Imagine you invested money into some enterprise that promised you a share of the profits it will attempt to gain. If that enterprise never actually attempted to turn a profit, it would effectively be fraud.
Now let's imagine they do give you a share of the profits, but the enterprise spends most of its income on frivolous and unnecessary expenses and therefore the profits are very small, that would still effectively be fraud.
Therefore, the provision is to maximize value. It is the basic responsibility of anyone running a public company. Of course this is all fuzzy and you do have a lot of leeway in justifying expenses/investments, but the principle remains.
> Therefore, the provision is to maximize value. It is the basic responsibility of anyone running a public company. Of course this is all fuzzy and you do have a lot of leeway in justifying expenses/investments, but the principle remains.
And this is where the law can step in. The shareholders can unite and take action. Or the gov can atep in. For example, the state of NY is going after Exxon Mobile for fraud, as related to EM's lack of disclosure over their role in climate change.
https://www.litigationandtrial.com/2010/09/articles/series/s...
Imagine you invested money into some enterprise that promised you a share of the profits it will attempt to gain. If that enterprise never actually attempted to turn a profit, it would effectively be fraud.
Now let's imagine they do give you a share of the profits, but the enterprise spends most of its income on frivolous and unnecessary expenses and therefore the profits are very small, that would still effectively be fraud.
Therefore, the provision is to maximize value. It is the basic responsibility of anyone running a public company. Of course this is all fuzzy and you do have a lot of leeway in justifying expenses/investments, but the principle remains.