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Opinion
Matt Levine, Columnist

The Board of Directors Is in Charge

Moelis, Crown Castle, OpenAI securities fraud, JBS securities fraud
and inflation super users.

February 29, 2024 at 1:10 PM EST
[160x160]
By Matt Levine
Matt Levine is a Bloomberg Opinion columnist. A former investment
banker at Goldman Sachs, he was a mergers and acquisitions lawyer at
Wachtell, Lipton, Rosen & Katz; a clerk for the U.S. Court of Appeals
for the 3rd Circuit; and an editor of Dealbreaker.
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The basic rule is that the board of directors of a company is in
charge of the company, and when they are faced with a decision, the
directors are supposed to make the choice that they believe is best
for the company and all of its shareholders. The shareholders don't
make the decision; the board does.1

Now, the directors are elected by the shareholders, and when the
company has a controlling shareholder, the idea that the directors
are in charge can feel somewhat absurd. The controlling shareholder --
say, a founder and chief executive officer who owns 60% of the stock
-- can come into the boardroom and say "I want you to sell all of the
company's assets to me for $1," and the directors will say "no, in
our independent judgment that's a bad idea," and the founder/CEO/
shareholder will say "okay you're fired," and she will replace them
with more pliable directors. And she can do that, because she has the
votes.2 But still: The directors are supposed to exercise their
independent judgment and do what is in the company's best interests,
and if they conclude that the founder/CEO's plan is bad, they have to
say no and get fired. They can't just say "well, ultimately she
controls the company, so we have to do what she asks." Exercising
independent judgment is their job.

 
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