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Serious question. Why should common stock holders have voting rights? If you're going to buy stock in any company the number one reason has to be that you belie

Serious question. Why should common stock holders have voting rights? If you're going to buy stock in any company the number one reason has to be that you believe in its leadership. The ultimate vote of a shareholder is to sell the stock. Mom & pop don't get to exercise any meaningful control over a company with voting rights, leaving folks like Icahn to exert undue influence, whose incentives are possibly not aligned with anyone else's.

idiot_stick 10y ago
>If you're going to buy stock in any company the number one reason has to be that you believe in its leadership. Why should this necessarily be the case? There are many reasons to buy a stock. Sometimes leadership is an issue, and getting rid of it is an opportunity.
brightball 10y ago
The main reason is to protect their interests in the case of visibly poor leadership. There's almost no reason outside of that that I can see. FWIW, there are a lot of people who's goal isn't to sell but to collect dividends due to the long term success of a company.
mholmes680 10y ago
I'd rather you looked at it this way: If Icahn has an incentive, then the company has a management problem. You might not like the outcomes of his investments, but hes top-notch at recognizing shortcomings in existing management and their own businesses. For me, despite ever maybe owning 0.0000000000001% of a company, the power of mutual ownership means all perspectives are taken into account. And that generally means more accurate valuations, and therefore safer investments.
marvin 10y ago
Serious follow-up question regarding US securities laws: If stock class A has zero voting rights, can the stockholders of class B with voting rights unilaterally decide that class A will get no dividends while class B will get the entire company's profits paid out as dividends?
- bedhead 10y ago
  Yes though it will depend on the bylaws of the company and the state they're in. There are some dual share classes in the US that do have materially different dividend policies in addition to voting rights.
- filleokus 10y ago
  I had the same question and it seems like that could be the case. I don't really have any reputable source but many sites write about it, like http://www.investorguide.com/article/11166/stock-classes-the-difference-between-common-stock-and-preferred-stock-igu/ http://www.investorguide.com/article/11166/stock-classes-the... Normally Class A has the voting right and Class B has not. But I would also like a clarification on this from somebody that actually knows. The S1 filing for Snap Inc. states: "We have paid a stock dividend of our Class A common stock on our capital stock in the past and from time to time in the future may pay special or regular stock dividends in the form of Class A common stock, which per the terms of our amended and restated certificate of incorporation must be paid equally to all stockholders." "Equally to all stockholders", does that mean all Class A holders or both A and B holders?
  - marvin 10y ago
    Okay, thanks for the info. I was asking more due to the general case; if a stock class has no voting rights and never will receive dividends, it is effectively worthless unless holders of other stock classes voluntarily give away their money (they won't). I am a little puzzled at some of the latest innovations in the US stock markets. I can understand investing in a company that a small group of insiders will always have majority control in, as long as all owners are treated equally wrt. all forms of payouts. I really don't understand why the market would assign value to a stock class with no voting rights and no plausible scenario for returning capital to stockholders.
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kgwgk 10y ago
Why should the owners of a business have any control? Just let the employees manage it!
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wch 10y ago
Another serious question: if a stock has no voting rights and no dividends, why would it be worth anything at all? That is, what makes it different from a piece of paper with the company's name on it? If there are voting rights, then there's value because someone potentially could buy enough shares to meaningfully exert those rights, but if not, then what value do the shares have to anyone?
- amorphid 10y ago
  That's an interesting question. To oversimplify it, the value of a stock of essentially a wild-ass guess about how much cash one might be able to pull out of a company eventually per share times the number of shares. If I a company isn't paying dividends or buying back stock, and we (the shareholders) can't coerce said company into doing so at some point, it's essentially an indestructible piggy bank in which money evaporates while you helplessly watch.
- tyre 10y ago
  It's value is that you can sell it to someone else. One of the big risks that Snap is taking in this IPO is that their common stock has no practical value. As you said, stock generally has two ways of being worth something: partial control and/or profit sharing. Snap common stock has neither. It's only value is its ability to be sold to someone else. It's basically a currency? Is $Snap the new BTC? I have no idea.
  - shalmanese 10y ago
    But that just pushes the question one layer of abstraction deeper. Why would that person be willing to buy Snap shares from you at any price? On a long enough timeline, you have to believe that Snap will either disburse dividends, be acquired by another company or find some other way to convert ownership into actual cash.
    - tyre 10y ago
      They would buy because they believe they can sell it later at a higher price, based on the belief that other people want to buy $SNAP and will drive the price up. I'm not avoiding your question—I agree that it should be based on underlying value—but that seems to be the only reason to buy $SNAP
pjc50 10y ago
Public traded companies: you can sell the stock. The voting rights are rarely used, but they allow majority shareholders to properly control the company. No distinction is made by size of shareholder, just shares = votes. Private held companies: not necessarily traded. Your investment is illiquid. Nobody outside is really watching. The managers can fly the company into the ground before you can find a buyer, and voting is your only shield against this.
bedhead 10y ago
Interest misalignment leads to all sorts of problems. Think of it as part of a system with checks and balances.

idiot_stick 10y ago

>If you're going to buy stock in any company the number one reason has to be that you believe in its leadership. Why should this necessarily be the case? There are many reasons to buy a stock. Sometimes leadership is an issue, and getting rid of it is an opportunity.

brightball 10y ago

The main reason is to protect their interests in the case of visibly poor leadership. There's almost no reason outside of that that I can see. FWIW, there are a lot of people who's goal isn't to sell but to collect dividends due to the long term success of a company.

mholmes680 10y ago

I'd rather you looked at it this way: If Icahn has an incentive, then the company has a management problem. You might not like the outcomes of his investments, but hes top-notch at recognizing shortcomings in existing management and their own businesses. For me, despite ever maybe owning 0.0000000000001% of a company, the power of mutual ownership means all perspectives are taken into account. And that generally means more accurate valuations, and therefore safer investments.

marvin 10y ago

Serious follow-up question regarding US securities laws: If stock class A has zero voting rights, can the stockholders of class B with voting rights unilaterally decide that class A will get no dividends while class B will get the entire company's profits paid out as dividends?

bedhead 10y ago
Yes though it will depend on the bylaws of the company and the state they're in. There are some dual share classes in the US that do have materially different dividend policies in addition to voting rights.
filleokus 10y ago
I had the same question and it seems like that could be the case. I don't really have any reputable source but many sites write about it, like http://www.investorguide.com/article/11166/stock-classes-the-difference-between-common-stock-and-preferred-stock-igu/ http://www.investorguide.com/article/11166/stock-classes-the... Normally Class A has the voting right and Class B has not. But I would also like a clarification on this from somebody that actually knows. The S1 filing for Snap Inc. states: "We have paid a stock dividend of our Class A common stock on our capital stock in the past and from time to time in the future may pay special or regular stock dividends in the form of Class A common stock, which per the terms of our amended and restated certificate of incorporation must be paid equally to all stockholders." "Equally to all stockholders", does that mean all Class A holders or both A and B holders?
- marvin 10y ago
  Okay, thanks for the info. I was asking more due to the general case; if a stock class has no voting rights and never will receive dividends, it is effectively worthless unless holders of other stock classes voluntarily give away their money (they won't). I am a little puzzled at some of the latest innovations in the US stock markets. I can understand investing in a company that a small group of insiders will always have majority control in, as long as all owners are treated equally wrt. all forms of payouts. I really don't understand why the market would assign value to a stock class with no voting rights and no plausible scenario for returning capital to stockholders.
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kgwgk 10y ago

Why should the owners of a business have any control? Just let the employees manage it!

deleted 10y ago

[deleted]

wch 10y ago

Another serious question: if a stock has no voting rights and no dividends, why would it be worth anything at all? That is, what makes it different from a piece of paper with the company's name on it? If there are voting rights, then there's value because someone potentially could buy enough shares to meaningfully exert those rights, but if not, then what value do the shares have to anyone?

amorphid 10y ago
That's an interesting question. To oversimplify it, the value of a stock of essentially a wild-ass guess about how much cash one might be able to pull out of a company eventually per share times the number of shares. If I a company isn't paying dividends or buying back stock, and we (the shareholders) can't coerce said company into doing so at some point, it's essentially an indestructible piggy bank in which money evaporates while you helplessly watch.
tyre 10y ago
It's value is that you can sell it to someone else. One of the big risks that Snap is taking in this IPO is that their common stock has no practical value. As you said, stock generally has two ways of being worth something: partial control and/or profit sharing. Snap common stock has neither. It's only value is its ability to be sold to someone else. It's basically a currency? Is $Snap the new BTC? I have no idea.
- shalmanese 10y ago
  But that just pushes the question one layer of abstraction deeper. Why would that person be willing to buy Snap shares from you at any price? On a long enough timeline, you have to believe that Snap will either disburse dividends, be acquired by another company or find some other way to convert ownership into actual cash.
  - tyre 10y ago
    They would buy because they believe they can sell it later at a higher price, based on the belief that other people want to buy $SNAP and will drive the price up. I'm not avoiding your question—I agree that it should be based on underlying value—but that seems to be the only reason to buy $SNAP

pjc50 10y ago

Public traded companies: you can sell the stock. The voting rights are rarely used, but they allow majority shareholders to properly control the company. No distinction is made by size of shareholder, just shares = votes. Private held companies: not necessarily traded. Your investment is illiquid. Nobody outside is really watching. The managers can fly the company into the ground before you can find a buyer, and voting is your only shield against this.

bedhead 10y ago

Interest misalignment leads to all sorts of problems. Think of it as part of a system with checks and balances.