I think there are important considerations to keep in mind.
First and foremost, Valve is not a public company. I don’t know if it has investors, but it is not driven by profits like many typical public companies are. These companies tend to allow themselves longer investments without any clear visibility of immediate profits. They also do things for the greater good, even though it does not bring profits.
But also, I think the whole of valve is a set of gamers and people who genuinely care about the gaming business and making great products. I think they all share Gabe’s values and goals. It’s not like Gabe is the only one holding everything together or else it would instantly crash into the profit driven company it could be.
Both of these scenarios keep me hopeful that this is a longer lasting stance and doesn’t hinge on just one person. It’s not a proof it will never be a typical profit company but these are barriers which are not typically present. Let’s hope for the best and keep rewarding them for their contributions to gaming, open source and for their good actions.
I don’t understand where this myth came from that if a company is a public that they aren’t potentially ruthlessly profit driven.
Valve is not special. Gabe is to a certain degree (though I would also caution people from deifying anybody period). We can never take for granted that the valve and steam experience we largely enjoy today will be there tomorrow. That’s a simple fact.
In the US, there are multiple Supreme Court precedent cases that force profit-maximizing. Shareholders can sue the CEO and board to maximize profit seeking.
So yes, increasing shareholder value is enshrined in US law. Only private corporations can get around that rule. Also, a corporation cannot be forced to break the law to maximize profits, that’s just something most CEO’s are willing to do for fun.
I didn’t say people don’t redline publicly traded companies. I’m saying not being public doesn’t mean leadership won’t. I’ve personally seen it plenty of times.
Also, “fiduciary duty” (the “Supreme Court cases” I’m assuming you’re vaguely referring to) does not mean a CEO needs to always slam the gas at all times to maximize every single red cent at the cost of all medium and longterm considerations. This is a commonly parroted assertion by people online without a basis. “Fiduciary duty” and other obligations to the shareholders simply mean they can’t make obviously bad decisions that will hurt the shareholders. They don’t get hauled off by the Investor Police if they make a single longterm decision at the expense of a little short term profit.
All of this isn’t to say we don’t see it happen all the time anyway. But if it was so strict we’d see more CEO’s hauled off, not golden parachutes everywhere as they break their companies apart.
So yes, increasing shareholder value is enshrined in US law. Only private corporations can get around that rule.
This is true, with one exception.
There are non-profit corporations. They have to declare that they are non-profit at the time of foundation, though. They have to write that in the statute (idk what it’s called in English, it’s “Satzung” in German).
It’s not that they can’t still be profit driven, it’s that they can’t be sued by investors for not being ruthlessly profit driven. Private just means that they have the choice at all
Publicly traded companies are, by law, driven to make as much money as possible for shareholders. Privately held companies are not held to this same limitation. So while a company like Valve could be highly profit-driven (let’s be honest, all for-profit companies in a capitalist system are driven by this motivation), it doesn’t seem to be driven to maximize profits in the short term. This means that they can focus on things other than profit if they so choose.
There is a common belief that corporate directors have a legal duty to maximize corporate profits and “shareholder value” even if this means skirting ethical rules, damaging the environment or harming employees. But this belief is utterly false. To quote the U.S. Supreme Court opinion in the recent Hobby Lobby case: “Modern corporate law does not require for-profit corporations to pursue profit at the expense of everything else, and many do not.”
For-profit vs. Non-profit is an entirely different distinction under US law, with specific legal definitions for each. This is entirely separate under US law from publicly traded vs. privately owned, which has separate specific legal definitions.
Valve is a for-profit privately owned company. That is what allows it to not maximize shareholder value, and is the unstated distinction that allows your quote to be true.
For-profit publicly traded companies do have a legal responsibility for such.
I don’t want to quote dump multiple paragraphs, but Stout explicitly explains that’s not correct in the following paragraphs, citing relevant case law where appropriate.
I’m not a lawyer, but that article reads pretty clearly to me; I’d be interested to hear if you read it and get a different interpretation.
More important than who works there is who inherits Gabe’s ownership of the company. A new owner can completely change a company and drive out or fire anyone who doesn’t go along with the new direction. Look at what happened with twitter when Musk took over. Or his inheritors could take Valve public and introduce all the issues with that.
It would be so awesome if they went employee owned. I get the impression the employees are people who are passionate about video games. I feel that they would choose leadership that is both good for the community and good for the long-term health of the company.
I think there are important considerations to keep in mind.
First and foremost, Valve is not a public company. I don’t know if it has investors, but it is not driven by profits like many typical public companies are. These companies tend to allow themselves longer investments without any clear visibility of immediate profits. They also do things for the greater good, even though it does not bring profits.
But also, I think the whole of valve is a set of gamers and people who genuinely care about the gaming business and making great products. I think they all share Gabe’s values and goals. It’s not like Gabe is the only one holding everything together or else it would instantly crash into the profit driven company it could be.
Both of these scenarios keep me hopeful that this is a longer lasting stance and doesn’t hinge on just one person. It’s not a proof it will never be a typical profit company but these are barriers which are not typically present. Let’s hope for the best and keep rewarding them for their contributions to gaming, open source and for their good actions.
I don’t understand where this myth came from that if a company is a public that they aren’t potentially ruthlessly profit driven.
Valve is not special. Gabe is to a certain degree (though I would also caution people from deifying anybody period). We can never take for granted that the valve and steam experience we largely enjoy today will be there tomorrow. That’s a simple fact.
In the US, there are multiple Supreme Court precedent cases that force profit-maximizing. Shareholders can sue the CEO and board to maximize profit seeking.
So yes, increasing shareholder value is enshrined in US law. Only private corporations can get around that rule. Also, a corporation cannot be forced to break the law to maximize profits, that’s just something most CEO’s are willing to do for fun.
I didn’t say people don’t redline publicly traded companies. I’m saying not being public doesn’t mean leadership won’t. I’ve personally seen it plenty of times.
Also, “fiduciary duty” (the “Supreme Court cases” I’m assuming you’re vaguely referring to) does not mean a CEO needs to always slam the gas at all times to maximize every single red cent at the cost of all medium and longterm considerations. This is a commonly parroted assertion by people online without a basis. “Fiduciary duty” and other obligations to the shareholders simply mean they can’t make obviously bad decisions that will hurt the shareholders. They don’t get hauled off by the Investor Police if they make a single longterm decision at the expense of a little short term profit.
All of this isn’t to say we don’t see it happen all the time anyway. But if it was so strict we’d see more CEO’s hauled off, not golden parachutes everywhere as they break their companies apart.
I think your original comment has a typo on “isn’t”, hence the confusion.
This is true, with one exception.
There are non-profit corporations. They have to declare that they are non-profit at the time of foundation, though. They have to write that in the statute (idk what it’s called in English, it’s “Satzung” in German).
It’s not that they can’t still be profit driven, it’s that they can’t be sued by investors for not being ruthlessly profit driven. Private just means that they have the choice at all
Publicly traded companies are, by law, driven to make as much money as possible for shareholders. Privately held companies are not held to this same limitation. So while a company like Valve could be highly profit-driven (let’s be honest, all for-profit companies in a capitalist system are driven by this motivation), it doesn’t seem to be driven to maximize profits in the short term. This means that they can focus on things other than profit if they so choose.
– Lynn Stout, professor of corporate and business law, Cornell University
For-profit vs. Non-profit is an entirely different distinction under US law, with specific legal definitions for each. This is entirely separate under US law from publicly traded vs. privately owned, which has separate specific legal definitions.
Valve is a for-profit privately owned company. That is what allows it to not maximize shareholder value, and is the unstated distinction that allows your quote to be true.
For-profit publicly traded companies do have a legal responsibility for such.
I don’t want to quote dump multiple paragraphs, but Stout explicitly explains that’s not correct in the following paragraphs, citing relevant case law where appropriate.
I’m not a lawyer, but that article reads pretty clearly to me; I’d be interested to hear if you read it and get a different interpretation.
More important than who works there is who inherits Gabe’s ownership of the company. A new owner can completely change a company and drive out or fire anyone who doesn’t go along with the new direction. Look at what happened with twitter when Musk took over. Or his inheritors could take Valve public and introduce all the issues with that.
It would be so awesome if they went employee owned. I get the impression the employees are people who are passionate about video games. I feel that they would choose leadership that is both good for the community and good for the long-term health of the company.