You say that “There is no law which compels a company to act for profit”. I’m not sure if this is true.
A little googling found that, in Maine, USA, under Section 716 of the business corporation act:
“…the directors and officers of a corporation shall exercise their powers and discharge their duties with a view to the interests of the corporation and of the shareholders…”
However, in Australia, under the Corporations Act, a corporation is compelled to act “in the best interests of the corporation”.
In Canada, they must act “with a view to the best interests of the corporation.”
The theme seems to be that directors of corporations are required to act in the interests of the corporation. As a legal entity without a body, a corporation has quite different interests to a human, or an animal.
So, if a corporation produces a product that is addictive and harmful to humans, but produces a good profit, it would probably be in the interests of the corporation to sell it.
At least the law in Maine included the phrase “and of the shareholders”. Presumably, even shareholders need to eat healthy food, drink clean water and breathe unpolluted air.
Donato Speroni
I’m sorry for the long delay in answering. Your comment got lost in a sea of spam, and my son Pietro recovered it. The basic rules for corporate bodies are not different from the ones for the physical persons. People are expected to act in their own interest – and codes are there in order to avoid that the clash of self interests get out of hand and damages the society as a whole. In the Italian Civil Code, for example, as in all the codes coming from the Latin system, the correct behavior (for instance if you have to take care af the interests of an underage) is referred as the one of “bonus pater familias”, the good father of the family. The pater familias should act for increasing the wealth of the family, but with a long term view, taking into consideration the interests of the community, the environment, etc.
In theory, directors of a corporate body are be expected to act in a different way. It’s in the interest of the company and of the shareholders to preserve the community where it is operating, otherwise it will perish.
Why this theory often does not work? Because the shareholders are very often, specially for the biggest companies, not real people who want to keep their share of the company for a long time, but institutional investors like investment or pension funds, whose directors are rated every three months on their ability to make as much money as possible from their portfolio. They have just a short term view, and don’t give a dam if a company fires it’s best personnel in order to face a short term crisis, or if it depletes the resources of the land. In any case, a few months later they will have cashed their investment and sold their shares. As I said in my post, it’s difficult to change this situation. But there re ethical funds which are expected to behave in a better way.
You say that “There is no law which compels a company to act for profit”. I’m not sure if this is true.
A little googling found that, in Maine, USA, under Section 716 of the business corporation act:
“…the directors and officers of a corporation shall exercise their powers and discharge their duties with a view to the interests of the corporation and of the shareholders…”
However, in Australia, under the Corporations Act, a corporation is compelled to act “in the best interests of the corporation”.
In Canada, they must act “with a view to the best interests of the corporation.”
The theme seems to be that directors of corporations are required to act in the interests of the corporation. As a legal entity without a body, a corporation has quite different interests to a human, or an animal.
So, if a corporation produces a product that is addictive and harmful to humans, but produces a good profit, it would probably be in the interests of the corporation to sell it.
At least the law in Maine included the phrase “and of the shareholders”. Presumably, even shareholders need to eat healthy food, drink clean water and breathe unpolluted air.
I’m sorry for the long delay in answering. Your comment got lost in a sea of spam, and my son Pietro recovered it. The basic rules for corporate bodies are not different from the ones for the physical persons. People are expected to act in their own interest – and codes are there in order to avoid that the clash of self interests get out of hand and damages the society as a whole. In the Italian Civil Code, for example, as in all the codes coming from the Latin system, the correct behavior (for instance if you have to take care af the interests of an underage) is referred as the one of “bonus pater familias”, the good father of the family. The pater familias should act for increasing the wealth of the family, but with a long term view, taking into consideration the interests of the community, the environment, etc.
In theory, directors of a corporate body are be expected to act in a different way. It’s in the interest of the company and of the shareholders to preserve the community where it is operating, otherwise it will perish.
Why this theory often does not work? Because the shareholders are very often, specially for the biggest companies, not real people who want to keep their share of the company for a long time, but institutional investors like investment or pension funds, whose directors are rated every three months on their ability to make as much money as possible from their portfolio. They have just a short term view, and don’t give a dam if a company fires it’s best personnel in order to face a short term crisis, or if it depletes the resources of the land. In any case, a few months later they will have cashed their investment and sold their shares. As I said in my post, it’s difficult to change this situation. But there re ethical funds which are expected to behave in a better way.