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Comment by gnopgnip | Hacker News Reader

The company, board of directors still owes a fiduciary duty to minority shareholders. Having 51% of voting control doesn't change that.

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If you don't like how a company is being managed, your recourse is to pull your investment.

That wouldn't make the investors whole for past violations, which is why they are suing for breach of fiduciary duty.

Except that there are limits on fiduciary duty. It should not be confused for a right to earn money. Losing money on a bad investment is part of the game. The duty that they have is to carry out the terms of the investment prospectus and nothing more.

Shareholders have the right to not get lied to by executives. The SEC forces companies to put lots of stuff into their annual reports, giving companies lots of opportunities to lie to shareholders. Companies basically write "we aren't doing anything morally ambiguous" in their annual reports, almost always lying when they do so.

https://www.bloomberg.com/opinion/articles/2019-06-26/everyt...

Except that intentionally making bad investments fully knowing that they are bad investments is not something you can put aside as just “bad investments you lost money on”. This is absolutely something the board needs to hold the executive team accountable for and is part of their fiduciary duty.

You're right, they absolutely should.

I bet the chairman, Mark Zuckerberg, is going to steer the board to get right on with punishing the CEO, Mark Zuckerberg, for his careless administration of the company.

This. I think the executives have an obligation to state their plans so investors can decide if they want to back it. But if making top dollar is a requirement then lots of companies should liquidate and invest in other companies with higher returns or something.

You can also sue them, because the law says they have a fiduciary duty towards you.

You can also work collectively with other shareholders to directly impact the board

Activist investors have always been around.

They only pull their investments if they fail.

If a manager doesn't want to manage within the law for the benefit of shareholders, their recourse is to purchase all the shares.

Is this fiduciary duty to make as much money as possible (who gets to decide what the max is), or just not to scam or steal from your investors?

Essentially, yes, it's to increase stock value, but generally the courts are to defer to executives' judgment on such decisions as long as the executive is acting in good faith. So in practice you don't have to, like, exploit people or anything as long as you say not exploiting people is good for the long-term health of the company's good will or something.

As per that article, it is said they failed to comply with a law. And complying with laws will be a given in most contracts.

Making money comes after complying with law and rules.

Can you cite case law for this opinion which would apply to a large public corporation during normal management?

The idea that directors of a corporation have a fiduciary duty to the company is not controversial. See e.g. https://en.wikipedia.org/wiki/Board_of_directors#Duties

No seems clear that the board of directors have fiduciary responsibilities to all shareholders in Anglo common law.

However reading some of the case law it seems that being a majority stockholder wasn’t always held the have same fiduciary responsibilities. Sounds like they still don’t in some jurisdictions?

Sort of fascinating and shows there’s some legal distinctions between majority stockholders and board of directors. IANAL but seems less cut and dry than summary articles pretend.

A blanket statement like the one I replied to oversimplifies things and implies Delaware law is federal law. It may be the largest and most influential in the US but it’s not the only equity law in the US.

> However reading some of the case law it seems that being a majority stockholder wasn’t always held the have same fiduciary responsibilities. Sounds like they still don’t in some jurisdictions?

I don't think that is relavent. As far as i understand Zuck is not being sued because he is a majority shareholder.

> A blanket statement like the one I replied to oversimplifies things and implies Delaware law is federal law.

I don't think anything you said disagrees with the statement you responded to. The statement you responded to never claimed that majority share holders have a fuduciary duty.

Interesting re-reading the Wikipedia link after reading some of the case law summaries this sticks out:

> Also, the duties [of board of directors] are owed to the company itself, and not to any other entity.[42] This does not mean that directors can never stand in a fiduciary relationship to the individual shareholders; they may well have such a duty in certain circumstances.[43]

Again it appears more nuanced than just “board of directors have fiduciary responsibility to minority shareholders”. Actually seems incorrect to phrase it that way even.

I think the idea is more that directors have a duty to the company (not the minority shareholder), and minority shareholders can bring suit on behalf of the company to allege that the duty to the company (and not themselves) was violated. When talking informally that feels like it amounts to basically the same thing, just technically slightly different [ianal,i might be out of my depth here]

IANAL either, which is why I asked for case law. I’d like to understand a bit more.

Strong statements like the OPs without qualifications can lead to skewed ideas. For example look at the amount of damage done by the “shareholder primacy” theory which many believe is a core legal requirement rather than a legal theory.

I too would like be enlightened, I'm not a lawyer but I 'd like to feel smarter, knowing the names of some cases and what was decided.

The other comment's Wikipedia link had footnotes for "Percival vs Wright [1902]" and "Coleman v Myers [1977]", but these are UK and New Zealand cases.

For the US, https://en.wikipedia.org/wiki/Fiduciary#Fiduciary_duties_und... seems most appropriate wiki link but most of the footnotes were for analysis and not cases.

Case law for the proposition that the company has a fiduciary duty to its shareholders? Here's a top google result for you: https://online.hbs.edu/blog/post/fiduciary-duty-to-investors

https://law.stanford.edu/wp-content/uploads/2023/01/Fiduciar...

Ervin v. Oregon Ry. & Nav. Co. 1886 and Rothchild v. Memphis & C.R. Co. 1902 would be some of the earlier cases

Thanks! Phrases like fiduciary obligations get brandied about so often they can loose meaning.

you're asking someone to cite case law for a random post on a forum?

> The company, board of directors still owes a fiduciary duty to minority shareholders. Having 51% of voting control doesn't change that.

Not OP but they were very confident in what they wrote. I'd assume they'd be able to provide evidence. Just because it's the law doesn't mean we're not gonna get asked for evidence. Maybe we should be more careful with our claims then.

You asked for them to cite case law. Certainly a link to a random article would convince you, though?

Whatever is necessary to support the claim

> The company, board of directors still owes a fiduciary duty to minority shareholders. Having 51% of voting control doesn't change that.

No, not a "random" article, but one that actually did do the homework and check law. Someone has to, otherwise you can't claim to know what the law says.

demanding weird standards of proof in a conversation is an annoying thing to do. if you want to know with more confidence maybe take two seconds to google it

Not sure what your point is, the Meta shares are doing great, hence Zuckerberg being in charge of things works.

From the second paragraph:

> The trial, set to begin Wednesday in Delaware’s Court of Chancery, aims to hold Zuckerberg, former Meta COO Sheryl Sandberg and other former executives personally liable for the billions the company spent to resolve allegations that it failed to safeguard user data.

Stock being up doesn’t mean they’re not allowed to voice dissatisfaction

Dissatisfaction to what?

The reply I answered mentioned the fiduciary duty to all shareholders, but, in my limited understanding of the term, based on how I see the term used, this means the company has an obligation to make moneis for the shareholders. Which Meta does, quite well.

Obviously, people can be dissatisfied about anything, but I'm not sure Meta is failing the "fiduciary duty" aspect.

Suppose meta stock price went up 10% despite the fact that Zuckerberg burned $1B in cash just for shits and giggles in a literal bonfire.

Are you saying you perspective is that investors have to suck it simply because the stock is up?

You can't tell your investors that you are going to make money building a farm, and then instead take their money and build houses with it. Even if the end result is you made more money building houses than you ever would have building a farm, you can't lie about your plans for the money. Consider an investor might already be heavily invested in building houses, and they want to diversify their portfolio by by investing in something that builds farms.

You are getting down voted because all the promises FB/META made to investors are available online and they never lied about how they are going to make moneys.

I never said they did, I was just telling OP how "we made money don't complain how" isn't adequate

“The stock is up, but it would be up more” - investors

Breach of fiduciary duty is already extremely hard to prove when share prices are down. Mark has the added benefit of the doubt that arises from the fact that his incentives are fundamentally aligned with the company's incentives, given how much of his wealth is tied up in those shares.

Being allowed to voice something doesn't make the something valid.

Hence the legal work, yes

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