5 ms·

For US companies registered in Delaware (which is most of them), the doctrine of shareholders primacy holds. Shareholders can and have sued corporate boards/exe

For US companies registered in Delaware (which is most of them), the doctrine of shareholders primacy holds. Shareholders can and have sued corporate boards/execs for not acting in their best interest. It goes back to the 1910s when Henry Ford very loudly and explicitly announced he was cutting shareholder dividends to pay workers the famous $5/day wage (double what any other factory workers were paid), and minority shareholders sued and won. Of course it is debated and different in different jurisdictions, as it is common law and not a specific statute. But ambiguity in law means execs lean towards the safe decision. Shareholders can go a long way with a legal threat that never sees trial. https://en.m.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co https://en.m.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co.

itsoktocry 3y ago
>Shareholders can and have sued corporate boards/execs for not acting in their best interest. Translating "best interest" to "maximize profits" is the stretch though. The shareholders define what is their best interest. Shareholders aren't faceless demons. They are you and me.
- starbugs 3y ago
  Come on. You know who the "shareholders" are that the parent commenter talks about. They are board members and people with a huge amount of shares, not "normal" people who hold 5 shares in their retirement portfolio. The main interest of a shareholder is return on investment. And that's fine. The problem is that if you don't have enough competing entities in a market, these shareholders of the few companies that still exist hold disproportionate power that can and will be misused to make any attempt at new, reasonable competition infeasible. It's really not that hard to understand.
  - mistrial9 3y ago
    no this is insufficiently informed.. company bylaws can vary quite a lot about voting rights. Your typical SiliValley cut-n-paste corp less so..
  - newswasboring 3y ago
    > The main interest of a shareholder is return on investment. And that's fine. No, it's not fine. Legally, maybe, but not morally fine. I don't understand how everyone is ok with this system which seems to be selecting for the worst humans.
    - mistrial9 3y ago
      because the previous system involved swords and later canons
    - starbugs 3y ago
      > No, it's not fine. Legally, maybe, but not morally fine. I don't understand how everyone is ok with this system which seems to be selecting for the worst humans. Wait. If you invest your money into something, do you not expect a return?
- nologic01 3y ago
  have you ever seen a shareholder that doesnt like a monopoly, winner-takes-all investment? this is the wet dream of investors. ensuring the system does not degenerate is the job of regulators.
  - mminer237 3y ago
    I think the point is that shareholders' preference isn't the legal standard. The board can make moves the shareholders absolutely hate and which lose money in the short-term, but as long as the board reasonably thinks it's in the shareholders best interest, they can't do anything about it legally. (Other than vote out the board over time.) Of course, regulation is needed to stop a bad board.
    - datavirtue 3y ago
      You can setup a company where the board is static and very dysfunctional. Lived it. Company grows and grows and you can't get rid of the founder who has clearly reached the "Peter Principle" stage. Very painful to be an investor or employee at a place like that.
- flangola7 3y ago
  They're not faceless but they are demons.
- wredue 3y ago
  lol. Shareholders are absolutely not “you and me”. Your couple Tesla shares doesn’t make you a “shareholder” as being discussed here. The shareholders that sue boards are shareholders who, if they sold, would disrupt share price notably.
- bobbruno 3y ago
  In most cases, the ones who do sue are neither - they’re companies themselves, with shareholders of their own, or funds with specific regulations (which amount to much the same, if not more specifically profit-oriented). These are not people, they don’t think morally the way people do. These are not demons, they are not evil themselves - these are more like machines, algorithms tuned to maximize profit. This structure is our paper-clip optimiser, already in place much before the AI revolution. If there is a devil, they are the ones behind setting up this entire system, not a player in it.
jdsully 3y ago
> For US companies registered in Delaware (which is most of them), the doctrine of shareholders primacy holds. Shareholders can and have sued corporate boards/execs for not acting in their best interest. It goes back to the 1910s when Henry Ford very loudly and explicitly announced he was cutting shareholder dividends to pay workers the famous $5/day wage (double what any other factory workers were paid), and minority shareholders sued and won. That's because he had the explicit goal of starving out the Dodge brothers who owned a competing automotive manufacturer. If it was just about the pay of employees the suit likely would have failed. You cannot prejudice minority shareholders even if they own competing companies.

itsoktocry 3y ago

>Shareholders can and have sued corporate boards/execs for not acting in their best interest. Translating "best interest" to "maximize profits" is the stretch though. The shareholders define what is their best interest. Shareholders aren't faceless demons. They are you and me.

starbugs 3y ago
Come on. You know who the "shareholders" are that the parent commenter talks about. They are board members and people with a huge amount of shares, not "normal" people who hold 5 shares in their retirement portfolio. The main interest of a shareholder is return on investment. And that's fine. The problem is that if you don't have enough competing entities in a market, these shareholders of the few companies that still exist hold disproportionate power that can and will be misused to make any attempt at new, reasonable competition infeasible. It's really not that hard to understand.
- mistrial9 3y ago
  no this is insufficiently informed.. company bylaws can vary quite a lot about voting rights. Your typical SiliValley cut-n-paste corp less so..
- newswasboring 3y ago
  > The main interest of a shareholder is return on investment. And that's fine. No, it's not fine. Legally, maybe, but not morally fine. I don't understand how everyone is ok with this system which seems to be selecting for the worst humans.
  - mistrial9 3y ago
    because the previous system involved swords and later canons
  - starbugs 3y ago
    > No, it's not fine. Legally, maybe, but not morally fine. I don't understand how everyone is ok with this system which seems to be selecting for the worst humans. Wait. If you invest your money into something, do you not expect a return?
nologic01 3y ago
have you ever seen a shareholder that doesnt like a monopoly, winner-takes-all investment? this is the wet dream of investors. ensuring the system does not degenerate is the job of regulators.
- mminer237 3y ago
  I think the point is that shareholders' preference isn't the legal standard. The board can make moves the shareholders absolutely hate and which lose money in the short-term, but as long as the board reasonably thinks it's in the shareholders best interest, they can't do anything about it legally. (Other than vote out the board over time.) Of course, regulation is needed to stop a bad board.
  - datavirtue 3y ago
    You can setup a company where the board is static and very dysfunctional. Lived it. Company grows and grows and you can't get rid of the founder who has clearly reached the "Peter Principle" stage. Very painful to be an investor or employee at a place like that.
flangola7 3y ago
They're not faceless but they are demons.
wredue 3y ago
lol. Shareholders are absolutely not “you and me”. Your couple Tesla shares doesn’t make you a “shareholder” as being discussed here. The shareholders that sue boards are shareholders who, if they sold, would disrupt share price notably.
bobbruno 3y ago
In most cases, the ones who do sue are neither - they’re companies themselves, with shareholders of their own, or funds with specific regulations (which amount to much the same, if not more specifically profit-oriented). These are not people, they don’t think morally the way people do. These are not demons, they are not evil themselves - these are more like machines, algorithms tuned to maximize profit. This structure is our paper-clip optimiser, already in place much before the AI revolution. If there is a devil, they are the ones behind setting up this entire system, not a player in it.

jdsully 3y ago

> For US companies registered in Delaware (which is most of them), the doctrine of shareholders primacy holds. Shareholders can and have sued corporate boards/execs for not acting in their best interest. It goes back to the 1910s when Henry Ford very loudly and explicitly announced he was cutting shareholder dividends to pay workers the famous $5/day wage (double what any other factory workers were paid), and minority shareholders sued and won. That's because he had the explicit goal of starving out the Dodge brothers who owned a competing automotive manufacturer. If it was just about the pay of employees the suit likely would have failed. You cannot prejudice minority shareholders even if they own competing companies.