LogFAQs > #908738078

LordoftheMorons posted...

Capitalism just recognizes the incentives that naturally exist and uses them to its advantage. Its in a companys best interest to maximize profit. When doing that would lead to behavior with extreme externalities, you can regulate that behavior directly without throwing out all of the benefits that capitalism brings.

Mmm...the law specifically that companies must maximize profits every quarter or be sued by their shareholders seems particularly troubling.

It's not just that they choose things that are bad for the human race, they choose things that are bad for themselves a few years down the line. Did you know that Blockbuster video was working on a streaming video service like Netflix? Yeah, the shareholders voted it down because at the time they were making so much money off of late return fees.

Guess what? Now Blockbuster is bankrupt.

But this law is actually pretty central to the current capitalist system. It's basically the main anti-internal corruption thermometer that we have right now.

I will give credit where credit is due, actually: apparently the current administration is looking to move earnings reports to be every 6 months instead of every 3 months, which is a small step in the right direction (pushes companies to think slightly more long term, slightly). Doesn't really fix the problem, though.

I will note that companies can make money just fine without this legal mandate to increase profits every quarter. Private companies have no such mandate, plenty of those do fine. And there are plenty of enormously successful companies in China where again no such mandate exists.
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