There’s a pretty big difference between “companies don’t have to seek maximum return for shareholders” and “companies can spend billions of dollars to prevent their executives from being personally liable”.
The myth part is that fiduciary duty != maximizing profits. There’s no quantity that you have to take a maximum of. You can’t spend the shareholder’s money on things that can’t be justified as business expenses, but that doesn’t keep companies from buying corporate jets or spending money on high-end travel. Or even just paying people more than they’re worth. Who’s to say what they’re worth?
This is a special case where saying “business judgement rule” might not be enough to get Facebook out of trouble, though I’m sure Facebook’s lawyers will dispute that.
Within some constraints you can put whatever you want in your corporation's bylaws when you found it, including a directive not to make a profit should you so choose.
It's absolutely not typically in the bylaws of corporations, that they must seek to optimize for profit. The parent comment dances around the language of the premise. It's extraordinarily rare to put anything remotely close to that in the bylaws, because it's a super dumb way to set yourself up for entirely unnecessary legal problems in the future.
The lawsuits may happen, however they also almost never win.
Also, paying $5B to bail out your CEO and focusing on maximizing long term shareholder returns are far from mutually exclusive. Shareholders should be looking beyond a quarterly earnings report
That makes him (effectively) the majority shareholder. If you can't vote (or your vote is effectively meaningless) then you don't have ownership and your shares are just a loan with wildly variable interest.
It's not that clear cut. If you can prove in court that the majority shareholders are acting to the detriment of minority shareholders, that's actionable. See Dodge v. Ford (https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co.) The majority gets control over the vote but that doesn't mean they can freely screw over minority shareholders. If an environmental activist organization somehow managed to buy a majority stake in Shell, they couldn't just vote to pump it all back in the ground, cap it, and wait for bankruptcy. They could however decide to trade financial assets with the innovative strategy of "buy high, sell low" so long as you couldn't prove they were making terrible decisions with intent to screw over the rest of the shareholders.
that's quite a stretch. There's a massive difference in an equity investment and a debt investment regardless of giving up voting rights. Let's be real, even voting rights in 99% of SPX companies don't mean anything. It's a representative democracy, shareholders only vote on the very, very biggest decisions in public companies, like "should we accept this merger". In every single SPX company you invest in, you are effectively giving up control of 99% of decisions to the executives and those under them at the company, regardless of whether your shares are class A or C
You’re effectively saying that representative democracy is a sham.
Zuck has set up the share structure so that even if all the other shareholders collectivised to move against him on *any* issue he’d still have his way. That’s a dictatorship.
I've been told more than once by my employer that "this is not a democracy". They meant that staff can have opinions, but don't get to vote; they weren't talking about shareholders. But AFAIA, stockholder corporations are not supposed to be democracies - FSVO "democracy".
Investors in Faceache get no dividends; the only reason they're there is to speculate on the value of their stock. With no dividends, there's no reason for stockholders to worry about profits. They just want to see the share-price increase.
I dunno, I'm not an investor. The last two decades are littered with the corpses of social networking firms that failed. I imagine Faceache must own assets, in the form of IP and so on; I doubt their value comes anywhere close to the company's market valuation.
That valuation is suspended from the fickle thread of shareholder sentiment; so on my reading, Faceache shares amount to a bubble.
I should have said it's a representative aristocracy for the shareholders, as when you do get a vote, your vote is obviously weighted by how many shares you have and not equally. However, whether you have 1 share or 100,000 shares of public company X, your day to day involvement is still essentially equal at 0 unless you are an executive or on the board.
Preferred stockholders (get paid first but can't vote) and common stock (can vote) are normal; the tech innovation is multiple classes of shares so that they get the benefits of an IPO without risking loss of control. Without that, Zuck would have waited as long as possible to list because once he loses control he loses the ability to spend company money on himself. Which he's breaking the law by doing; hence this suit.
Ah, but if Mark Zuckerberg is the majority shareholder, isn't spending an obscene amount of money to keep him from facing liability actually in the best interest of... the majority of your shareholders?
https://skeptics.stackexchange.com/questions/8146/are-u-s-co...