These kinds of suits are so common that directors and officers of large corporations all carry insurance against them --- is there something particularly notable about this suit?
Oh, yeah, no, I totally get why a serious lawsuit against Facebook execs would be on-topic for HN! I'm more asking, doesn't Facebook see a lawsuit like this like once a quarter?
This suit is regarding a privacy order they failed to meet and the investors claim this led to the Cambridge Analytics affair. Not a once a quarter repeat event.
If by "break a law" you mean "commit an unlawful act", including colorably reneging on contracts or committing torts as well as violating regulations and committing crimes, then yes, I think every major corporation in America does thats several times a quarter.
IANAL, but this case sounds like the extremest of long shots to me. Does anyone who knows about this sort of thing have any idea how likely such a lawsuit is to suceede?
You would have to be a shareholder (which you probably are if you have a 401k) and you would have to show that their decision to save and use private data has hurt their enterprise such that they would have been more profitable and/or grown more/faster had they not done so.
I'm cynical enough to think that this, too, will result in a payout of some kind. Whatever it might be called.
Companies like this are too big to be held accountable. Every problem is soluble given their capitalization, the only consequence is irritation and fighting—usually among those already complicit and merely concerned that they didn't maximize their view—of interest to few.
"We knowingly bought into a scheme where one man - the one we're suing - has 51% of the voting power on all corporate affairs. We think he screwed up and owes us money. Can you help us?" - the shareholders to the Delaware CoC, in effect.
Remember: the people who work for these shareholders - most of which are institutional investors, not individuals - went to exclusive schools and make more in bonuses than you will in a lifetime of work, at least if you're the average American.
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.
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.
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.
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.
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.
> 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.
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.
> 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.
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.
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.
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.
I have worked with asset managers, employees come from all around the world and vary in background. Yes there will be a weighting to the more privileged kids but most of the jobs don't make big bonuses. That's just the Sales leads and funds managers.
But it's irrelevant. As the institutional investors who invest are doing so for their underlying investors e.g. Pension Funds.
The people suing, if win, will report higher results and their bonuses will be higher but so will the underlying investors.
> Remember: the people who work for these shareholders - most of which are institutional investors, not individuals - went to exclusive schools and make more in bonuses than you will in a lifetime of work, at least if you're the average American.
So? What's your point? We should root for Zuckerberg because the people who are suing him are rich? Zuckerberg is an order of magnitude worse in all those resentment metrics you list than the people who are suing him.
My point is that everyone involved is awful and that none of this should happen in a remotely sane society. What kind of corporate governance model allows for a dictatorship? Why aren't the shareholders just selling if they think they were wronged the better part of a decade ago?
Because we're insane.
Maybe they're filing the suit out of the fiduciary duty to their fund members. Worst-case scenario, it goes nowhere. Best-case scenario, they get money out of Meta. Now, they're doing this off the backs of the people of Delaware, but whatever.
Not true. These are people who are likely responsible for global economic meltdowns and then asking for handouts (anyone remember 2008). Zuck isn’t making anyone’s life harder without them signing into his platforms. Just stay off of them if you don’t like zuck.
But you can’t stay off the financial system. So, creepy as zuck maybe, I think he is impact for evil is a whole lot less.
It was a comment revealing his attitude towards what would soon become his customers in a globally-impactful business over which he has sole control. It’s more relevant than ever today.
In most cases those comments weren’t about the service they still running at 40. His comment was also him self-reporting that he shouldn’t be trusted with user data, when his whole business revolves around user data. If it was some off color joke in poor taste, I wouldn’t care so much.
He's an entirely different person now. There is no one under the age of 45 on the planet who would say "you know, yeah, I'm fundamentally the same person I was 22 years ago."
I'm not saying he's a better person. Just different. Judge him by what he says and does now, which is no better.
I feel that I fundamentally am the same person. More experienced, of course. Less naive and idealistic. But my sense of right and wrong? Pretty much the same.
You can be an asshole at 22 and still be an asshole at 45. You might be an asshole in different ways, but an asshole is still an asshole. As I'm often reminded of myself
The things Donald Trump says are sufficiently untethered from reality that whether a given statement is truth or lie could be used as a pseudorandom number generator, so I don't know if that statement counts for or against my claim.
I don't disagree with your point, but nothing is absolute. In this case, he's essentially done a tremendously good job of showing us since then that, no, we can't trust him. He's more than lived up to his words.
Is there any proof that he said that, apart the movie? I'm not arguing he didn't, but the only place I've found to support that is the movie. I didn't try very hard either...
This reminds me of the 2000s when the media was full of “terrorism experts” who were calling everything a terrorism risk. There’s a never ending supply of these experts for whatever topics currently in the news.
Hm, btw, what idiot flags link to sources that show that another idiot is arguing there's no genocide based on data linearly extrapolated from pre-genocide population growth?
I disagree that it's a genocide, but if you're going to link a source showing it is, the United Nations, and/or the wikipedia page on the topic, would be better than a paywalled NYT article.
These kinds of suits are so common that directors and officers of large corporations all carry insurance against them --- is there something particularly notable about this suit?
It discusses HN-adjacent VCs, Delaware business law, and "Big Tech" and government regulation.
But, yeah, the $8B in question hardly seems existential to FB.
Oh, yeah, no, I totally get why a serious lawsuit against Facebook execs would be on-topic for HN! I'm more asking, doesn't Facebook see a lawsuit like this like once a quarter?
Sorry, my personal information bubble is not calibrated to maintain a half-way-objective estimate on that.
Perhaps if we hang around here looking sad someone else will research the answer and tell us?
Does Meta break a new law every quarter?
This suit is regarding a privacy order they failed to meet and the investors claim this led to the Cambridge Analytics affair. Not a once a quarter repeat event.
If by "break a law" you mean "commit an unlawful act", including colorably reneging on contracts or committing torts as well as violating regulations and committing crimes, then yes, I think every major corporation in America does thats several times a quarter.
IANAL, but this case sounds like the extremest of long shots to me. Does anyone who knows about this sort of thing have any idea how likely such a lawsuit is to suceede?
Does anybody with knowledge of the process know if this can be a path to holding companies liable for the private data they save?
You would have to be a shareholder (which you probably are if you have a 401k) and you would have to show that their decision to save and use private data has hurt their enterprise such that they would have been more profitable and/or grown more/faster had they not done so.
How many shareholders are leading this? It better not be someone who owns one share that they didn't even hold for that long....
I'm cynical enough to think that this, too, will result in a payout of some kind. Whatever it might be called.
Companies like this are too big to be held accountable. Every problem is soluble given their capitalization, the only consequence is irritation and fighting—usually among those already complicit and merely concerned that they didn't maximize their view—of interest to few.
Meanwhile, Rome is burning. Oh well.
Meta are not involved.
Individuals directors are being sued, not the company
"We knowingly bought into a scheme where one man - the one we're suing - has 51% of the voting power on all corporate affairs. We think he screwed up and owes us money. Can you help us?" - the shareholders to the Delaware CoC, in effect.
Remember: the people who work for these shareholders - most of which are institutional investors, not individuals - went to exclusive schools and make more in bonuses than you will in a lifetime of work, at least if you're the average American.
The company, board of directors still owes a fiduciary duty to minority shareholders. Having 51% of voting control doesn't change that.
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.
Activist investors have always been around.
They only pull their investments if they fail.
You can also work collectively with other shareholders to directly impact the board
If a manager doesn't want to manage within the law for the benefit of shareholders, their recourse is to purchase all the shares.
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.
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 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.
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.
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
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?
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.
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.
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.
“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.
Have you worked in this area?
I have worked with asset managers, employees come from all around the world and vary in background. Yes there will be a weighting to the more privileged kids but most of the jobs don't make big bonuses. That's just the Sales leads and funds managers.
But it's irrelevant. As the institutional investors who invest are doing so for their underlying investors e.g. Pension Funds.
The people suing, if win, will report higher results and their bonuses will be higher but so will the underlying investors.
> Remember: the people who work for these shareholders - most of which are institutional investors, not individuals - went to exclusive schools and make more in bonuses than you will in a lifetime of work, at least if you're the average American.
So? What's your point? We should root for Zuckerberg because the people who are suing him are rich? Zuckerberg is an order of magnitude worse in all those resentment metrics you list than the people who are suing him.
My point is that everyone involved is awful and that none of this should happen in a remotely sane society. What kind of corporate governance model allows for a dictatorship? Why aren't the shareholders just selling if they think they were wronged the better part of a decade ago?
Because we're insane.
Maybe they're filing the suit out of the fiduciary duty to their fund members. Worst-case scenario, it goes nowhere. Best-case scenario, they get money out of Meta. Now, they're doing this off the backs of the people of Delaware, but whatever.
Not true. These are people who are likely responsible for global economic meltdowns and then asking for handouts (anyone remember 2008). Zuck isn’t making anyone’s life harder without them signing into his platforms. Just stay off of them if you don’t like zuck.
But you can’t stay off the financial system. So, creepy as zuck maybe, I think he is impact for evil is a whole lot less.
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There are so many reasons to hate Zuck. But bringing up something he said as a teenager in a private conversation is one of the dumbest reasons.
It was a comment revealing his attitude towards what would soon become his customers in a globally-impactful business over which he has sole control. It’s more relevant than ever today.
"Let every 40-year-old be measured by the shittiest thing they said when they were 19"
In most cases those comments weren’t about the service they still running at 40. His comment was also him self-reporting that he shouldn’t be trusted with user data, when his whole business revolves around user data. If it was some off color joke in poor taste, I wouldn’t care so much.
Even if he said something in his role as CEO of Facebook?
"Young people are just smarter" and so on...
He's an entirely different person now. There is no one under the age of 45 on the planet who would say "you know, yeah, I'm fundamentally the same person I was 22 years ago."
I'm not saying he's a better person. Just different. Judge him by what he says and does now, which is no better.
I feel that I fundamentally am the same person. More experienced, of course. Less naive and idealistic. But my sense of right and wrong? Pretty much the same.
You can be an asshole at 22 and still be an asshole at 45. You might be an asshole in different ways, but an asshole is still an asshole. As I'm often reminded of myself
Yes, that's exactly my point.
Here's the neat thing. If someone is an asshole at 45, you don't need to reach back to when they were 22 to find evidence of them being an asshole.
Donald Trump famously said in his 70s that his personality hasn't changed since he was a child. I'm sure there are others like him.
The things Donald Trump says are sufficiently untethered from reality that whether a given statement is truth or lie could be used as a pseudorandom number generator, so I don't know if that statement counts for or against my claim.
I don't disagree with your point, but nothing is absolute. In this case, he's essentially done a tremendously good job of showing us since then that, no, we can't trust him. He's more than lived up to his words.
Is there any proof that he said that, apart the movie? I'm not arguing he didn't, but the only place I've found to support that is the movie. I didn't try very hard either...
Yes, he said (well, typed) it.
https://www.businessinsider.com/well-these-new-zuckerberg-im...
Thanks for the link, but I can read that, too many intrusive ads. I'll give it a go when I get to a computer.
Goalpost mover.
Was that in the movie? I thought it came from emails released in court.
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What genocide? https://www.worldometers.info/world-population/state-of-pale...
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This reminds me of the 2000s when the media was full of “terrorism experts” who were calling everything a terrorism risk. There’s a never ending supply of these experts for whatever topics currently in the news.
And?
Hm, btw, what idiot flags link to sources that show that another idiot is arguing there's no genocide based on data linearly extrapolated from pre-genocide population growth?
I disagree that it's a genocide, but if you're going to link a source showing it is, the United Nations, and/or the wikipedia page on the topic, would be better than a paywalled NYT article.
Wow. Go Meta shareholders!!
Meta's stock did 26x since 2012, they're already winning
Meta absolutely pumps out money.
It's embedded in the sales process of very many, perhaps most, businesses, and their margins are huge.
https://valustox.com/META
They are upset it didn't go 66x.