Max KennerlyJan 2, 2023

One thing about the Southwest airlines logistics disaster is how it has the same cause as the threatened railroad strike and low domestic oil production and the lack of semiconductor manufacturing:

U.S. companies had more than enough money to fix it in advance, but they chose to goose their valuations with investor windfalls like stock buybacks.

The question is why our tax laws don't discourage that.

Show threadCaseyLJan 2, 2023

@maxkennerly

A SCOTUS decision some years ago (before Trump, IIRC) held that publicly-held companies' ONLY duty is to their shareholders. Not customers, not vendors, not employees.... just shareholders.

It was a totally dingbat decision, right up there with Citizens United, in the damage it's caused. Also right up there with the 19th Century SCOTUS decision which declared corporations as "legal persons."

Show threadglyphJan 2, 2023
@CaseyL @maxkennerly The decision that's commonly cited for this is Dodge v Ford (1919). It was Michigan Supreme Court, not SCOTUS. It's really unclear that it would hold up as an actual precedent, given that pretty much every company is incorporated in Delaware. But CEOs loooove to use it as a justification for whatever BS they're doing.
Show threadglyphJan 2, 2023
@CaseyL @maxkennerly Also, there's so much freedom to define what might be in "shareholders best interest" that Dodge holding up wouldn't even mean much. A long term holder of a stock might prefer prudent capital investment, whereas a flipper might prefer crazy buybacks or liquidation.
Show threadCaseyLJan 2, 2023

@GlyphStory @maxkennerly

You're right! I know (or thought I knew) I had read about a more recent case in which SCOTUS upheld the shareholders-uber-alles reasoning, but now I can't find any decision that is on point.

What I did find was an article from 2019 wherein The Business Roundtable staked a claim that corporations MUST be socially responsible. But that was before Covid upended everything; not sure if their project is still active.

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@CaseyL @maxkennerly Oh! You may be thinking of Revlon (https://en.m.wikipedia.org/wiki/Revlon,_Inc._v._MacAndrews_%26_Forbes_Holdings,_Inc.) It's from 1986. Also not SCOTUS, but from the state court that actually controls this stuff (DE). That one isn't crazy and probably does kind of hold, if someone is trying to take the company private. But it does get brought up as justification outside of that context, which is BS. (IMHO, IANAL)
Jan 2, 2023 at 10:02pmWeb
Show threadglyphJan 2, 2023

@CaseyL @maxkennerly The reason I say it's not crazy is that as I read it, it just says that you can't use long term shareholder interest as a justification for accepting a lower buyout price when a company is going private.

Which, eh. To the extent that it implicitly asserts shareholder rather than STAKEholder primacy, I hate it, but it is at least narrow as written.

Show threadCaseyLJan 2, 2023

@GlyphStory @maxkennerly

I was thinking of two main prongs: using "shareholder value" to do a hostile takeover/LBO; and corporations refusing to take part in or even acknowledge the interests of the community around them. I.e, corporations used to be major donors to things like museums, hospitals, schools, and other "local assets." I don't know if they still are.

Many lawsuits are in process against Musk over taking Twitter private - but not SFAIK any former shareholders, who made $$$$.