3 ms·

Well, one could argue the more complex the ownership structure is capable of being, the more opportunity for abuse arises. For example, by saying he has "speci

by mfoy_ 8y ago

Well, one could argue the more complex the ownership structure is capable of being, the more opportunity for abuse arises. For example, by saying he has "special" shares that grant him 10x the votes of "normal" shares, he can sell way more than 50% of the company and retain 100% control. This means shareholders are 100% along for the ride, and get no say in how he runs the business. I could see a strong argument for the SEC coming down hard and saying "Okay, enough is enough. 1 share, 1 vote."

sokoloff 8y ago
If a shareholder doesn't want to invest in a company with multi-class shares or defense industry ties or tobacco or whatever, they can opt out.
- mfoy_ 8y ago
  You can use the same reasoning to justify a large variety of predatory tactics, and scams. "Buyer beware" doesn't absolve a practice of being, at the very least, scummy.
  - sokoloff 8y ago
    I was made more likely to invest in Facebook and Google because of the multi-share structures. I believe that having control and financial ownership separate concepts can be a good thing, provided those with control have a stronger/better vision than the aggregate of the investors. This is not some underhanded, secret dealing. It's very much publicized. That makes it "not a scam" IMO.
    - mfoy_ 8y ago
      I never said that multi-class shares are a scam. This is a straw man argument. EDIT: To clarify, almost every scam involves the victim doing something of their own free will. Either they do not have all the information they need, or they do something based on trust which is then betrayed. So saying scams are okay because people can just not fall for them is completely asinine. In this case, you could argue that WeWork's shareholders have been "scammed" because they trusted that the CEO would act in WeWork's best interest, not his own. However, one could argue that he violated his fiduciary duty in renting office space for WeWork from himself at questionable rent prices. The reason he was interest and able to do that, profitably, was that he actually owns a relatively low % of WeWork's stock. So he can use his 65% voting power to decide to do this, WeWork loses on the rent each month, and he basically profits by over 80% of WeWork's loss. He's in a position where if he steals $100 from WeWork, then his shares drop by less than $20. Because he has majority control, the board can't do anything about it unless they or the SEC decides he's gone too far and is into fraud territory. What enables his insane margins there is the 10x vote weighting he gave his own shares. If it were 1 vote = 1 share then he'd steal $100 and profit $35. Still incentive, but not TRIPLE the incentive. EDIT: To further clarify what I mean by "stealing" is this... let's say the rent would usually be $1000 a month for the space. If he's charging WeWork $1100 a month, he's stealing $100 a month from his own company.
  - travisoneill1 8y ago
    To be predatory it has to be deceptive or complex in a way that leads people to misunderstand. This is not the case here. It is crystal clear that a non voting share gives the buyer no control over the company, and if he buyer accepts that then he should get no such control.
    - mfoy_ 8y ago
      What's complex is the ownership structure of any company with multiple classes of shares, especially with different voting weightings. Simple would be "1 share = 1 vote". ----- What's deceptive is the conflict of interest he created for himself that makes it unclear whether or not he is actually fulfilling his fiduciary duty. Clear and conflict-free would be renting from someone unrelated, and renting his building out to different company.

by mfoy_ 8y ago

sokoloff 8y ago

If a shareholder doesn't want to invest in a company with multi-class shares or defense industry ties or tobacco or whatever, they can opt out.

mfoy_ 8y ago
You can use the same reasoning to justify a large variety of predatory tactics, and scams. "Buyer beware" doesn't absolve a practice of being, at the very least, scummy.
- sokoloff 8y ago
  I was made more likely to invest in Facebook and Google because of the multi-share structures. I believe that having control and financial ownership separate concepts can be a good thing, provided those with control have a stronger/better vision than the aggregate of the investors. This is not some underhanded, secret dealing. It's very much publicized. That makes it "not a scam" IMO.
  - mfoy_ 8y ago
    I never said that multi-class shares are a scam. This is a straw man argument. EDIT: To clarify, almost every scam involves the victim doing something of their own free will. Either they do not have all the information they need, or they do something based on trust which is then betrayed. So saying scams are okay because people can just not fall for them is completely asinine. In this case, you could argue that WeWork's shareholders have been "scammed" because they trusted that the CEO would act in WeWork's best interest, not his own. However, one could argue that he violated his fiduciary duty in renting office space for WeWork from himself at questionable rent prices. The reason he was interest and able to do that, profitably, was that he actually owns a relatively low % of WeWork's stock. So he can use his 65% voting power to decide to do this, WeWork loses on the rent each month, and he basically profits by over 80% of WeWork's loss. He's in a position where if he steals $100 from WeWork, then his shares drop by less than $20. Because he has majority control, the board can't do anything about it unless they or the SEC decides he's gone too far and is into fraud territory. What enables his insane margins there is the 10x vote weighting he gave his own shares. If it were 1 vote = 1 share then he'd steal $100 and profit $35. Still incentive, but not TRIPLE the incentive. EDIT: To further clarify what I mean by "stealing" is this... let's say the rent would usually be $1000 a month for the space. If he's charging WeWork $1100 a month, he's stealing $100 a month from his own company.
- travisoneill1 8y ago
  To be predatory it has to be deceptive or complex in a way that leads people to misunderstand. This is not the case here. It is crystal clear that a non voting share gives the buyer no control over the company, and if he buyer accepts that then he should get no such control.
  - mfoy_ 8y ago
    What's complex is the ownership structure of any company with multiple classes of shares, especially with different voting weightings. Simple would be "1 share = 1 vote". ----- What's deceptive is the conflict of interest he created for himself that makes it unclear whether or not he is actually fulfilling his fiduciary duty. Clear and conflict-free would be renting from someone unrelated, and renting his building out to different company.