It is a common trope I see claimed quite often similar to:

Individuals and interest groups are governed by laws that demand maximum profit where possible. These laws are inherent in the monetary system prevalent in most countries today – capitalism.


or here

It also makes no sense to endlessly chase after individual instances of corporate wrongdoing, when that wrongdoing is a natural result of the system design. Corporations abuse the public interest because the law tells them their only legal duty is to maximize profits for shareholders. Until we change the law of corporate governance, the problem of corporate abuse can never fully be solved.

SOURCE (final paragraph)

Or Senator Al Franken

In a recent speech at the Netroots Nation, Senator Al Franken tried to frighten the crowd by trotting out the corporate bogeyman that greedily makes decisions without regard to anything other than profit. Franken told them: “it is literally malfeasance for a corporation not to do everything it legally can to maximize its profits.”


I am aware of no law in the US or any other country that requires anything like this. I know that it is a common business goal to improve profitability but rarely see a reputable company that takes an increase profits at all cost philosophy.

So are there any laws in the US or any other 1st world country with similar requirements?

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    This may be an understanding issue; the paragraph doesn't reference an actual law, instead negatively pointing at the concept of Capitalism, specifically "Make Money." – Drunk Cynic Sep 2 '16 at 20:39
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    @DrunkCynic - That is not what it says though "are governed by laws that demand maximum profit where possible" I hear this quite a bit from the anti-capitolists but I know of no laws that encourage this behavior directly, and of no companies that are run with this overt mentality. Even where it has existed in places like Enron, and Lehman Brothers, it was done covertly among a small class of important people who knew they were at best operating in the grey areas of the law, and often on the wrong side of it. – SoylentGray Sep 2 '16 at 20:41
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    Consider the Laws of Gravity and the Laws of Thermodynamics. – Drunk Cynic Sep 2 '16 at 20:48
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    (-1) This question seems like a bad pun. The claim, however vacuous or questionable it might be, is clearly not about a written statute but about laws in the sense of principles of (social) behaviour. – Relaxed Sep 2 '16 at 20:57
  • I updated the question with more claims of the same thing. – SoylentGray Sep 2 '16 at 21:21

It derives from the fiduciary duty of managers. From the link:

Corporate directors have a special fiduciary duty to their shareholders. They are accountable not only for the safekeeping of assets but also for their efficient and effective use.

"Efficient and effective use" means that the manager has to do what is best for shareholders, increasing the value of their assets (note that this may not always mean direct monetary value; a manager can claim that donating to a charity improves the public perception of the business even if it cost money short term).

And yes, a manager can be sued if they fail in performing their fiduciary duty (although proving it is hard unless the case involves embezzlement or fraud).


rarely see a reputable company that takes an increase profits at all cost philosophy.

What you rarely see is a reputable company publicly admitting that. Which is OK, because the manager saying "all my company cares is about profits" could cause a negative reaction of the public, thus being of breach of the above mentioned fiduciary duty. So they instead they say that they talk about caring about the customers (and that somehow the profits they get are an unexpected bonus...).

As Scott Adams wrote in one of his books, if they care most about their customers or employees, why do they treat them the way they do? Look at pharma companies for more info.

  • That is not the same as maximizing profit though. Often maximizing profit would be at the expense of share price. The question is not do companies operate in the best interests of the public at all times just do they have an obligation to MAXIMIZE PROFITS – SoylentGray Sep 2 '16 at 21:09
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    What part of "efficient and effective use" don't you understand? If a fiduciary can get 100$ to his entrustor and only gets him 40$, then he is not being "efficient and effective" by any means. – SJuan76 Sep 2 '16 at 21:15
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    Prove what? It is a definition of efficient, definitions do not have proofs; go and search a dictionary. Note that profit is not the same that dividend, a company that provides no dividend because it reinvests its profits is also giving profit to the shareholder because the stock value raises to match the increased value of the company. – SJuan76 Sep 2 '16 at 21:24
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    @Chad - if the manager knowingly ruined the business pursuing short term profits, he violated fiduciary duty. The problem is, proving it is extremely difficult if not impossible in court of law, because what you need to prove is that he knew that would be the outcome, as opposed that he simply made a "mistake". The latter means you can't convict them. (a side story is, that if corporate governance worked correctly, said CEO would have been booted out of a job by the BOD) – user4012 Sep 3 '16 at 16:59
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    @Chad Do you mean short-term profits or profits over a given period of time like one year? Because otherwise I don't understand your objections. The obligation is to maximize profit over the whole lifetime of the company, that's how profits, dividends, share price, shareholder's interests, and fiduciary duty are connected and that's what the critics you found have in mind. People disagree on whether that's a good thing overall or whether there is any workable alternative but there is nothing really controversial here. That's how capitalism works. – Relaxed Sep 7 '16 at 13:53

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