3 ms·

The money doesn't actually belong to the shareholders, since a shareholder only owns the company stock not the company (stocks typically do not grant any owners

by boh 6y ago

The money doesn't actually belong to the shareholders, since a shareholder only owns the company stock not the company (stocks typically do not grant any ownership rights of any kind besides votes on management/corporate actions--many don't even do that). Companies can decide to re-allocate profits through dividends or buy-backs, but can also decide to re-allocate to other things that may not ultimately benefit the shareholder. Suing the company potentially gives shareholders access to money they may not be able to access otherwise.

s1artibartfast 6y ago
As far as I know, everything you said is factually incorrect in the majority of cases. Common stock is a security that represents ownership in a corporation. In a liquidation, common stockholders receive whatever assets remain after creditors, bondholders, and preferred stockholders are paid. Do you have a source for these bold claims?
- matthewdgreen 6y ago
  It seems to me that both descriptions are practically accurate. A compromise position is: lawsuits allow shareholders to receive company funds even in a situation where the majority of the (voting) shareholders would not otherwise authorize it. For some companies with dual-class voting structures, this might even be the only way that a common shareholder would ever see a payout.
- boh 6y ago
  These aren't bold claims, it's literally how stocks work. The belief of shareholders actually owning the company was just a side-effect of the marketing for shareholder primacy ideology. Even recent finance/management textbooks specifically call this out. Some sources: https://hbr.org/2012/07/what-good-are-shareholders https://hbr.org/2012/07/what-good-are-shareholders https://www.ft.com/content/7bd1b20a-879b-11e5-90de-f44762bf9896 https://www.ft.com/content/7bd1b20a-879b-11e5-90de-f44762bf9...
imtringued 6y ago
Shareholders can just liquidate the company and redistribute the assets of the company based on the number of shares a person possesses. Liquidation is generally only done when absolutely necessary. Why close a functioning company if you can just sell it to someone else?
- boh 6y ago
  Shareholders can't liquidate a company.

by boh 6y ago

s1artibartfast 6y ago

As far as I know, everything you said is factually incorrect in the majority of cases. Common stock is a security that represents ownership in a corporation. In a liquidation, common stockholders receive whatever assets remain after creditors, bondholders, and preferred stockholders are paid. Do you have a source for these bold claims?

matthewdgreen 6y ago
It seems to me that both descriptions are practically accurate. A compromise position is: lawsuits allow shareholders to receive company funds even in a situation where the majority of the (voting) shareholders would not otherwise authorize it. For some companies with dual-class voting structures, this might even be the only way that a common shareholder would ever see a payout.
boh 6y ago
These aren't bold claims, it's literally how stocks work. The belief of shareholders actually owning the company was just a side-effect of the marketing for shareholder primacy ideology. Even recent finance/management textbooks specifically call this out. Some sources: https://hbr.org/2012/07/what-good-are-shareholders https://hbr.org/2012/07/what-good-are-shareholders https://www.ft.com/content/7bd1b20a-879b-11e5-90de-f44762bf9896 https://www.ft.com/content/7bd1b20a-879b-11e5-90de-f44762bf9...

imtringued 6y ago

Shareholders can just liquidate the company and redistribute the assets of the company based on the number of shares a person possesses. Liquidation is generally only done when absolutely necessary. Why close a functioning company if you can just sell it to someone else?

boh 6y ago
Shareholders can't liquidate a company.