6 ms·

Minority shareholders aren't just supposed to be along for whatever frolic you whimsically decide to send them on.

by unyttigfjelltol 5y ago

landemva 5y ago
Queue the shareholder lawsuit. USA is home of justice to the highest bidder.
- fakedang 5y ago
  Cue*
- collectedparts 5y ago
  Er, yes. The topic of the linked article - the reason that this is coming to light in the news now - is indeed, that a shareholder lawsuit has been brought against them (Zuckerberg, Sandberg, etc are named defendants and the company is nominal defendant). Direct link, from the article: https://655e71e2-f98d-40e9-822b-081bc894b6af.filesusr.com/ugd/372b91_d52609662545424aaa74c3b37a4edf65.pdf https://655e71e2-f98d-40e9-822b-081bc894b6af.filesusr.com/ug...
  - scotuswroteus 5y ago
    Also, lawsuits aren't just raw competitions between two entities about who is willing to spend the most.
potatolicious 5y ago
Not to mention the "minority" shareholders are only minority in voting rights, not minority in shares owned. The multi-class share system is designed to enable exactly this kind of executive behavior, where even a broad shareholder revolt isn't enough.
- deleted 5y ago
  [deleted]
- MrMorden 5y ago
  But in this case the Facebook board (which has a fiduciary duty to the company, not to Zuck) paid $5B when the BATNA had them pay $100M. The extra money bought the company nothing; the only benefits were to Zuck and Sandberg personally, which makes the $4.9B undeclared income -- if they didn't disclose it as part of their compensation on the relevant SEC documents and W2s, it's tax and securities fraud. And hence this lawsuit.
  - ink_13 5y ago
    It seems pretty clear that the company considered avoiding depositions of Zuckerberg and Sandberg to not be worth $0.
meltedcapacitor 5y ago
Are they not? It's not exactly a secret he has full control.
- echelon 5y ago
  How did he get and maintain full control? What are other startups / companies where the founder is in full control? Is it possible, as a founder, to maintain complete control of the board and the company through Series A - E ? I've seen several short answers on this in other threads, but I want to know more about this.
  - vineyardmike 5y ago
    > How did he get and maintain full control? It's his company. When you make the company and give out shares, just get the lawyers to agree to allow you to keep control. Its just legal documents. If you have a good startup VCs and angels may be willing to give you better terms. > Is it possible, as a founder, to maintain complete control of the board and the company through Series A - E ? Sure. I've noticed several company IPO announcements on HN lately included the founder-control shares in their IPO prospectus, so it can't be too unique. The way they do this is by having share classes. Eg Class A shares each gets x% of company and y% of votes. Class B shares get X% of company and [Y/20]% (or 0 sometimes) of votes. The 1/20 is arbitraty btw, it can be any ratio. Sometimes i see A, B, C shares where A is founder/vc tier with extra votes, B is "regular" with smaller votes, and C is no-vote shares, and often C is sold through IPOs into the exchanges. I have no data on how common these different schemes are, but they're things ive seen in HN-announced start-ups and IPOs in the last year, so take that as anecdotal.
    - munk-a 5y ago
      It honestly just comes down to a question of what the investors will let you get away with - if you're viewed as incompetent but sitting on a golden goose investors will push to dis-empower you as much as possible whenever you come knocking for emergency funds. If the company is successful and just seeking some marginal funding that could, alternatively, be secured by bank loans... then you've not given them as much leverage to work with.

Minority shareholders aren't just supposed to be along for whatever frolic you whimsically decide to send them on.

landemva 5y ago

Queue the shareholder lawsuit. USA is home of justice to the highest bidder.

fakedang 5y ago
Cue*
collectedparts 5y ago
Er, yes. The topic of the linked article - the reason that this is coming to light in the news now - is indeed, that a shareholder lawsuit has been brought against them (Zuckerberg, Sandberg, etc are named defendants and the company is nominal defendant). Direct link, from the article: https://655e71e2-f98d-40e9-822b-081bc894b6af.filesusr.com/ugd/372b91_d52609662545424aaa74c3b37a4edf65.pdf https://655e71e2-f98d-40e9-822b-081bc894b6af.filesusr.com/ug...
- scotuswroteus 5y ago
  Also, lawsuits aren't just raw competitions between two entities about who is willing to spend the most.

potatolicious 5y ago

Not to mention the "minority" shareholders are only minority in voting rights, not minority in shares owned. The multi-class share system is designed to enable exactly this kind of executive behavior, where even a broad shareholder revolt isn't enough.

deleted 5y ago
[deleted]
MrMorden 5y ago
But in this case the Facebook board (which has a fiduciary duty to the company, not to Zuck) paid $5B when the BATNA had them pay $100M. The extra money bought the company nothing; the only benefits were to Zuck and Sandberg personally, which makes the $4.9B undeclared income -- if they didn't disclose it as part of their compensation on the relevant SEC documents and W2s, it's tax and securities fraud. And hence this lawsuit.
- ink_13 5y ago
  It seems pretty clear that the company considered avoiding depositions of Zuckerberg and Sandberg to not be worth $0.

meltedcapacitor 5y ago

Are they not? It's not exactly a secret he has full control.

echelon 5y ago
How did he get and maintain full control? What are other startups / companies where the founder is in full control? Is it possible, as a founder, to maintain complete control of the board and the company through Series A - E ? I've seen several short answers on this in other threads, but I want to know more about this.
- vineyardmike 5y ago
  > How did he get and maintain full control? It's his company. When you make the company and give out shares, just get the lawyers to agree to allow you to keep control. Its just legal documents. If you have a good startup VCs and angels may be willing to give you better terms. > Is it possible, as a founder, to maintain complete control of the board and the company through Series A - E ? Sure. I've noticed several company IPO announcements on HN lately included the founder-control shares in their IPO prospectus, so it can't be too unique. The way they do this is by having share classes. Eg Class A shares each gets x% of company and y% of votes. Class B shares get X% of company and [Y/20]% (or 0 sometimes) of votes. The 1/20 is arbitraty btw, it can be any ratio. Sometimes i see A, B, C shares where A is founder/vc tier with extra votes, B is "regular" with smaller votes, and C is no-vote shares, and often C is sold through IPOs into the exchanges. I have no data on how common these different schemes are, but they're things ive seen in HN-announced start-ups and IPOs in the last year, so take that as anecdotal.
  - munk-a 5y ago
    It honestly just comes down to a question of what the investors will let you get away with - if you're viewed as incompetent but sitting on a golden goose investors will push to dis-empower you as much as possible whenever you come knocking for emergency funds. If the company is successful and just seeking some marginal funding that could, alternatively, be secured by bank loans... then you've not given them as much leverage to work with.