3/28    Hi, let's say there's a small corporation.  The number of authorized
        shares is 1,000,000. All 1,000,000 shares are issued, and employees
        are granted 10% of that, and the founder grants himself 90%.  What's
        to prevent the founder from voting to double the number of
        authorized shares to 2,000,000 and screwing the employees with 2x
        dilution?  Other than all the employees getting pissed and leaving.
        \_ The board can do anything.  If you're a staffer and want to sue,
           you're welcome to but good luck on that.  You'll spend way more
           on lawyers than whatever you might have regained in a lawsuit and
           probably won't win anyway.
        \_ Word of advice, if the chair/founder/whatever is Ari Zilka, leave.
           He'll take most of the money and leave you suckers with
           almost nothing.
           \_ Please tell me more of the Ari Zilka story (I've heard rumors)
              \_ If I tell you the story my identity will be exposed.
                 Let's just say that he's born with special privileges in a
                 well connected family and feels entitled to do whatever he
                 pleases without regard to the well beings of the people
                 who works for him. Back then he and the VCs had deep inner
                 connections and they knew how to get around "the system"
                 very well. They knew how to make up rules and and before
                 you know it, checkmate. You no longer have any legal
                 protection and you're of no use to them. Ari is one
                 fine example of why the rich get richer.
        \_ Nothing.  But, generally this is why small corporations have
           boards, and, if memory serves, the board must be at least 3 people,
           and, once a corporation gets to a certain number of employees, the
           board gets bigger. -dans
           \_ What if two of the three positions on the board of directors
              is occupied by the founder and his wife, in which case the
              are occupied by the founder and his wife, in which case the
              founder will always get the majority vote?
              \_ Welcome to the wonderful world of business.
              \- Is the founder's name RIGAS? --psb
              \_ Then you're fucked.  Not sure, but there *may* be laws
                 against this because of conflicts of interest. -dans
        \_ Merely issuing more shares would not directly screw the employees.
           If he did something like say grant himself 1,000,000 new shares
           that could be grounds for a shareholder lawsuit but good luck.
           \_ What about doubling the number of authorized shares?
              \_ That's basically the same as issuing treasury stock... it
                 only matters when it actually changes hands.
        \_ We just started covering this in my bus org/corp law class. The
           way I understand it majority controlling shareholders have a
           fiduciary duty wrt to the minority shareholders. In the scenario
           you describe the maj shareholder has effectively reduced the
           voting power of the min shareholders by 1/2 (assuming that each
           of the new shares has one vote and the voting power of the old
           stock did not increase). By acting this way the maj shareholder
           has breached his fiduciary duty and the min shareholders can sue
           him for this breach.
           [ I might have this wrong, so I'll ask my bus org prof on thurs ]
        \_ Can the dude with 90% also pay himself a big salary, and thus
           take away all the profits of the company?
           \_ Yes, but the minority shareholders could almost certainly sue
              him because he is not working in the best interests of the
              shareholders. -dans
                 \_ Who is Ari Zilka? -dans
                    \_ ari@csua
                 \_ what goes around, comes around.  hopefully he'll get
                    his just due.
                    \_ He paid his dues when he married chris@soda.
        \_ I don't think there is anything realistic stopping this behavior.
           However, most (not every) leaders realize that by sharing the
           wealth the company has much better chances of success, as everyone's
           interests then align for the good of the corporation.  It's better
           to own 25% of a billion dollar corporation than to own 90% of a
           $10 million dollar corporation.
           \_ Yes, but it's relatively much easier to create a $10M company
              than a $1B company.  Taking the chance of success into account,
              and also taking into account (to use the numbers from your
              example) most people would value $9M more than 9/250 of $250M,
              maybe it's a better strategy to shoot for the 90% of $10M.
                \_ Except a lot of leaders of companies already HAVE that
                   much money.  I'm pretty sure my founding CEO was.
                   much money.  I'm pretty sure my founding CEO did.