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Comment by yumraj | Hacker News Reader

It's not his company. It's a public company in which he does not own more than 50% of stocks.

He just has more than 50% voting rights, which should never have been allowed, and should be one of the things that SEC should look at if/when any kind of antitrust probe is done. It leads to deviant behavior by public companies.

Edit:

Some people below are looking at it below from a purely investor standpoint.

I'm not an investor in FB and own no stocks.

I'm looking at the behavior of FB which IMHO is purely due to Zuck, him being unethical (as someone else has also called out below) and the fact that he has unchecked power in how he is running FB. Like in a Government, the Board is supposed to provide the checks and balances in a public company. Unfortunately, due to the voting structure the Board of FB is 100% impotent.

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> It leads to deviant behavior by public companies

From my experience, having majority shareholders don't lead to "deviant behavior" any more than companies with no majority shareholder. In fact, one could argue that many of the ugly collective action problems facing the world today stem from organizations in which nobody has the power to veto unethical policies.

I think the problem here is that Zuck can veto. I think it's that Zuck is unethical.

What horrible 'collective action' policies are you talking about ? Seems entirely made up.

It’s both.

You can take financial resources of the public or you can have veto power. If you have both, you’re not a “Public Company” anymore and your stocks should be immediately delisted from public markets.

To do that, you would need to change the law first, and then go after FB.

Given the fact that what happens appears to be us going after tech firms under current law, I wouldn't hold out much hope for needed changes in the legal environment. For some reason, (money), people just don't want to do that.

I've never understood why rank and file employees don't get a vote despite not owning stock.

Arguably, they are the ones most affected with the most to lose. A salaried employee with no stock options likely depends more on their continued paycheck and the continued success of the company than any large shareholder or even the class of employees who hold stock.

Their vote should count MORE than the board.

Because they don't own the company... You say they have the most to lose, but I would say the investors who put 100s of millions of dollars into the company have more.

I guess I'm saying it is relative. If you stand to lose your child's college fund, your home, or the ability to eat next week I'd classify that as, "more to lose" than 100 million dollars.

I understand why this isn't practicable. Those who have large investments have a large incentive to educate themselves on how the market works and how corporate governance will impact overall success for the company.

Sometimes hard and unpopular decisions are necessary in order to keep the company profitable.

I do, however, see real value in having input from a sector that's focused more on long term success than short term profits.

Only through one perspective. If you have a billion dollars, losing a few 100 million dollars isn’t as bad as losing a job or a black mark on your resume if you’re living paycheck to paycheck.

They're giving their time -- literally the one non-fungible resource any human being has -- in exchange for money. Money comes and goes. You never get your 20s or 30s back.

Literally everyone does, it's the definition of work, and you may or may not have to give more of it to get a desired standard of living. (Unless you don't have to work because you're filthy rich or connected.)

The question is, how well can you sell it and whether the conditions are otherwise acceptable.

Anyone who draws income via rent-seeking does not trade time for money.

Your landlord, most of the time (i.e. when they're not repairing or maintaining their properties), is not trading money for time; they are charging you for access to materials which, moment to moment, costs them nothing.

Patent trolls make money without trading away their time -- you work to pay for access to an idea, which costs them nothing to maintain.

One could go on and on with examples of widespread rent-seeking fields of work and industry; but in general, no, it isn't literally everyone who trades time for money.

That's basically Elizabeth Warren's corporate governance proposal: have employees elect 40% of the board.

So you're saying we should give control of the means of production to the workers? ;)

It would probably lower turnover. Transparency and flat org structures are already all the rage. This just seems like the next logical step.

Is there a name for accidental socialist agitation? Like a "Marxian slip"?

lapsus linguae of the proletariat.

Jeremy Corbyn presented this idea in the UK: https://www.independent.co.uk/news/uk/politics/jeremy-corbyn...

The media, of course, isn't owned by workers, and so rampant character assassination is par for the course for anybody who moots ideas like this ("czech spy", "arch brexiteer", "anti-semite", "terrorist sympathizer", etc.).

The Germans have this. https://en.wikipedia.org/wiki/Codetermination_in_Germany

Dual share classes have existed for a long time. If people dont like the share structure they can not invest.

Or compel the SEC to require a deprecation of dual class structure as part of a settlement agreement. All Facebook crimes are securities crime when you’re public (apologies to Matt Levine).

This administration seems to want to go after tech. If you’re a large Facebook investor, encourage them. You’re going to lose some value, but less than if you leave Mark in charge.

But there won't be any settlement agreement. That's the problem. Assuming there will is akin to just saying, "Well, someone will fix it" while executing the Jedi Hand Wave gesture.

We're not Jedi.

If we want things to change, we have to change the actual laws. Expecting lawyers to find some violation under current law is fanciful in the extreme.

It’s really not that simple when FB is in so many funds / indexes. It has market effects even if you don’t invest in it.

That was a choice with passive investment. If you want active you can do it and see if dual structure is harmful.

True.

There's always the option of putting your money where your mouth is. If you're saying a dual class structure is bad, and not in the interest of shareholders or companies? I mean, well, you should be willing to put your money behind that assertion. It should be to your benefit because the implication is that not investing in companies with dual class structures should be more profitable over time.

Yes, they can decide not to invest, but that doesn't preclude pushing for a change, and saying they don't think the current structure is in the best interest of the company or shareholders. (I'm not sure they're right though. Zuck's track record isn't stellar, but I shutter to think what a completely mercenary company chasing every last cent might do. Much bad as we've seen, I don't think we've seen things as bad as they could be)

I’m a willing investor in FB, but not everyone is. If you are a pensioner, quite likely your money is invested in index funds containing FB....so it isn’t that easy.

That said, these voters should try to change the SEC guidelines, no use hating the player, change the game.

I figure there's no need to choose. They can try to change from within the company and also push the SEC for reform. Personally I don't like the idea of a Zuck autocracy, but I'm also not convinced that anythinng else would better. I know, hardly a decisive opinion, but I don't think we've yet seen a FAANG level company go completely balls to the wall monetizing ever last bit of personal data, so it's a tenuous balance.

Why should SEC limit or ban dual share stock? You know exactly what you're getting, a semi-public company.

This is what I don't understand?

I mean, did people not read the prospectus? What, exactly, did they think "dual class" meant? These people should consider divesting, because I'm not certain that they studied their investment target closely enough to wargame out different possible outcomes prior to throwing money at FB.

You're right that this was obvious, but I think the people actually guiding this vote did read the prospectus. It's just random armchair commentators who are outraged that this outcome is unfair.

This vote was proposed by Trillium Asset Management, an activist investment group. They hold $7M of Facebook stock, and the group they lead to bring the ouster vote appear to control around $3B. These are people who knew what they were investing in, and decided to bring this vote to put pressure on Facebook, not in a deluded hope that it would pass. What's more, a bunch of the outside investors seem to want more leverage without wanting Zuckerberg out - there's a 15-point gap between "voted for a new chair" and "voted to end dual class stock".

More broadly, this is just a round of the kind of corporate advertising via news that PG called the 'submarine' (http://www.paulgraham.com/submarine.html). Trillium called a vote that couldn't pass, and was on hand to provide a pithy closing quote to Business Insider's reporter. BoingBoing is running the story with a narrative of fighting the evil tech billionaires, never mind that Doctorow normally hates the idea of companies "disciplined by shareholder choices". Meanwhile, Trillium's website posted the story "Trillium's Ongoing Pressure on Facebook Governance in the News" - this is a conscious and apparently quite effective effort to create a "Zuckerberg ignores his shareholders" narrative.

>this is a conscious and apparently quite effective effort to create a "Zuckerberg ignores his shareholders" narrative...

My point is that the prospectus "...is a conscious and apparently quite effective effort to create a 'Zuckerberg ignores his shareholders' narrative..."

It's quite literally, publicly stated company policy in this regard.

I guess the distinction I'm drawing is between can ignore and does ignore.

Everyone who bought in knew, or should have known, that Zuckerberg had the power to ignore their votes. But in principle, that could have been limited to fending off raiders, mergers, or other harmful initiatives. By repeatedly demanding an executive chair to provide oversight, Trillium stresses the idea that Zuckerberg is using his majority vote to defend irresponsible leadership.

Will anything actually come of it? Probably not, but if FTC or SEC pressure amounts to something real it might position them better to gain influence over the company.

Why should SEC or FTC pressure anybody? If Facebook fails sure to irresponsible leadership, so be it. Someone will buy it off. The shareholders accept that risk and can always divest...

About the only thing this fuss does is manipulate Facebook's share price.

Of course, everyone wants a bigger piece of the pie, so they can try to bring even more political pressure on Zuck.

I think it makes sense to have shares where you have right to a proportion of the profit, but not have a say in how the company is run.

Yeah I have very little sympathy for "powerless" shareholders of a multi-billion dollar company. How could they not know what they were getting into before investing?

The idea that a Facebook run by the shareholders would be a kinder, gentler, less evil company than the current iteration of FB is laughably naive. When shareholders revolt against management it’s almost always because they want the company to be more ruthless about cost cutting and boosting profits at the expense of customers and employees. You really believe that a Carl Icahn type is going to spend billions of dollars buying up a bunch of shares just to pressure Facebook into being more socially responsible?

Shhhh, you're pulling back the curtain and forcing the keyboard social justice warriors to think for themselves. Not very nice.

Facebook agreed to certain additional rules (eg quarterly reporting) in exchange for being able to solicit investment from the public. There was no rule against the share classes.

I agree with others. It was well known that Facebook was exclusively controlled by zuck when it went public, and that wouldn’t change. I think the only recourse is to lobby the sec to prevent it from happening in future IPOs.

Plot twist:

the worth of shares in the hands of the investors is highly dependent on Zuckerberg being at the helm & maintaining Facebook on the course.

If they ousted Zuckerberg, or curtailed his power to make decisions, the shares' worth would enter a slow, but inevitably terminal, decline.

Side note, I disagree with, and condemn Facebook's certain practices. The above post is only to indicate the company as a whole is a highly efficient money making machine.

> He just has more than 50% voting rights, which should never have been allowed, and should be one of the things that SEC should look at if/when any kind of antitrust probe is done.

S&P refuses to add companies with dual-class stock to the S&P 500 or other benchmarks they control (Facebook was grandfathered in).

But I try to invest my 401(k) according to what I understand of academic research, and they never mention the importance of avoiding dual-class stock ( https://web.stanford.edu/~wfsharpe/art/active/active.htm ). I understand that some people have personal crusades about this or other questions of corporate governance; but those are their crusades, not mine, and they aren’t responsible for my financial well-being.

>>He just has more than 50% voting rights, which should never have been allowed

And that what matters in this case. The knew what they're buying, it was a huge debate about it in the media too. All was legal and was disclosed. Personally I would not buy stock in a company structured this way, but if I did, I would not have a right to complain.

Actually you do have the right to complain.

It is the expectation of action missing.

I'd call it a non-public corporation. A public corporation is one who's ownership is distributed among the public. The public does not have distributed ownership, as ownership would imply control. The public so-called=ownership has ZERO control over the corporation as a private entity has ALL control. As such, facebook is not a public company by the common meaning.

It is a public company in label only. This is a psuedo-public company as long as a single individual owns/controls the company.

I can trade their stock on NYSE, so it seems a public company to me...

> It leads to deviant behavior by public companies.

I haven’t seen this be true any more than public companies where stocks are directly equal to voting rights. Why would it be any different?

It is his company - that's basically what it means to own more than 50% of the voting shares.

No it doesn’t there are rules and requirements beyond those of a privately owned company, which is for instance why he can’t just call a vote tomorrow nullifying every share except for his own without seeing it blow up in his face. It’s not his company, it’s a public company in which he has controlling shares. He can’t do whatever he likes without consequence, but he can definitely retain control even in the face of rising criticism.

Sure, he can't violate the law. But (within the confines of the law) it is effectively his, and only his, company.

He started it. He’s owned it right up until the IPO, and still retains 60% of the voting power.

I’d say that for all practical purposes he controls it (but not owns).

Good thing too. Facebook wouldn’t be the same without Zuck.

Reminder that the deviant behavior is caused by the employees of these companies. They are responsible for their actions, and for continuing to work there despite the evil they do every day.

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