The problem is the fact that somebody could enter a company, increase the short term benefits, but destroy the company long term...
is not necessarily a problem. There are many companies that should do this, but instead try to continue existing (mainly so the CEO/etc can keep their job).
The goal of most companies is to increase shareholder value. Shareholders, like most people, get more value out of money right now than money in the future. If a company has good short term profits, but their future prospects are not great, shareholder value can be increased by making shareholders a lot of money now and going out of business.
The shareholders would then be free to invest the money in other companies with better prospects.
In my opinion, Microsoft is a good example of a company that should do this. It's highly unlikely that shareholders would have chosen to invest in Bing were Bing a separate company. Rather, they would probably have preferred to invest the money in Google, Facebook and other such companies, or perhaps even diversified out of technology. But due to a misplaced desire of corporate executives for Microsoft to continue existing, shareholder value was not maximized.
(Admittedly, taxes complicate this picture, and encourage investment within a company rather than outside a company. But that's somewhat tangential to the main point.)
Who here started a company to increase shareholder value?
My cofounders and I did.
A company that exists to fulfil someone's dream is a hobby. Occasionally you can make money from it, but very often not.
In contrast, by building what customers want (rather than what you dream of), you create customer value. In turn, the customers pay you and increase shareholder value.
As for whether all companies exist to increase shareholder value, clearly they do not. The Gates Foundation, any church, or the Committee to Elect Hillary Clinton are obvious counterexamples. I was discussing the companies who do have increasing shareholder value as their goal.
is not necessarily a problem. There are many companies that should do this, but instead try to continue existing (mainly so the CEO/etc can keep their job).
The goal of most companies is to increase shareholder value. Shareholders, like most people, get more value out of money right now than money in the future. If a company has good short term profits, but their future prospects are not great, shareholder value can be increased by making shareholders a lot of money now and going out of business.
The shareholders would then be free to invest the money in other companies with better prospects.
In my opinion, Microsoft is a good example of a company that should do this. It's highly unlikely that shareholders would have chosen to invest in Bing were Bing a separate company. Rather, they would probably have preferred to invest the money in Google, Facebook and other such companies, or perhaps even diversified out of technology. But due to a misplaced desire of corporate executives for Microsoft to continue existing, shareholder value was not maximized.
(Admittedly, taxes complicate this picture, and encourage investment within a company rather than outside a company. But that's somewhat tangential to the main point.)