3 ms·

Good thing there's a strong corporate governance model at SpaceX where the c-suite is fully accountable to an independent board of directors, who could use thei

Good thing there's a strong corporate governance model at SpaceX where the c-suite is fully accountable to an independent board of directors, who could use their majority voting power to remove that c-suite at will. Could you imagine the abuse of power that could happen if one person held over 50% of the voting power at such a company?

rtkwe 3mo ago
Are super shares like Zuckerberg's and Musk a new thing? Genuinely curious if they're a recent invention or something that's quietly happened for a while because it seems like a large inversion of the deal of going public, lose some control of the company in exchange for a large amount of cash but these nonvoting/supervoting share splits seem to completely upend what I understood to be part of the deal for access to the stock market.
- nolta 3mo ago
  https://en.wikipedia.org/wiki/Ivar_Kreuger#B-shares https://en.wikipedia.org/wiki/Ivar_Kreuger#B-shares
  - lapcat 3mo ago
    > Kreuger's financial empire has been described by one biographer as a Ponzi scheme... Another biographer called Kreuger a "genius and swindler", and John Kenneth Galbraith wrote that he was the "Leonardo of larcenists".
- skybrian 3mo ago
  No. Google has them too.
  - Arainach 3mo ago
    That's absolutely still "recent" when discussing corporate governance.
  - rtkwe 3mo ago
    Google is also pretty new in the terms I was talking about only slightly older than Facebook. I mean going back to the 80s/90s or earlier, pre current FAANG at least.
- georgeecollins 3mo ago
  Ford has them. What it has meant for Ford-- and will probably mean for Facebook-- is that Zuck's heirs will control the company, for better or for worse. The common justification for this is that for a media company (NYT) you want a person or family to take responsibility for the editorial content, not a pure profit seeker. Facebook has it both ways and typically denies it has editorial control. IMO, the flaw of markets is that they are short sighted. Sometimes this allows states to outmaneuver them with a longer view. Current exhibit A: China. Historically state intervention has been worse in the long run. But who knows. If we went into a depression a lot of people may think state intervention is a better system, as many admired the USSR during the Great Depression.
  - orionsbelt 3mo ago
    Zuckerberg’s high vote shares convert to regular shares after he leaves or dies. His heirs will not continue to have super votes.
    - deleted 3mo ago
      [deleted]
    - shimman 3mo ago
      Don't worry, he will try to change the law before he passes this mortal coil. This is a person that has open disdain for the law and thinks he should be emperor of humanity.
      - sroussey 3mo ago
        You mean bylaw not law. No law says anything about super voting shares not surviving death.
  - kmeisthax 3mo ago
    The USSR's main problem was not that it was socialist or communist, but that it was Russian. Russia is run by people who are adept at coopting revolutionary movements into a corrupt, authoritarian core. When left-wing libertarians say "true Socialism has never been tried", this is (along with China) what they are referring to. The theoretical arguments against socialism (or, more specifically, centrally planned state production) given by Hayek is that pricing is information and markets are computers on that information, ergo changing the information gives you a bad result. This certainly applied to the kinds of production the Soviet Union loved to engage in, but there's no particular reason why it can't apply to capitalist enterprise as well. I mean, Facebook's headcount or market cap alone is larger than some actual nation-states' population or GDP. Just like how the USSR was nominally socialist but practically engaged in exactly the same state-controlled mode of production as feudalism, today's corporate entities are nominally capitalist but practically feudalist. The medieval historians in the room would probably balk at me using the word "feudalist" to describe either, so to be clear, what I mean is "an economic system in which the majority of profit goes to landowners / platform owners / the state / etc". In this economic mode, companies can warp markets to their whims in exactly the same way Congress can. Except, Congress is democratically controlled. Joint-stock corporations are inherently oligarchial in structure: control of the company is assigned based on how many shares you can afford to buy, so the company answers to the amount of money that has capitalized it, and not any other concern[0]. The "innovation" in Facebook's IPO was to go from internal oligarchy to internal autocracy - to install Mark Zuckerberg as God-Emperor of Facebook and largely depose the shareholder class that normally runs publicly-traded entities. You'd think markets would have priced in this risk, but Facebook IPO'd at the peak of its hype and was able to get away with this. The funny thing about Hayek's distributed market computer is that it does not actually reach perfectly efficient price computation. If it did, you could crack RSA keys by placing a sufficient number of suitably complex options trades. Markets can put a bounty on fixing incorrect pricing information, but they can also just refuse to accept corrected pricing. Everyone rushing into Facebook stock counteracted the few people concerned about the ridiculously autocratic governance structure. And now that it's obvious that such a thing was a problem, it's too late to challenge it, because now Facebook has platform holder money. Zuckerberg can bribe the shareholders to not care about their lack of control. The history of state intervention is very fraught, but there's one subset of interventions that has a better track record than most: those intended to stymie autocrats of trade. The state cannot correctly set prices better than a market can, but it absolutely can prevent other state-like entities from doing the same thing. Likewise, it would behoove the world's competition law and securities regulators to investigate and regulate the use of dual-class shares to retain control over companies you do not own. Unfortunately, the current administration is unlikely to do anything about this. Actually, to make matters worse, Texas is deliberately trying to pour gasoline on the problem by disenfranchising minority shareholders. I believe this was done specifically to give Elon Musk even more control over SpaceX, because Delaware made the mistake of actually entertaining a shareholder lawsuit over Musk's pay packet. If Facebook was an autocracy that bribed its shareholders into compliance, then SpaceX is an autocracy that says, "Fuck you, pay me". If there's one thing that gives me hope, it's that the markets are rightfully rejecting this obvious attempt at offloading Musk's toxic junk onto retail. But this is mainly because Elon failed to generate suitable hype to get the market to buy into his trash, not because markets are actually good at pricing in this specific kind of risk. [0] In fact, this is part of why you see companies go to great lengths to fight unions, even when negotiating with a union would be cheaper. The shareholder class considers democratic control (one worker, one vote) to be an existential threat.
- rhplus 3mo ago
  Some media companies had them before the 1980s. New York Times issued dual class in 1969 so that the owning family maintained editorial control. Berkshire Hathaway is possibly the most famous from the 80s/90s. The class A shares are significantly more expensive and proportionately even more powerful than the class B shares. The lower price version was important back when physical exchanges didn’t support fractional shares as they do today.
  - wbl 3mo ago
    Berkshires share classes are different in that A is exactly ten B shares and anyone can convert A to B and hold them. The dual share classes that are bad separate control from ownership.
    - rtkwe 3mo ago
      The BRK A and B are slightly different in that A is worth 1500 B but B only has 1/10000 of a vote so it IS a somewhat lopsided value vs voting share but not as bad as the 0 vote SPCX shares that just got dumped on the market.
    - rhplus 3mo ago
      Your ratios are way off. Price ratio is 1:1500 for A to B, while voting power ration is 1:10000. Each A share is 6.67x more powerful than 1500 x B shares.
- anamax 3mo ago
  The New York Times Company operates under a dual-class stock structure where the Ochs-Sulzberger family holds roughly 95% of Class B shares. This family control allows them to elect 70% of the company's Board of Directors. Copied from google's response to "new york times governance" Google's AI also says that the NYT has had that structure since 1957. Ford has something similar from the 1930s. (Dodge did too until it was bought.) Raylon (synthetic textiles) did it in the 1920s and the company behind Jack Daniels did it right after Prohibition. Google says that the NYSE banned dual-class between 1926 and 1986; I don't know how to reconcile that with Ford.
  - rtkwe 3mo ago
    A news org I see a valid reason for keeping two classes of stock I guess. It feels slimy elsewhere without that some editorial independence justification.
- deleted 3mo ago
  [deleted]
- saalweachter 3mo ago
  They were a thing in the previous 20's and the exchanges banned them in like the 40's (you could still have a dual-class corporate structure, you just wouldn't be listed on eg the NYSE), because investors thought that was some bullshit to have someone control a company while owning only a tiny slice of it. That rule was dropped sometime in the 80s.
dgritsko 3mo ago
You dropped your "/s".
- artemonster 3mo ago
  This is not reddit, people actually read and understand sarcasm (most of the time)
  - fluoridation 3mo ago
    Poe's law means you should still give some indication that you're making a joke.
  - Capricorn2481 3mo ago
    HN is closer to Reddit than you think, there's just a little more ceremony to it.
- fragmede 3mo ago
  Good. Marking comments with /s makes us dumber.
cryptoegorophy 3mo ago
Is it abuse of power or company success? Wouldn’t shareholders vote out any crazy successful ideas Elon had? Likely bankrupting companies at their early stages?
- tclancy 3mo ago
  No one ever votes out the guy running the ring toss at the carnival either. What if your man only plays rigged games so he can resist anyone looking at the books or having a voice?
- wildzzz 3mo ago
  That's why companies usually don't have a bunch of competing owners from the start. You do your big risky moves early on when you have the novel vision and a big blank check from a VC. Public stockholders aren't going to be as risk tolerant because the ROI is never going to be as high as what the early VC would get. Going public is growing up, you can't do the fun risky stuff you did when you were a young startup with more cash than sense. When you do want to do something fun as a public company, you have to do it carefully because you're dealing with other people's money now.
- lenerdenator 3mo ago
  More and more, "abuse of power" and "company success" seem to be intertwined. Meta would be an excellent example of that.
  - cryptoegorophy 3mo ago
    I just realized that dictatorship is in a way the same thing. Look at Singapore. It is super successful because of "right" dictatorship. Libya was somewhat a good example with their insane water infrastructure and social programs.
    - lenerdenator 3mo ago
      The thing is, you don't really need to have dictatorship to get those things. You could just, I don't know, fund infrastructure and social programs without developing cults of personality around leaders or letting them torture opponents to death.
dweekly 3mo ago
Interestingly enough, strong corporate governance and independent directors do not produce better returns. This is a central point in Eric Rees's book Incorruptible. https://leeds-faculty.colorado.edu/bhagat/bb-022300.pdf https://leeds-faculty.colorado.edu/bhagat/bb-022300.pdf
- iririririr 3mo ago
  guys a successful founder who lucked out and now has an academic hobby. I'd read other people if i were you.
  - dweekly 3mo ago
    1. He cites existing academic literature that is peer reviewed such as the link I provided. 2. If his claims are incorrect and poorly sourced, feel free to call them out. But his research appears to have been rather exhaustive on this topic. 3. If there are other sources that contradict these claims and are well researched, links are welcome
  - fragmede 3mo ago
    Ad hominem.
    - iririririr 3mo ago
      yes. sometimes that's valid tho.
- lenerdenator 3mo ago
  I'll need to read that, but if my anecdotal experience is any indication, there aren't that many "independent" boards of directors. Ultimately you do find some sort of connection between board members and the c-suite of many companies. In some cases (Meta) the CEO is the chairman. Marc Andreesen is also on Meta's board despite being an early investor and mentor to Zuckerberg. Seems like an explicit conflict of interest, no?

rtkwe 3mo ago

Are super shares like Zuckerberg's and Musk a new thing? Genuinely curious if they're a recent invention or something that's quietly happened for a while because it seems like a large inversion of the deal of going public, lose some control of the company in exchange for a large amount of cash but these nonvoting/supervoting share splits seem to completely upend what I understood to be part of the deal for access to the stock market.

nolta 3mo ago
https://en.wikipedia.org/wiki/Ivar_Kreuger#B-shares https://en.wikipedia.org/wiki/Ivar_Kreuger#B-shares
- lapcat 3mo ago
  > Kreuger's financial empire has been described by one biographer as a Ponzi scheme... Another biographer called Kreuger a "genius and swindler", and John Kenneth Galbraith wrote that he was the "Leonardo of larcenists".
skybrian 3mo ago
No. Google has them too.
- Arainach 3mo ago
  That's absolutely still "recent" when discussing corporate governance.
- rtkwe 3mo ago
  Google is also pretty new in the terms I was talking about only slightly older than Facebook. I mean going back to the 80s/90s or earlier, pre current FAANG at least.
georgeecollins 3mo ago
Ford has them. What it has meant for Ford-- and will probably mean for Facebook-- is that Zuck's heirs will control the company, for better or for worse. The common justification for this is that for a media company (NYT) you want a person or family to take responsibility for the editorial content, not a pure profit seeker. Facebook has it both ways and typically denies it has editorial control. IMO, the flaw of markets is that they are short sighted. Sometimes this allows states to outmaneuver them with a longer view. Current exhibit A: China. Historically state intervention has been worse in the long run. But who knows. If we went into a depression a lot of people may think state intervention is a better system, as many admired the USSR during the Great Depression.
- orionsbelt 3mo ago
  Zuckerberg’s high vote shares convert to regular shares after he leaves or dies. His heirs will not continue to have super votes.
  - deleted 3mo ago
    [deleted]
  - shimman 3mo ago
    Don't worry, he will try to change the law before he passes this mortal coil. This is a person that has open disdain for the law and thinks he should be emperor of humanity.
    - sroussey 3mo ago
      You mean bylaw not law. No law says anything about super voting shares not surviving death.
- kmeisthax 3mo ago
  The USSR's main problem was not that it was socialist or communist, but that it was Russian. Russia is run by people who are adept at coopting revolutionary movements into a corrupt, authoritarian core. When left-wing libertarians say "true Socialism has never been tried", this is (along with China) what they are referring to. The theoretical arguments against socialism (or, more specifically, centrally planned state production) given by Hayek is that pricing is information and markets are computers on that information, ergo changing the information gives you a bad result. This certainly applied to the kinds of production the Soviet Union loved to engage in, but there's no particular reason why it can't apply to capitalist enterprise as well. I mean, Facebook's headcount or market cap alone is larger than some actual nation-states' population or GDP. Just like how the USSR was nominally socialist but practically engaged in exactly the same state-controlled mode of production as feudalism, today's corporate entities are nominally capitalist but practically feudalist. The medieval historians in the room would probably balk at me using the word "feudalist" to describe either, so to be clear, what I mean is "an economic system in which the majority of profit goes to landowners / platform owners / the state / etc". In this economic mode, companies can warp markets to their whims in exactly the same way Congress can. Except, Congress is democratically controlled. Joint-stock corporations are inherently oligarchial in structure: control of the company is assigned based on how many shares you can afford to buy, so the company answers to the amount of money that has capitalized it, and not any other concern[0]. The "innovation" in Facebook's IPO was to go from internal oligarchy to internal autocracy - to install Mark Zuckerberg as God-Emperor of Facebook and largely depose the shareholder class that normally runs publicly-traded entities. You'd think markets would have priced in this risk, but Facebook IPO'd at the peak of its hype and was able to get away with this. The funny thing about Hayek's distributed market computer is that it does not actually reach perfectly efficient price computation. If it did, you could crack RSA keys by placing a sufficient number of suitably complex options trades. Markets can put a bounty on fixing incorrect pricing information, but they can also just refuse to accept corrected pricing. Everyone rushing into Facebook stock counteracted the few people concerned about the ridiculously autocratic governance structure. And now that it's obvious that such a thing was a problem, it's too late to challenge it, because now Facebook has platform holder money. Zuckerberg can bribe the shareholders to not care about their lack of control. The history of state intervention is very fraught, but there's one subset of interventions that has a better track record than most: those intended to stymie autocrats of trade. The state cannot correctly set prices better than a market can, but it absolutely can prevent other state-like entities from doing the same thing. Likewise, it would behoove the world's competition law and securities regulators to investigate and regulate the use of dual-class shares to retain control over companies you do not own. Unfortunately, the current administration is unlikely to do anything about this. Actually, to make matters worse, Texas is deliberately trying to pour gasoline on the problem by disenfranchising minority shareholders. I believe this was done specifically to give Elon Musk even more control over SpaceX, because Delaware made the mistake of actually entertaining a shareholder lawsuit over Musk's pay packet. If Facebook was an autocracy that bribed its shareholders into compliance, then SpaceX is an autocracy that says, "Fuck you, pay me". If there's one thing that gives me hope, it's that the markets are rightfully rejecting this obvious attempt at offloading Musk's toxic junk onto retail. But this is mainly because Elon failed to generate suitable hype to get the market to buy into his trash, not because markets are actually good at pricing in this specific kind of risk. [0] In fact, this is part of why you see companies go to great lengths to fight unions, even when negotiating with a union would be cheaper. The shareholder class considers democratic control (one worker, one vote) to be an existential threat.
rhplus 3mo ago
Some media companies had them before the 1980s. New York Times issued dual class in 1969 so that the owning family maintained editorial control. Berkshire Hathaway is possibly the most famous from the 80s/90s. The class A shares are significantly more expensive and proportionately even more powerful than the class B shares. The lower price version was important back when physical exchanges didn’t support fractional shares as they do today.
- wbl 3mo ago
  Berkshires share classes are different in that A is exactly ten B shares and anyone can convert A to B and hold them. The dual share classes that are bad separate control from ownership.
  - rtkwe 3mo ago
    The BRK A and B are slightly different in that A is worth 1500 B but B only has 1/10000 of a vote so it IS a somewhat lopsided value vs voting share but not as bad as the 0 vote SPCX shares that just got dumped on the market.
  - rhplus 3mo ago
    Your ratios are way off. Price ratio is 1:1500 for A to B, while voting power ration is 1:10000. Each A share is 6.67x more powerful than 1500 x B shares.
anamax 3mo ago
The New York Times Company operates under a dual-class stock structure where the Ochs-Sulzberger family holds roughly 95% of Class B shares. This family control allows them to elect 70% of the company's Board of Directors. Copied from google's response to "new york times governance" Google's AI also says that the NYT has had that structure since 1957. Ford has something similar from the 1930s. (Dodge did too until it was bought.) Raylon (synthetic textiles) did it in the 1920s and the company behind Jack Daniels did it right after Prohibition. Google says that the NYSE banned dual-class between 1926 and 1986; I don't know how to reconcile that with Ford.
- rtkwe 3mo ago
  A news org I see a valid reason for keeping two classes of stock I guess. It feels slimy elsewhere without that some editorial independence justification.
deleted 3mo ago
[deleted]
saalweachter 3mo ago
They were a thing in the previous 20's and the exchanges banned them in like the 40's (you could still have a dual-class corporate structure, you just wouldn't be listed on eg the NYSE), because investors thought that was some bullshit to have someone control a company while owning only a tiny slice of it. That rule was dropped sometime in the 80s.

dgritsko 3mo ago

You dropped your "/s".

artemonster 3mo ago
This is not reddit, people actually read and understand sarcasm (most of the time)
- fluoridation 3mo ago
  Poe's law means you should still give some indication that you're making a joke.
- Capricorn2481 3mo ago
  HN is closer to Reddit than you think, there's just a little more ceremony to it.
fragmede 3mo ago
Good. Marking comments with /s makes us dumber.

cryptoegorophy 3mo ago

Is it abuse of power or company success? Wouldn’t shareholders vote out any crazy successful ideas Elon had? Likely bankrupting companies at their early stages?

tclancy 3mo ago
No one ever votes out the guy running the ring toss at the carnival either. What if your man only plays rigged games so he can resist anyone looking at the books or having a voice?
wildzzz 3mo ago
That's why companies usually don't have a bunch of competing owners from the start. You do your big risky moves early on when you have the novel vision and a big blank check from a VC. Public stockholders aren't going to be as risk tolerant because the ROI is never going to be as high as what the early VC would get. Going public is growing up, you can't do the fun risky stuff you did when you were a young startup with more cash than sense. When you do want to do something fun as a public company, you have to do it carefully because you're dealing with other people's money now.
lenerdenator 3mo ago
More and more, "abuse of power" and "company success" seem to be intertwined. Meta would be an excellent example of that.
- cryptoegorophy 3mo ago
  I just realized that dictatorship is in a way the same thing. Look at Singapore. It is super successful because of "right" dictatorship. Libya was somewhat a good example with their insane water infrastructure and social programs.
  - lenerdenator 3mo ago
    The thing is, you don't really need to have dictatorship to get those things. You could just, I don't know, fund infrastructure and social programs without developing cults of personality around leaders or letting them torture opponents to death.

dweekly 3mo ago

Interestingly enough, strong corporate governance and independent directors do not produce better returns. This is a central point in Eric Rees's book Incorruptible. https://leeds-faculty.colorado.edu/bhagat/bb-022300.pdf https://leeds-faculty.colorado.edu/bhagat/bb-022300.pdf

iririririr 3mo ago
guys a successful founder who lucked out and now has an academic hobby. I'd read other people if i were you.
- dweekly 3mo ago
  1. He cites existing academic literature that is peer reviewed such as the link I provided. 2. If his claims are incorrect and poorly sourced, feel free to call them out. But his research appears to have been rather exhaustive on this topic. 3. If there are other sources that contradict these claims and are well researched, links are welcome
- fragmede 3mo ago
  Ad hominem.
  - iririririr 3mo ago
    yes. sometimes that's valid tho.
lenerdenator 3mo ago
I'll need to read that, but if my anecdotal experience is any indication, there aren't that many "independent" boards of directors. Ultimately you do find some sort of connection between board members and the c-suite of many companies. In some cases (Meta) the CEO is the chairman. Marc Andreesen is also on Meta's board despite being an early investor and mentor to Zuckerberg. Seems like an explicit conflict of interest, no?