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True, but that's not what's happening here. If a majority of shareholders wanted this proposal, or some other proposal, they could get it in the proxy statemen

by nirvana 14y ago

True, but that's not what's happening here. If a majority of shareholders wanted this proposal, or some other proposal, they could get it in the proxy statement and then get it passed. What's happening here is a lawsuit to try and do an endrun around the process by which the shareholders exercise their rights. Hell, shareholders vote for the members of the board of directors.... shareholders could choose to nominate and vote for board members that support the idea if they wanted.

rayiner 14y ago
A shareholder lawsuit isn't an "end run" around the process. It's one of the options in the process. Companies incorporate under statutory frameworks that explicitly contemplate shareholder lawsuits in addition to other mechanisms for shareholders to assert their interests. Investors, in turn, buy stock with full knowledge of (and indeed, often because of) the fact that lawsuits are an option shareholders have to assert their rights. In this case, you have to distinguish between "I think Apple should be managed differently" and "hoarding cash amounts to a breach of fiduciary duty." The former is about general corporate strategy, and that is governed by majority consent of the shareholders. The latter is a right specific to each shareholder, and so cannot be waived by majority consent. Why is the process structured this way? For obvious reasons. Say you're buying a 25% stake in Apple, but back in the 1970's before it was Apple (remember, the rules of the arrangement as decided prospectively, before anyone knows how things will turn out, not retrospectively, after everyone knows the company will be a hit). You might be willing to leave general corporate strategy to a majority vote. However, if you think the company's actions actually amount to misuse of your capital investment, you want to be able to sue, not just submit your grievance to the majority vote.

by nirvana 14y ago

rayiner 14y ago

A shareholder lawsuit isn't an "end run" around the process. It's one of the options in the process. Companies incorporate under statutory frameworks that explicitly contemplate shareholder lawsuits in addition to other mechanisms for shareholders to assert their interests. Investors, in turn, buy stock with full knowledge of (and indeed, often because of) the fact that lawsuits are an option shareholders have to assert their rights. In this case, you have to distinguish between "I think Apple should be managed differently" and "hoarding cash amounts to a breach of fiduciary duty." The former is about general corporate strategy, and that is governed by majority consent of the shareholders. The latter is a right specific to each shareholder, and so cannot be waived by majority consent. Why is the process structured this way? For obvious reasons. Say you're buying a 25% stake in Apple, but back in the 1970's before it was Apple (remember, the rules of the arrangement as decided prospectively, before anyone knows how things will turn out, not retrospectively, after everyone knows the company will be a hit). You might be willing to leave general corporate strategy to a majority vote. However, if you think the company's actions actually amount to misuse of your capital investment, you want to be able to sue, not just submit your grievance to the majority vote.