10 ms·

Lawsuit against Meta invokes modern portfolio theory to protect shareholders

123 points by XnoiVeX 4y ago

cratermoon 4y ago
In simple terms, investors are suing because even though they might have made a boatload of cash from their investments in Meta, they ended up with a net loss overall because what Meta did to pump up the stock value ended up destroying the value of a lot of other things the investors had in their portfolios.
- cherioo 4y ago
  Wow, this seems bananas. The loss in value isn’t even other investment, but rather “mental health issues for millions of users and increasingly negative political rhetoric, while facilitating ethnic cleansing, drug cartels, modern slavery, and vaccine disinformation”
  - TheGeminon 4y ago
    I think they are intentionally being vague to encompass as much as possible in their theoretical “diversified portfolio”. I think their goal is to prove that Meta’s negative impact was so broad that most investors had some sort of negative impact outside of their Meta holdings.
  - threeseed 4y ago
    Meta is really just a microcosm for the entire internet. So if Meta is liable then surely every company involved in the foundation of the internet is as well e.g. Google, Microsoft, Cloudflare, ISPs etc.
- bombcar 4y ago
  It seems to me that if you owned the companies outright something like preventing one company from harming the value of the other could easily be illegal collusion and monopolizing. I doubt they’ll win this one but if they do it would be hilariously amusing.
- math_dandy 4y ago
  Reading the article, it sounds more like someone really wants to get an ESG precedent established.
- WaitWaitWha 4y ago
  That is not what I gathered, but I invest in dirt so who knows. What I gathered, is that the facebook decisions impacted non-facebook stocks, facebook not only should have known but also are responsible as fiduciary to the stock holders. In short, besides you, I bought your competitor, you should have known I bought them, your actions now crushed your competitor, I lost a boatload on them, you are responsible. > The complaint alleges that the Meta directors failed to consider that shareholders with diversified portfolios may be subject to net losses from Meta’s pursuit of a business model that maximizes advertising revenue without regard to the harms it inflicts on the rest of their portfolios. In particular, the complaint identifies press reports establishing that the company knew that its conduct was leading to mental health issues for millions of users and increasingly negative political rhetoric, while facilitating ethnic cleansing, drug cartels, modern slavery, and vaccine disinformation. These activities pose risks to political stability, public health, and rule of law, threatening the intrinsic value of the global economy and thus the value of diversified portfolios. (As diversified portfolios represent a slice of the economy, reducing the value of the global economy inevitably reduces portfolio value.
  - cratermoon 4y ago
    > the facebook decisions impacted non-facebook stocks, facebook not only should have known but also are responsible as fiduciary to the stock holders. That's sort of the same as what I said. The claim is that Meta did things to make money that caused investors to lose money in other stocks & investments, and that Meta is responsible for those losses.
paxys 4y ago
I can't speak to the legalese, but on the surface the complaint sounds ridiculous. > The complaint alleges that the Meta directors failed to consider that shareholders with diversified portfolios may be subject to net losses from Meta’s pursuit of a business model that maximizes advertising revenue without regard to the harms it inflicts on the rest of their portfolios. In particular, the complaint identifies press reports establishing that the company knew that its conduct was leading to mental health issues for millions of users and increasingly negative political rhetoric, while facilitating ethnic cleansing, drug cartels, modern slavery, and vaccine disinformation. These activities pose risks to political stability, public health, and rule of law, threatening the intrinsic value of the global economy and thus the value of diversified portfolios. Is there any company in existence that would clear this bar?
- nradov 4y ago
  Lawsuits like this are just political theater, abusing the court system to publicize a particular social issue. The plaintiffs know they have no hope of winning a judgment, but if they can bring enough negative publicity to Meta then the company might actually change some policies.
hn_throwaway_99 4y ago
This seems totally insane to me. The lawsuit is arguing that directors not only have a fiduciary responsibility to shareholders to increase the value of their Meta holdings, but also of other stocks they may own. The consequences of that line of thinking are scary. I'm sure the vast majority of shareholders of most US companies own ICE cars. If a company decides to put a lot of effort into, for example, cheaper batteries, could shareholders sue because the company is devaluing an asset most of them own? This totally smells like a lawyer trying a random, BS theory in the hope that something "sticks" in order to make their mark.
- taneq 4y ago
  It's like a Lotto winner suing Lotto because their other ticket lost.
- kmeisthax 4y ago
  Alternatively it could be an argumentum ad absurdum against the concept of shareholder primacy.
- jbombadil 4y ago
  > This seems totally insane to me. The lawsuit is arguing that directors not only have a fiduciary responsibility to shareholders to increase the value of their Meta holdings, but also of other stocks they may own. This is my thinking as well. If I own stock of Coca Cola and Pepsi. Coca Cola comes up with a great product that eats a huge amount of market from Pepsi. According to this I sue Coca Cola for my losses on the Pepsi stock?
  - Kranar 4y ago
    I don't think this lawsuit has much merit, but the lawsuit is arguing against damages to an overall portfolio. If a diversified portfolio consisting of Coca Cola and Pepsi was on the whole damaged due to the actions of Coca Cola against Pepsi, then the plaintiffs argue that Coca Cola would be liable for some part of that damage. If, however, Coca Cola's actions harmed Pepsi specifically but benefited the overall portfolio, then no damages would be pursued. So Coca Cola is welcome to take market share from Pepsi so long as doing so is a net benefit to a diversified portfolio, as opposed to doing so in a way that harms a diversified portfolio.
supernova87a 4y ago
Hopefully the case gets summarily tossed for lack of standing. The idea that one company's decisions would have such tangible and personally-harmful (to "my portfolio") effects due to "negative political rhetoric, while facilitating ethnic cleansing, drug cartels, modern slavery, and vaccine disinformation" would open up every company to diffuse claims of responsibility.
- vineyardmike 4y ago
  As another person commented, maybe they should be open to that responsibility? > The idea that one company's decisions would have such tangible and personally-harmful effects due to "negative political rhetoric, while facilitating ethnic cleansing, drug cartels, modern slavery, and vaccine disinformation" would open up every company to diffuse claims of responsibility. Kinda scary we’re tacitly saying that IFF a company is responsible for this then it’s ok? If a person was responsible for all (any) of that, most of society would hold them in pretty low regard.
  - supernova87a 4y ago
    I'm not saying it's ok -- I'm saying that an individual person doesn't have enough concrete, particularized, provable harm that came from the company's actions to take that company to court. If that became the standard, everyone could sue everyone else on the thinnest of connections. There are laws, regulators, governments, and other entities to hold such corporations to account, but it is not the individual citizen who can show a direct and concrete connection (for those kinds of harms). I would like to sue Donald Trump for diminishing the US's standing in the world and causing my portfolio to drop as well.
eezurr 4y ago
Interesting and disturbing. They are making an argument that Facebook/Meta is harmful to the global economy because it cant do [impossible task] of moderating its 3.5 billion users to stifle [unwanted behavior]. And because of that, their decisions are negatively impacting the modern investors distributed portfolios. Because Mark Z. is not diversified (wealth is in Meta) and has total control over the company, his decisions create a conflict of interest to the modern investor. Yet the article doesnt mention how his decisions directly impacted the economy. Maybe the lawsuit does, but Im not going to read that... >the fiduciary implication of the fact that modern investors are generally diversified, so that their interests extend beyond (and may be in opposition to) the maximization of the value of future cash flows to be received from owning a company’s shares. So it's fighting monopolistic behavior?
- etiennebausson 4y ago
  It's fighting pursuit pursuit of benefits that negatively impact the global economy. Nothing directly about monopolistic behavior here, though true monopolies end up harming global economy in their pursuit of benefits. Which is why they are regularly broken up, or merge prohibited I suppose.
- deleted 4y ago
  [deleted]
flanflan 4y ago
I'm just a two-bit software engineer and not a lawyer but I'll go against the general flow of the rest of the posts here and say "this is interesting." Whether or not it will work is another question, but it seems like they are trying to establish some precedent that companies need to consider the downstream impacts of the things they do. I see posters here brushing off talk about mental health and political impacts from decisions corporate directors make. Well if there is a measurable harm that can be traced back to a given company why shouldn't they be sued? It's a meme, but we live in a society. Companies don't exist in isolation, neither do profits.
- IncRnd 4y ago
  > Well if there is a measurable harm that can be traced back to a given company why shouldn't they be sued? Say I overhear my neighbors talking with each other. Despite my not knowing them, if based on listening to their conversation I decid to go kill some people at my place of employment - that is on me. My neighbors do not bear any responsibility. At some point there is the concept of personal responsibility. Honestly, this should be obvious.
- subradios 4y ago
  The problem is that this creates an open ended obligation of companies to whatever common shareholders want in their dreams about Society, and are responsible for doing so.
  - rsrsrs86 4y ago
    Externalities are perhaps worse.
- hn_throwaway_99 4y ago
  But the lawsuit isn't arguing that "companies need to consider the downstream impacts of the things they do." That's an argument to be made to governments that grant corporate charters (though, I'd note that some governments have recently gone in the opposite direction, e.g. prohibiting pension fund managers from considering anything besides financial returns in their decisions). Instead, the lawsuit is trying to expand the concept of "fiduciary duty" to other aspects of shareholders lives. That is the part that a lot of us think is insane.
anigbrowl 4y ago
Anyone who invested in Facebook directly (rather than via a managed or exchange-traded fund of some sort) did so with the expected awareness that all the voting stock was controlled by Zuckerberg personally. Effectively, FB is a corporate dictatorship and it's hard to have sympathy for people who put money into it during the good times and are now surprised to discover that they made a bad investment decision. https://www.morningstar.com/articles/1061237/how-facebook-silences-its-investors https://www.morningstar.com/articles/1061237/how-facebook-si... Suing Zuckerberg on the basis that FB has made the world a worse place is one thing, suing him on the basis that a corporate dictatorship has disrupted their portfolio is a joke. They'd be better off suing the SEC or FTC for failure to regulate effectively.
- qclibre22 4y ago
  Might be a good time to go back to one share one vote corporate structure.
  - dantheman 4y ago
    You can choose to invest in companies with that structure and others can choose to invest in other structures...
  - sicp-enjoyer 4y ago
    The CEO is still the chief executive. Share voting rights do not control day to day business decisions or even strategy.
    - lifeplusplus 4y ago
      you can replace the CEO
      - sicp-enjoyer 4y ago
        Do you have someone in mind for meta? Or just change in general?
twic 4y ago
Stop! Please think of the impact articles like this will have on Matt Levine.
mccorrinall 4y ago
Everything is securities fraud and everything is insider trading - Levine
rsrsrs86 4y ago
It looks coherent with internalization of negative externalities but actually proving that is an econometrics mindfuck.
yk 4y ago
While I like the idea that a company has a duty to the wider marketplace, the construction using diversified portfolios is more creative than convincing. Problem is, that we can easily construct portfolios that react in a specific way to actions. In the example with promotion of mental health issues we may wonder how the bottom line of clinics of chocolate manufacturers is impacted by trying to avoid mental health issues.
faangiq 4y ago
This is America. Garbage piled on garbage. With lawyers collecting fees all the way.
dqpb 4y ago
Can litigious shareholders be countersued for the financial harm caused by self-litigating?
- throw_m239339 4y ago
  > Can litigious shareholders be countersued for the financial harm caused by self-litigating? Anybody can sue everybody for anything, as long as they have the money and the time. This is how civil courts work.
Ice_cream_suit 4y ago
"Distinguishing the Complaint From Models Based on Either Stakeholder or Enterprise Value It is important to note two things that the complaint does not claim. First, it does not claim that stakeholders (e.g., users of its platforms or citizens of destabilized countries) are owed fiduciary duties, or that harm to these stakeholders in and of itself constitutes a fiduciary breach. Secondly, the complaint does not allege that this conduct was bad for Meta’s own finances. Instead, the complaint alleges that the conduct revealed by Haugen threatens the global economy, and consequently the portfolios of the Company’s diversified shareholders. The complaint explains: Meta is the largest social media network company in the world, with 3.5 billion users—43% of humanity. Its business decisions inevitably create financial impact well beyond its own cash flows and enterprise value and have significant impacts on the global economy. While defendants have a duty to operate the Company as a business for the financial benefit of its stockholders, those stockholders are often diversified investors with portfolio interests beyond Meta’s own financial success. If the decisions that maximize the Company’s long-term cash flows also imperil the rule of law or public health, the portfolios of its diversified stockholders are likely to be financially harmed by those decisions.""
mirod1 4y ago
The lawsuit doesn't argue that Facebook actions hurt specific portfolios from their shareholders. It claims that it hurt a typical diversified portfolio. One that FB shareholders should have, according to the Modern Portfolio Theory (MPT). It notes that the MPT is not only commonly accepted, it is in fact used to write laws and regulations: "Before the advent of MPT, “legal lists” prohibited many fiduciaries from owning common stock". So if the MPT is indeed a cornerstone of modern economics, and modern laws, the natural conclusion is that it should be considered when looking at the fiduciary consequences of a company decision. Facebook case shows the problem very clearly, because both of the scale of the impact of the company on the World in general, and the structure of its governance, where the majority vote holder interests are not diversified, which makes them diverge significantly from all the other shareholders interests. As I understand it, it's a bit of legal jiu-jitsu: it takes the MPT, which so far has been used to allow more actors to invest in stocks, and so accepted readily by business and legal actors. It then uses it to extend the responsibility of companies to some externalities. It may or may not succeed, but it doesn't seem completely insane. At the very least the discovery process could be used to show to which extend Facebook knows about features that have a clearly negative effect on society in general, and chooses to implement them anyway.
- dplgk 4y ago
  You had me at first but then overplayed your GPT hand.
  - mirod1 4y ago
    I was actually nearly going to add a notice that the post had _not_ been generated by an AI. It does say something about the current state of AI that at least 2 people had the same thought.
JustLurking2022 4y ago
Honestly, the whole business of shareholders suing companies is a bit crazy given they were also the beneficiary of any ill-gotten gains and, ultimately, any damages come out of the share price. I realize in this case it's effectively one subset if shareholders trying to get paid at the expense of other shareholders but it feels like there should be a higher bar for this type of litigation.

123 points by XnoiVeX 4y ago

In simple terms, investors are suing because even though they might have made a boatload of cash from their investments in Meta, they ended up with a net loss overall because what Meta did to pump up the stock value ended up destroying the value of a lot of other things the investors had in their portfolios.

cherioo 4y ago
Wow, this seems bananas. The loss in value isn’t even other investment, but rather “mental health issues for millions of users and increasingly negative political rhetoric, while facilitating ethnic cleansing, drug cartels, modern slavery, and vaccine disinformation”
- TheGeminon 4y ago
  I think they are intentionally being vague to encompass as much as possible in their theoretical “diversified portfolio”. I think their goal is to prove that Meta’s negative impact was so broad that most investors had some sort of negative impact outside of their Meta holdings.
- threeseed 4y ago
  Meta is really just a microcosm for the entire internet. So if Meta is liable then surely every company involved in the foundation of the internet is as well e.g. Google, Microsoft, Cloudflare, ISPs etc.
bombcar 4y ago
It seems to me that if you owned the companies outright something like preventing one company from harming the value of the other could easily be illegal collusion and monopolizing. I doubt they’ll win this one but if they do it would be hilariously amusing.
math_dandy 4y ago
Reading the article, it sounds more like someone really wants to get an ESG precedent established.
WaitWaitWha 4y ago
That is not what I gathered, but I invest in dirt so who knows. What I gathered, is that the facebook decisions impacted non-facebook stocks, facebook not only should have known but also are responsible as fiduciary to the stock holders. In short, besides you, I bought your competitor, you should have known I bought them, your actions now crushed your competitor, I lost a boatload on them, you are responsible. > The complaint alleges that the Meta directors failed to consider that shareholders with diversified portfolios may be subject to net losses from Meta’s pursuit of a business model that maximizes advertising revenue without regard to the harms it inflicts on the rest of their portfolios. In particular, the complaint identifies press reports establishing that the company knew that its conduct was leading to mental health issues for millions of users and increasingly negative political rhetoric, while facilitating ethnic cleansing, drug cartels, modern slavery, and vaccine disinformation. These activities pose risks to political stability, public health, and rule of law, threatening the intrinsic value of the global economy and thus the value of diversified portfolios. (As diversified portfolios represent a slice of the economy, reducing the value of the global economy inevitably reduces portfolio value.
- cratermoon 4y ago
  > the facebook decisions impacted non-facebook stocks, facebook not only should have known but also are responsible as fiduciary to the stock holders. That's sort of the same as what I said. The claim is that Meta did things to make money that caused investors to lose money in other stocks & investments, and that Meta is responsible for those losses.

paxys 4y ago

I can't speak to the legalese, but on the surface the complaint sounds ridiculous. > The complaint alleges that the Meta directors failed to consider that shareholders with diversified portfolios may be subject to net losses from Meta’s pursuit of a business model that maximizes advertising revenue without regard to the harms it inflicts on the rest of their portfolios. In particular, the complaint identifies press reports establishing that the company knew that its conduct was leading to mental health issues for millions of users and increasingly negative political rhetoric, while facilitating ethnic cleansing, drug cartels, modern slavery, and vaccine disinformation. These activities pose risks to political stability, public health, and rule of law, threatening the intrinsic value of the global economy and thus the value of diversified portfolios. Is there any company in existence that would clear this bar?

nradov 4y ago
Lawsuits like this are just political theater, abusing the court system to publicize a particular social issue. The plaintiffs know they have no hope of winning a judgment, but if they can bring enough negative publicity to Meta then the company might actually change some policies.

hn_throwaway_99 4y ago

This seems totally insane to me. The lawsuit is arguing that directors not only have a fiduciary responsibility to shareholders to increase the value of their Meta holdings, but also of other stocks they may own. The consequences of that line of thinking are scary. I'm sure the vast majority of shareholders of most US companies own ICE cars. If a company decides to put a lot of effort into, for example, cheaper batteries, could shareholders sue because the company is devaluing an asset most of them own? This totally smells like a lawyer trying a random, BS theory in the hope that something "sticks" in order to make their mark.

taneq 4y ago
It's like a Lotto winner suing Lotto because their other ticket lost.
kmeisthax 4y ago
Alternatively it could be an argumentum ad absurdum against the concept of shareholder primacy.
jbombadil 4y ago
> This seems totally insane to me. The lawsuit is arguing that directors not only have a fiduciary responsibility to shareholders to increase the value of their Meta holdings, but also of other stocks they may own. This is my thinking as well. If I own stock of Coca Cola and Pepsi. Coca Cola comes up with a great product that eats a huge amount of market from Pepsi. According to this I sue Coca Cola for my losses on the Pepsi stock?
- Kranar 4y ago
  I don't think this lawsuit has much merit, but the lawsuit is arguing against damages to an overall portfolio. If a diversified portfolio consisting of Coca Cola and Pepsi was on the whole damaged due to the actions of Coca Cola against Pepsi, then the plaintiffs argue that Coca Cola would be liable for some part of that damage. If, however, Coca Cola's actions harmed Pepsi specifically but benefited the overall portfolio, then no damages would be pursued. So Coca Cola is welcome to take market share from Pepsi so long as doing so is a net benefit to a diversified portfolio, as opposed to doing so in a way that harms a diversified portfolio.

supernova87a 4y ago

Hopefully the case gets summarily tossed for lack of standing. The idea that one company's decisions would have such tangible and personally-harmful (to "my portfolio") effects due to "negative political rhetoric, while facilitating ethnic cleansing, drug cartels, modern slavery, and vaccine disinformation" would open up every company to diffuse claims of responsibility.

vineyardmike 4y ago
As another person commented, maybe they should be open to that responsibility? > The idea that one company's decisions would have such tangible and personally-harmful effects due to "negative political rhetoric, while facilitating ethnic cleansing, drug cartels, modern slavery, and vaccine disinformation" would open up every company to diffuse claims of responsibility. Kinda scary we’re tacitly saying that IFF a company is responsible for this then it’s ok? If a person was responsible for all (any) of that, most of society would hold them in pretty low regard.
- supernova87a 4y ago
  I'm not saying it's ok -- I'm saying that an individual person doesn't have enough concrete, particularized, provable harm that came from the company's actions to take that company to court. If that became the standard, everyone could sue everyone else on the thinnest of connections. There are laws, regulators, governments, and other entities to hold such corporations to account, but it is not the individual citizen who can show a direct and concrete connection (for those kinds of harms). I would like to sue Donald Trump for diminishing the US's standing in the world and causing my portfolio to drop as well.

eezurr 4y ago

Interesting and disturbing. They are making an argument that Facebook/Meta is harmful to the global economy because it cant do [impossible task] of moderating its 3.5 billion users to stifle [unwanted behavior]. And because of that, their decisions are negatively impacting the modern investors distributed portfolios. Because Mark Z. is not diversified (wealth is in Meta) and has total control over the company, his decisions create a conflict of interest to the modern investor. Yet the article doesnt mention how his decisions directly impacted the economy. Maybe the lawsuit does, but Im not going to read that... >the fiduciary implication of the fact that modern investors are generally diversified, so that their interests extend beyond (and may be in opposition to) the maximization of the value of future cash flows to be received from owning a company’s shares. So it's fighting monopolistic behavior?

etiennebausson 4y ago
It's fighting pursuit pursuit of benefits that negatively impact the global economy. Nothing directly about monopolistic behavior here, though true monopolies end up harming global economy in their pursuit of benefits. Which is why they are regularly broken up, or merge prohibited I suppose.
deleted 4y ago
[deleted]

flanflan 4y ago

I'm just a two-bit software engineer and not a lawyer but I'll go against the general flow of the rest of the posts here and say "this is interesting." Whether or not it will work is another question, but it seems like they are trying to establish some precedent that companies need to consider the downstream impacts of the things they do. I see posters here brushing off talk about mental health and political impacts from decisions corporate directors make. Well if there is a measurable harm that can be traced back to a given company why shouldn't they be sued? It's a meme, but we live in a society. Companies don't exist in isolation, neither do profits.

IncRnd 4y ago
> Well if there is a measurable harm that can be traced back to a given company why shouldn't they be sued? Say I overhear my neighbors talking with each other. Despite my not knowing them, if based on listening to their conversation I decid to go kill some people at my place of employment - that is on me. My neighbors do not bear any responsibility. At some point there is the concept of personal responsibility. Honestly, this should be obvious.
subradios 4y ago
The problem is that this creates an open ended obligation of companies to whatever common shareholders want in their dreams about Society, and are responsible for doing so.
- rsrsrs86 4y ago
  Externalities are perhaps worse.
hn_throwaway_99 4y ago
But the lawsuit isn't arguing that "companies need to consider the downstream impacts of the things they do." That's an argument to be made to governments that grant corporate charters (though, I'd note that some governments have recently gone in the opposite direction, e.g. prohibiting pension fund managers from considering anything besides financial returns in their decisions). Instead, the lawsuit is trying to expand the concept of "fiduciary duty" to other aspects of shareholders lives. That is the part that a lot of us think is insane.

anigbrowl 4y ago

Anyone who invested in Facebook directly (rather than via a managed or exchange-traded fund of some sort) did so with the expected awareness that all the voting stock was controlled by Zuckerberg personally. Effectively, FB is a corporate dictatorship and it's hard to have sympathy for people who put money into it during the good times and are now surprised to discover that they made a bad investment decision. https://www.morningstar.com/articles/1061237/how-facebook-silences-its-investors https://www.morningstar.com/articles/1061237/how-facebook-si... Suing Zuckerberg on the basis that FB has made the world a worse place is one thing, suing him on the basis that a corporate dictatorship has disrupted their portfolio is a joke. They'd be better off suing the SEC or FTC for failure to regulate effectively.

qclibre22 4y ago
Might be a good time to go back to one share one vote corporate structure.
- dantheman 4y ago
  You can choose to invest in companies with that structure and others can choose to invest in other structures...
- sicp-enjoyer 4y ago
  The CEO is still the chief executive. Share voting rights do not control day to day business decisions or even strategy.
  - lifeplusplus 4y ago
    you can replace the CEO
    - sicp-enjoyer 4y ago
      Do you have someone in mind for meta? Or just change in general?

twic 4y ago

Stop! Please think of the impact articles like this will have on Matt Levine.

mccorrinall 4y ago

Everything is securities fraud and everything is insider trading - Levine

rsrsrs86 4y ago

It looks coherent with internalization of negative externalities but actually proving that is an econometrics mindfuck.

yk 4y ago

While I like the idea that a company has a duty to the wider marketplace, the construction using diversified portfolios is more creative than convincing. Problem is, that we can easily construct portfolios that react in a specific way to actions. In the example with promotion of mental health issues we may wonder how the bottom line of clinics of chocolate manufacturers is impacted by trying to avoid mental health issues.

faangiq 4y ago

This is America. Garbage piled on garbage. With lawyers collecting fees all the way.

dqpb 4y ago

Can litigious shareholders be countersued for the financial harm caused by self-litigating?

throw_m239339 4y ago
> Can litigious shareholders be countersued for the financial harm caused by self-litigating? Anybody can sue everybody for anything, as long as they have the money and the time. This is how civil courts work.

Ice_cream_suit 4y ago

"Distinguishing the Complaint From Models Based on Either Stakeholder or Enterprise Value It is important to note two things that the complaint does not claim. First, it does not claim that stakeholders (e.g., users of its platforms or citizens of destabilized countries) are owed fiduciary duties, or that harm to these stakeholders in and of itself constitutes a fiduciary breach. Secondly, the complaint does not allege that this conduct was bad for Meta’s own finances. Instead, the complaint alleges that the conduct revealed by Haugen threatens the global economy, and consequently the portfolios of the Company’s diversified shareholders. The complaint explains: Meta is the largest social media network company in the world, with 3.5 billion users—43% of humanity. Its business decisions inevitably create financial impact well beyond its own cash flows and enterprise value and have significant impacts on the global economy. While defendants have a duty to operate the Company as a business for the financial benefit of its stockholders, those stockholders are often diversified investors with portfolio interests beyond Meta’s own financial success. If the decisions that maximize the Company’s long-term cash flows also imperil the rule of law or public health, the portfolios of its diversified stockholders are likely to be financially harmed by those decisions.""

mirod1 4y ago

The lawsuit doesn't argue that Facebook actions hurt specific portfolios from their shareholders. It claims that it hurt a typical diversified portfolio. One that FB shareholders should have, according to the Modern Portfolio Theory (MPT). It notes that the MPT is not only commonly accepted, it is in fact used to write laws and regulations: "Before the advent of MPT, “legal lists” prohibited many fiduciaries from owning common stock". So if the MPT is indeed a cornerstone of modern economics, and modern laws, the natural conclusion is that it should be considered when looking at the fiduciary consequences of a company decision. Facebook case shows the problem very clearly, because both of the scale of the impact of the company on the World in general, and the structure of its governance, where the majority vote holder interests are not diversified, which makes them diverge significantly from all the other shareholders interests. As I understand it, it's a bit of legal jiu-jitsu: it takes the MPT, which so far has been used to allow more actors to invest in stocks, and so accepted readily by business and legal actors. It then uses it to extend the responsibility of companies to some externalities. It may or may not succeed, but it doesn't seem completely insane. At the very least the discovery process could be used to show to which extend Facebook knows about features that have a clearly negative effect on society in general, and chooses to implement them anyway.

dplgk 4y ago
You had me at first but then overplayed your GPT hand.
- mirod1 4y ago
  I was actually nearly going to add a notice that the post had _not_ been generated by an AI. It does say something about the current state of AI that at least 2 people had the same thought.

JustLurking2022 4y ago

Honestly, the whole business of shareholders suing companies is a bit crazy given they were also the beneficiary of any ill-gotten gains and, ultimately, any damages come out of the share price. I realize in this case it's effectively one subset if shareholders trying to get paid at the expense of other shareholders but it feels like there should be a higher bar for this type of litigation.