I agree that investors may sue management for fraud or corruption. "Not maximizing profit" is neither fraudulent nor corrupt.
Investors who feel that profit is not being maximized can sell their shares or can vote to replace management. They can also buy sufficient shares from other unhappy shareholders to let them take control of the company altogether, and manage it themselves.
What evidence do you have that any shareholder has ever won a lawsuit against a company on the basis that the company was not maximizing profits?
It's true that investors can sell if profit isn't being maximized, but how often does that happen in privately held companies?
E.g. if startup X has the tech to take over a market, but is insufficiently pursuing a profit opportunity because of moral squeamishness, chances are relatively good that investors in X will simply replace the executives with somebody that will pursue those opportunities since that's vastly cheaper than building up competitive tech in a new investment.
Similarly with publicly traded companies, not pursuing profit opportunities can result in large sell offs of a stock. You see a lot of animus against short sellers that suggests that the "businesses must maximize profit" norm is thoroughly ingrained in investor communities even if it's not legally mandatory.
Do you agree, then, that there is no legal requirement for a company's management to maximize profits, and that you know of no cases where a shareholder prevailed in a lawsuit against management for failure to maximize profit?
Similarly with publicly traded companies, not pursuing profit opportunities can result in large sell offs of a stock.
That isn't obviously true. Eg, Amazon spent years actively doing everything possible to avoid making profits.
If investors don't like a company's strategy then they can try to get management changes or they can sell. But company strategy goes way beyond the blind pursuit of profit.
E.g. if startup X has the tech to take over a market, but is insufficiently pursuing a profit opportunity because of moral squeamishness, chances are relatively good that investors in X will simply replace the executives with somebody that will pursue those opportunities since that's vastly cheaper than building up competitive tech in a new investment.
That maybe true sometimes, but it is a lot rarer than you seem to believe (especially with early stage companies). The team running the company is a very large part of what people invest it. As a good counter example: Uber. Few would say that Travis wasn't pursuing profit every way possible, and it was the investors that moved against him because of his bad moral judgment.
With early stage companies, often what happens is investors subsidize an investment precisely because they know what the profit strategy is and because they think it's strong.
With Uber, Travis was attempting to undercut competition. Investors subsidize rides because when there is no competition they are in a better place to profit. Amazon (I believe?) was reinvesting the money in the business while subsidizing prices and package delivery to gain loyal customers. Many times an investor will subsidize a no-advertisement experience to gain an audience, and then switch on ads when the network effects are strong enough to retain the audience.
This is basically Machiavelli's advice that new princes should give favors to the masses when they rise to power, so that their positions are stronger later. But the real goal is always to turn profit aggressively, even if investors are patient for a few years while they maneuver into the right position.
Also just to be clear, no investor wants a business to pursue every profit opportunity. They want the business to focus on a strategy that will maximize profit given their strengths, and that always involves focus rather than being distracted by every possible opportunity.
Investors who feel that profit is not being maximized can sell their shares or can vote to replace management. They can also buy sufficient shares from other unhappy shareholders to let them take control of the company altogether, and manage it themselves.
What evidence do you have that any shareholder has ever won a lawsuit against a company on the basis that the company was not maximizing profits?