These executive salaries ara usually shareholder's money (like the whole business), and the problem is that shareholders are often too distributed and don't have enough control to do anything about it.
> the problem is that shareholders are often too distributed and don't have enough control to do anything about it
Any examples to cite? Because I can't think of an example of a single company where this is true.
Usually it's a small group of shareholders that hold more than 50% of the company, making it essentially theirs as they hold a winning number of votes. They run it in a way that benefits them, placing their people on the Board of Directors, setting their goals, which the C's just follow. Sure the C's get paid well, but that's negotiated with the Board (who represents the majority shareholders).
I'll concede that sometimes, when the majority shareholder is also in the C-suite, you see more blatant "take from the company and give to myself" behavior. But as the majority shareholder it's effectively their company, and they can do what they want with what they own (basic freedoms I think we all agree on?). For example, Elon, as majority shareholder, could simply liquidate Tesla and pocket his share of the sale. It's his company.
Poorly run companies usually have a poor Board of Directors. This usually happens when the majority shareholders are short sighted and prioritize short term profit over long term growth.
I've seen situations where the company/board claws back money after a C leaves, because the C was negligent/dishonest in their doings.
In all of the above cases, the shareholders are the one's holding the cards. I can't think of a single case where the board conspired with the C's to fleece the shareholders. To do so would likely result in criminal charges.
>But as the majority shareholder it's effectively their company, and they can do what they want with what they own (basic freedoms I think we all agree on?). For example, Elon, as majority shareholder, could simply liquidate Tesla and pocket his share of the sale. It's his company.
Yeah, but minority investors know that going in. If I buy 10 shares of Google, it's unrealistic for me to think that I hold any power as a shareholder. I'm simply along for the ride.
A large investor buying say, a 25% stake in a company, while being aware of an existing 51% voting block, knows that their 25% position is a minority and does not come with significant influence.
Any investor who buys a large minority stake and later complains about not having control didn't do their homework ahead of time.
If a minority shareholder doesn't like the way the company is run they have three choices:
- sell their shares and buy-in to a more attractive company
- buy up a controlling interest and get their voice heard
- shut their mouth and deal with it
Why should the minority opinion be allowed to overrule the majority? The majority has more skin in the game, they have more money at stake in the company.
Controlling shareholders have a fiduciary duty to deal with minority owners in a fair, just, and equitable manner and they may not use their power to control corporate activities to benefit themselves alone or in a manner detrimental to the minority.
