You know, given how often liberals denounce corporations, you think they would understand some basic truths about corporate law and governance. Or maybe their hatred is born out of ignorance, come to think of it. But here are some basic facts missing from this discussion.
First, Al-Waleed didn’t “fund Fox News” as you often hear claimed—not unless he was part of the IPO, which has not been claimed. Let me explain. News Corp is a publicly traded company. So this is what happened. At some point in the history of the company they had an initial public offering. At that time various people bought the stock. Those people put money into News Corp’s treasury.
Then they sold the stock to someone else. And how much did New Corp get out of that transaction? Nothing. And then the stock probably changed hands several more times, and finally 7% ended up in the hands of Al-Waleed.
Think of it like selling a car, because in a real sense it is no different. When you sell your car to someone, that person is “funding you” in the sense that he is giving you money. But if that person sells the car to another person, and that person sells to another person, those transactions literally have no effect on your finances. Its precisely the same way with stocks.
And yeah, you read that right. He owns a paltry 7% of the company. Which leads me to my next point:
Second, Al-Waleed has no power in the company. To try to hide the ball on this Al-Waleed is called “co-owner” very often, or the second largest shareholder. And its bullshit, all of it.
Let’s take my company. I created it (although I am not its owner or even a stockholder) so I know a lot about it. It’s not a publicly traded company, but it is a corporation, you know with stock and all that good stuff. Now the CEO owns 49% of the stock. He is technically its co-owner. That’s a lot more than 7% so you might think that means his power is much greater.
Er, no. Why? Because the other stockholder, the President of the company, holds 51% of the stock. So this is how the votes go: “I, the President, vote yes. You, the CEO votes no. The ayes have it.” Not that the President is nearly that obnoxious, but everyone understands, the President is in charge. The CEO’s real power comes from his ability to persuade the President, and in that sense, he is very powerful within the company. But when the chips are down, the President wins.
And of course corporations are typically very close to being straight majoritarianism. The minority stockholders have a few rights, which might matter in certain limited circumstances, but its nothing like, say, the Federal Government where those who are in the minority still retain many rights. And of course unlike in our government a minority of voters could literally own the majority of votes.
So let’s apply that to News Corp. According to this page the largest shareholder is K. Rupert Murdoch, with 39.7% of the stock. So let’s suppose 100% of the stockholders show up to vote. For Murdoch to get his way, he has to gain about 12 percentage points. By comparison, Al-Waleed has to win about 45 percentage points. Or to put it more baldly, for Al Waleed to win an argument with Murdoch, he has to convince 83% of the remaining voters to side with him.
Now obviously in reality not everyone shows up at such meetings, but you would have to have shareholders representing around 80% of the stock to be in attendance to even have enough people to overrule Murdoch, even if opposition among shareholders is unanimous. And of course other members of the Murdoch Family are invested in this too, further complicating matters.
So in some sense he is “co-owner” but it’s a title, only. And being the second largest shareholder doesn’t mean very much either. And anyone who can do math and understands corporate law at all, knows that.
Which is not to say that the minority shareholder is completely without power. Even owning a single stock gives you the right to a seat at the table, and like the CEO of my company, it gives you the opportunity to persuade. And you can always vote with your feet, which in turn might influence the price of a stock and that might in turn influence the other shareholders. But you aren’t in charge, and that is just the cold reality of it.
So as my title suggests, holding that stock is not even relevant. Its just bullshit. And anyone with minimal knowledge of corporate law and a degree of critical thinking.
By the way, exit question. Given that it is a publicly traded company, what on earth could News Corp do to prevent the sale of stock to that man? They could no more control the future sale of that stock than you can control the future resale of a car you sold.
