July 13, 2020

A Corporate Governance Question

As many of you know Weyland Yutani Tencent ( a massive Chinese umbrella corporation that is controlled by the Politburo) has bought large stakes in many western media companies. This article focuses on their investments in video games and they appear to have majority stakes in Sharkmob, Supercell, Grinding Gear, and Riot.

My question is this: While a majority of shares does imply control, how much influence do smaller percentages indicate? Does a 20-40 percent share have real influence? It might get one on the board of directors, and of course the immense lure of the Chinese market is always going to be a severe temptation to those of weak conscience in making creative decisions or censoring content. Given the deep pockets of the CCP, less direct influences on board members are certainly likely and probably influence shareholder votes to a great extent, but I'm curious as to how much straight up power such share percentages might represent. 

References on such matters seem to be very opaque on this particular point, but I probably just don't know what references to check out in this field as it outside my bailiwick. 

Posted by: The Brickmuppet at 05:20 PM | Comments (3) | Add Comment
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1 In modern day it's rare for most large corporations to have a majority shareholder.  Each of the minority shareholders will have their own agenda.  This means that most boards function more like Parliament than Congress.  The CEO, much like a Prime Minister, needs to keep support from a majority of the board to keep his job.
Short form, a major minority shareholder will have considerable influence, even if they aren't controlling.

Posted by: StargazerA5 at Mon Jul 13 18:07:59 2020 (SdLmn)

2 It's going to depend a lot on the company. If you have 51% of the company, you can tell the other 49% to go jump in a lake; you're obliged to give them information but not to actually do what they want.
But if you have less than that, and you're in charge through agreement with other shareholders... you might come in one day to find out that your minority stake partner has been talking with the other shareholders, or that they bought the shares from those shareholders, and now someone else is in the driver's seat. This is often followed by the previous company's management rapidly being shown the door. You get a lot of "I invented something, created a company to market it, and was then pushed out by the VC folks" stories.
For a publicly traded company, it's not uncommon for most of the shares to be held by institutional investors who don't, of themselves, give a crap about the company in question, except that its stock may go up in value. A minority shareholder can often get their way in that kind of environment just by saying "look, this isn't a big deal, and if we don't get it we'll sell our stock and the price will take a hit". The guys representing mutual funds and public sector retirement funding aren't going to care about minor issues of creative direction.
I don't mean to say that you can go "okay, the next project must be hagiography of Xi OR WE SELL EVERYTHING", but say you were doing a zombie plague game, you could probably say "can we make the disease NOT have come from rural China?" and get results.

Posted by: Avatar at Mon Jul 13 19:31:12 2020 (v29Tn)

3 In my experience, percentage doesn't really matter, all that matters is that a shareholder can get in contact with a manager in say, storywriting, and say "as a shareholder, I would appreciate it if you didn't do xxx", and in all likelihood, xxx won't happen.  It's pretty darn rare for a dept to say, "no, that's compromising our integrity, kick that back to the board for a vote."

Posted by: David at Tue Jul 14 02:02:18 2020 (UmjNG)

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