By Dave Lindorff
What’s wrong with this picture: Four groups invest in a company.
One group puts in a 55% investment, a second puts in a 20-35%
investment, a third puts in an 8% investment and a fourth goes in for
2%. The group putting in the 20-35% stake gets three seats on the
company’s nine-member board of directors, which will be appointing the
new company’s management team. The group investing 8% gets four board
members, and the group investing 2% gets 1 seat. Finally, the group
that will hold the majority stake in the company, 55% of the shares,
gets…the one remaining seat on the board.
Why would anyone buy a majority stake in the company and accept
only a 1/9 representation on the board, and thus virtually no say in
the selection of management or in management decisions?