

[Beagle]

Profitable companies generate revenue for the taxpayer and for other businesses through employees and their own purchasing. Always possible to argue they should pay more, which they will of course if increasingly profitable....
Did I mention personal responsibility? Not in so many words ...

Seems many have completely overlooked those two very pertinent points !!
We are not all just mindless shareholder sheep expecting companies to make altruistic decisions for us...something that seems to have been very conveniently overlooked by the shareholder lefties amongst us....possibly because they do little if anything in that regard personally ?

[Mr Slothbear]

I would argue putting the customer first is in the long run puttingbthe shareholder first. One only need look at Jack Ma from Alibaba and Bezos both who use this as their mantra and look at their results.

[Bjauck]

A company pays 28% tax, one of the higher corporate tax level's in the OECD. Companies already pay more than their fair share of contributing to a fair society for all. Corporate tax rate in America for example is just 21%. Most companies see the resource management act is extremely odious and exhaustive. Reform is desperately needed in my opinion.

Shareholders receiving dividends can end up paying more than the 28% already paid by companies on their trading profit. The USA has a general capital gains tax too.

It is only right that companies which society allows to operate, should pay for their ability to trade with the rest of society, and to compensate for any costs which the rest of society would otherwise have to bear.

I am not sure who is suggesting that companies act altruistically. However as companies only exist, and are allowed to trade with the public, as a result of society and society's laws, then they are indebted to that society. It makes good business sense too to help and ensure the continued healthy functioning of the society with which they interact.

[Beagle]

I don't see your point. Companies pay 28% tax, they employ staff who pay PAYE to the Govt, they collect GST for the Govt and as you mention some shareholders end up paying another 5% (soon to be 11%) extra tax on dividends received. Companies must operate at extremely high compliance cost within a vast number of regulatory and local authority regulations all of which they pay for through levies rates, waste collection fees RMA fees etc etc etc.

As companies grow they pay more of all of the above taxes, levies and compliance costs.