> given they collectively advise $20 trillion worth of assets, would someone please explain why this is not toxic to a free market
They're recommendations. Reading board proposals and working out the consequences of CEO pay packages is (a) hard and (b) not particularly rewarding. Instead of every investment firm having someone doing hard and non-rewarding work, they outsource it to these proxy advisory firms.
Keep in mind who these advisory firms' customers are: the investors. It could be impolite for XYZ shareholder to publicly vote against Elon Musk. It is easier to call one's proxy advisory firm and let them know your thoughts. (It would also be more effective, from a political perspective, at achieving her goal.)
(Nitpick: they advise in respect of $20 trillion of assets. They don't make buy/sell decisions.)
> I'm not convinced that everyone who's knowledgeable enough to preside over this hearing has been paid by this specific firm.
Literally every economic decision Yellen has to advise upon will affect some firm or organisation to which she has provided services.
> Nobody's saying that the advisor on this issue needs to have never given a paid speech or worked for one of the big players.
But this is exactly what you are saying by implication. Whatever regulatory outcome occurs here will affect all trading firms, which means that all advisors will have been paid by someone at some stage in the past affected by any outcome.
> They're saying that the advisor should not have been paid $800,000 by Citadel over the course of multiple speaking arrangements because that's an obvious sign of a preexisting relationship and therefore a conflict of interest.
That is not how conflict of interest works. If there is no current relationship, and no indication of a future relationship (e.g. quid pro quo or a promise of employment), and no obvious link to the firm (e.g. an unpaid board seat, etc), then I am finding it hard to see how a conflict of interest might occur.
> Who is judging the code not being satisfactory? Can we see example of the code in question?
Why should you see the code, or learn who the judge is, or be the judge yourself? Are you qualified to judge someone else's $44B acquisition? If you haven't recently purchased a social network for $44B, then you are not qualified to look at things from their perspective either.
Go start your own company and then you can do what you want with yours and your investors' money, but Elon Musk doesn't owe you a shred of explanation for anything he chooses with the company that he bought that he clearly believes was on life support, at best.
This presumes open and direct confrontation, which means the relationship is going bad, and which I’d speculate most people would rather avoid. You’re forgetting a bunch of things, like what the investment terms might say about it, what your reputation is going to be down the road, all the ways people can apply lots and lots of pressure, how important networking can be, and the fact that in some cases the investor is providing other resources and/or might be the gateway to future investment. Getting to a place where you’re openly ignoring your investors and calling for a board vote to overturn them is a last resort, and is playing Russian roulette, not the first thing to try if there’s disagreement about their advice, right?
>it would be a mistake to assume that others in the same position would do the same because you feel they should. They don't and they probably won't.
I don't assume that.
>people that do not disclose their positions are not decent human beings.
Decent human beings is a bit broad, but I do think they're engaging in an unethical action, yes.
>Holding HN to some kind of imaginary standard when it comes to discussing public companies is both unproductive and likely will not illuminate but will merely give the illusion that if someone does not disclose their position that they don't have any. After all, who will verify what anybody writes?
I don't expect to illuminate it and I don't think the community would fall for the illusion you think that it would any more than it already does. Perhaps the root disagreement comes down to doing what you can when you can even if the effect is only a small one, which is kind of what I'm doing here.
>full disclosure: I hold about 2 billion worth of Tesla stock...
I don't know whether you do or not (EDIT: do or do not disclose that is, for clarification) but I think if you post about Tesla without disclosing that holding, that's unethical. Whether it's against the rules or not.
> I have difficulty imagining a company led by a man being valued at $10 billion based on a lot of hot air and then going to zero overnight as happened with Theranos.
An investor should research the company they are investing in. If it's a public company there is a wealth of current and historical data. It takes time, but it's not hard.
This is basic stuff, right?
In the specific case of WeWork, even though it was a private company, there was a massive amount of information questioning its business model, the founder, and its corporate structure.
I have no stake in WeWork, and I barely care about them, but even I knew what they were about.
>Wouldn't it be better to just live under a system of laws that prevents insanity like this? And then you could spend your time learning and being productive instead of poring over the details of how you're being duped in any given situation?
NO!!! I'm flabbergasted someone would make such a statement. You have to take responsibility for your life. You can't just offload that responsibility on someone else. Just because a law is made, doesn't mean it's followed, doesn't mean there aren't loopholes, doesn't mean you're protected. Ask Bernie Madoff investors who lost their life savings even though there were laws and regulations that 'protected' them. You still have to do your own diligence. It's like crossing the street and getting hit by a car - does it matter if you had the right of way and the car broke the law if you're now disabled for life? You look both ways even when the light green before crossing the street.
I'm also not sure what a law to prohibit the children of founders from taking an active role in the operations of said company would even look like. How do you even begin to craft such a law?
And do you even want to? If a child of a founder was around a company from a young age learning how it is run, the culture, and the business - is it that bad if the board and shareholders decide this person, with a wealth of experience, would be chosen to run it? Maybe, or maybe not. This is why laws are a blunt instrument. A law could be made to prohibit this, but it would then prohibit all the cases where it would have been beneficial to the company.
> but it certainly seems risky going against an army of people that hate you and are willing to lose a lot of money just to spite you.
That's the part I don't understand. Other institutional investors will make money off this vindictiveness, right? It's not like they're punishing Wall Street as a collective; just the ones who have short positions.
> The risk portfolio of Vanguard just went up considerably because in the case that they fully lose faith in the board, they no longer have the option of installing a friendly board, they must simply liquidate their holdings. This, in turn, makes them more skeptical of further smaller (non-takeover) investment because it’s more to liquidate and more risk.
It sounds like your interpretation Vanguard's risk profile / likelihood and their interpretation differ. And given that I trust Vanguard's assessment.
Frankly, if I were an institutional investor, I'd probably prefer the poison pill than have Twitter become a toy subject to Elon Musk's random political fight.
Wasn't he all in on Doge coin, except he wasn't, and all in on bitcoin but then not fully, then some other random alt coin, oh and then he's back in on Doge again and how to improve it.
It sounds like sound fiduciary duty to not let your company be subject to those whims.
> The board negotiated a deal with Elon after putting the poison pill into effect.
There was no "negotiation" with the board. Elon just made an unsolicited offer and said take it or leave it. The board "left it" and yet here we are.
> If Elon had made a deal directly with the stockholders, that would have triggered the poison pill.
What? That's not how poison pills work. Poison pills exist to prevent hostile takeovers. It isn't there to prevent someone from talking to the stockholders. If the stockholders agree to the deal, it is no longer a hostile takeover.
> He surely spoke with and lobbied the stockholders for support, but the deal he agreed to was approved by the board.
Yes. The deal was first rejected by the board. And then the deal was approved by the board. Why do you think that was? What made the board change their minds? I wonder. You might have a point if elon raised his offer from $54.20 to a much higher number. But all reporting indicates he didn't change his offer.
Of course the deal was approved by the board. My point is that the shareholders made them approve the deal.
That doesn't really seem too hard to stay on top of. Might not be able to rattle them off later, but even spending 10 minutes looking into the investment of the day should be able to expose really obvious conflicts of interest.
>> You can absolutely know and understand all of those things without understanding the product, mostly by asking the people who do understand the product.
You can't figure who to trust (even if you don't realize it, it's analogous to Gell-Mann Amnesia), you can't put the pieces together in your head.
>> Otherwise you're arguing against the concept of delegation, and there are several mountains of counterexamples were you to try.
Delegating works to get work done, not to understand things. There is almost zero history of institutionalizing good investment decision making (Sequoia might be a one generation counter). Guys like Buffett sit in a room all by themselves. Almost every example of investment outperformance through time is a singular brain or very small team. If delegating worked, this wouldn't (and couldn't) be the case.
> The involvement of the banks was always the confusing part of that deal. Really made me lose respect for their judgement.
Agreed, but to be fair the bank transactions were for debt rather than equity, so they will still end up ahead unless he really does drive the company to bankruptcy. That’s a real possibility, but they’re in better shape than the equity investors who have in one public case[1] already written down the investment 47%.
They're recommendations. Reading board proposals and working out the consequences of CEO pay packages is (a) hard and (b) not particularly rewarding. Instead of every investment firm having someone doing hard and non-rewarding work, they outsource it to these proxy advisory firms.
Keep in mind who these advisory firms' customers are: the investors. It could be impolite for XYZ shareholder to publicly vote against Elon Musk. It is easier to call one's proxy advisory firm and let them know your thoughts. (It would also be more effective, from a political perspective, at achieving her goal.)
(Nitpick: they advise in respect of $20 trillion of assets. They don't make buy/sell decisions.)
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