Illegal company manifesto over at T=Machine

kboesky — March 21 2009, 18:04:54 UTC

Erik, Your interpretation of the case you cited is a very common mistake. The Ford case surrounded dividend payment and the language you a citing is dicta, not the opinion of the case. Ford was withholding profits when payment of dividends was very common and often an expectation of investors. At the time, the market valued companies based on anticipated dividends, not growth. It was also decided well before the disclosure requirements arising with the birth of the SEC and the two securities acts. The relevance of the opinion today is only that minority shareholders have rights. Even if your interpretation was accurate, it would still not be relevant. First, the shareholders would be investing with full disclosure. They know a portion of the profits will be reinvested in employee projects. Perhaps they would do this because they believe the employees will be more productive if management lets them work on things of personal interest. Ford did when they did the factory lighting tests. Second, the projects are authorized by the management who serve at the pleasure of the board. There is a mechanism for the shareholders to replace management if they don't like the decision. The beauty of the disclosure and statement of the principles is that if you don't agree, you don't have to participate. Keith

erikbethke — March 21 2009, 19:46:55 UTC

I have to admit I am interpreting from one source: The Corporation from Joel Bakan.I would be happy to be wrong!But it comes down two two essential threads: A) We will have a non-standard company organization in order to improve productivity = e.g. more profit for you the shareholders...= or =B) You knew we were NOT about optimal profits for the shareholder Mr. Investor, and so how would you like to fund our lifestyle?To me what Google does is essentially A in marketing to the retail investor, even if at the heart of the company their is a grossly profitable ad business and the rest is a bunch of lifestyle hobby R&D.In short I would think if Adam is to be successful in raising money he would have to market the investment as A over B...-Erik

anonymous — March 15 2009, 14:10:44 UTC

Does this override the articles of association, and the shareholder agreements?My understanding was that these documents trumped everything else. I thought (amongst other things) they defined - on a company by company basis - the interpretation of that vague idea of "benefitting the shareholders".I'd be interested in Dodge v Ford, although I'm sure it's not that simple. Just thinking about it, in most cases executives on a daily basis do many things that most of their shareholders would consider "not beneficial" but the execs do because "we know better than you do, that's why we're running the company; if you dont like it, fire us at the next AGM/shareholder meeting".

dhw — March 15 2009, 13:25:20 UTC

Dodge v. Ford (which, incidentally, is a Michigan Supreme Court Case) isn't quite as clear as that, and there are some legal experts who argue that it is in fact, "dead law" at this point. Others of course, disagree.http://www.professorbainbridge.com/Lists/Posts/Post.aspx?ID=1581