from the archives: you job is to maximize profits… sorta

fool (with a plan)

Leaders talk about their fiduciary responsibility to maximize profits for the business owners (shareholders). This is largely true, but in my opinion, incorrect.

From my point of view, their fiduciary responsibility is to maximize profits based on their clearly defined business strategy. This sounds the same but it isn’t. Not even close. Let’s consider some examples. (But before we do, I need to offer the full disclosure that my understanding of general business strategy far exceeds my specific investment knowledge. I’m approaching this from a business philosophy perspective NOT a business law perspective.)

A conservative investment company with a strategy that prizes long-term soundness above rapid growth has a responsibility to make different decisions and take different actions than an investment company that is trying to grow as fast as possible. I’m not suggesting that one strategy is better than the other – both have their place – but…

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