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Comment by dingo_bat | Hacker News Reader

I feel it is good that founders are increasingly able to keep their companies under their control.

Before they go public, maybe. After they go public (not the case with Uber) then having different classes of shares makes stock a bad version of bonds with a messianic belief that the founders will deliver returns.

There was an article about this on The Economist recently but I can't find it quickly enough.

On the other hand owning Google or Facebook shares was a good idea, no?

Be wary of "obvious" things that "should" be true. A lot of people said the Fed was pumping up the stock market with QE, that inflation would go crazy, etc. I ignored them and bought into the market heavily in 2009. Maybe the market is being irrational but I sure did make a lot of money (doubling my personal account and nearly tripling my retirement) by ignoring so called "obvious truths" and investing in a "rigged market".

Maybe in the long term you are right. You sure can lose a lot of money or miss out on a lot of gains that way too.

>On the other hand owning Google or Facebook shares was a good idea, no?

Was it? Did you buy, make money, and sell?

What about the guy you sold to? Is he the Greater Fool? How much money do you make from buying and holding a stock that pays no dividends, forever?

Yeah, it's basically tenure. And while you can argue against tenure in various circumstances, it does provide intellectual/strategic freedom and that allows someone to take bets they otherwise couldn't. Whether that's a good thing is up to the investor buying the shares.

And while tenure at public elementary schools could be up for debate, getting tenure at an organization you founded seems reasonable. You created the institution, your values are its values. That's kind of the point of tenure, it's like a marriage. It's saying "we believe in each others values, so let's stop asking whether we're going to have a relationship and just see how the relationship evolves."

>I feel it is good that founders are increasingly able to keep their companies under their control.

Huh? An IPO is literally going to the public to sell a stake in the company.

If you want to maintain control, don't go public. This has been a truism for 100 years.

If Uber fails due to the fact the Uber board cannot fire its CEO, the trend may reverse. Uber is too big to fail without industry-wide repercussions.

Uber is too big to fail

Not true. If Uber disappeared then everyone would install another app - if they haven't already - and one ride later would forget Uber ever existed.

They're discussing the VC industry, not the ride-sharing industry.

I wasn't referring to consumers. What I meant was that $60 billion in value disappearing in a puff of smoke, because of one individual who couldn't be fired when the role outgrew him, would be a shattering event for SV investors, and negotiations around equity terms for founders would likely change.

It is not $60B, but $10B of investment disappearing.

I think the phrase "$60 billion in value" is roughly accurate, considering it's the tax-basis the IRS would use for shares sold. Any accountants on HN want to chime in?

You weren't around for the dotcom bubble, were you?

I was, and equity terms did change at that time. But that was 17 years ago.

Why? Fundamentally, why? The ability for the shareholders to check the person who is running the company was sound principle I thought.

>Fundamentally, why?

I'd also like an answer. My theory is that these founders are "just like us!" as opposed to the grey-haired CEOs running stodgy companies.

We plead for transparency and accountability of executives...for all companies outside the Valley.

It is mostly because the CEO "market" isn't bringing transparency and accountability anywhere, so this is better than the alternative.

Want to fix the desirability of hacking the bare possession of a company to avoid suits¹ taking over? Fix the governance of suits.

1 - Not the best possible term, but it is the best short term to use here. I'm not going into a lengthy debate on the meaning of "suits".

It is not "their" company, however. The company belongs to all the shareholders.

It depends, if I start a company and offer a share contract where I am the BDFL(Benevolent Dictator For Life) of the company, then any shareholder purchasing the stocks is buying it by agreeing to that term.

Sure the shares will not reach as high of a valuation as they would if shares didn't come with this condition, but there is no claim whatsoever that somehow shareholders somehow gain more power over the company than what they agreed to when purchasing the shares.

I'm not a lawyer, but I strongly suspect you have a fiduciary duty to all shareholders. If you are director-shareholder, you cannot act in the interests of your shareholding alone. Also, the idea that you can put any condition into a contract is naive. Many such conditions are legally unenforceable because they are incompatible with the corporate law framework.

> Oddly, no previous management research has looked at what the legal literature says about the topic, so we conducted a systematic analysis of a century’s worth of legal theory and precedent. It turns out that the law provides a surprisingly clear answer: Shareholders do not own the corporation, which is an autonomous legal person. What’s more, when directors go against shareholder wishes—even when a loss in value is documented—courts side with directors the vast majority of the time. Shareholders seem to get this. They’ve tried to unseat directors through lawsuits just 24 times in large corporations over the past 20 years; they’ve succeeded only eight times. In short, directors are to a great extent autonomous.

https://hbr.org/2010/04/the-myth-of-shareholder-capitalism

My non-expert view is that super shares for founders change less about the legal status of corporations than people think they do.

If you call the increasing controversies as Uber being "Kept under control"

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