Theranos Letter Shows Elizabeth Holmes Tried to Take Control from Shareholders(forbes.com)
forbes.com
Theranos Letter Shows Elizabeth Holmes Tried to Take Control from Shareholders
http://www.forbes.com/sites/petercohan/2015/11/03/theranos-letter-shows-elizabeth-holmes-tried-to-take-control-from-shareholders/
4 comments
This is the kind of thing you have to be very careful about if you're an officer of a company. It's permitted under Delaware law to do such things by unanimous consent, and in some circumstances by majority written consent, but certain notices have to be given to the stockholders.[1] In addition, controlling stockholders have fiduciary obligations to non-controlling stockholders.[2] The authority of the majority is not unlimited. In particular, an attempt by the majority, especially when the majority is management, to dilute the rights of the minority while benefiting management usually leads to trouble.
Claiming there was unanimous approval when there wasn't is a great way to get sued.
[1] http://delcode.delaware.gov/title8/c001/sc07/ [2] https://www.akingump.com/images/content/2/2/v4/22475/Duties-...
Claiming there was unanimous approval when there wasn't is a great way to get sued.
[1] http://delcode.delaware.gov/title8/c001/sc07/ [2] https://www.akingump.com/images/content/2/2/v4/22475/Duties-...
Good clarification, and I should say that my comment was more intended to address the broader objection to having abstaining members, yet still calling quorum & unanimous consent - rather than evaluate the specific Theranos situation. IANAL and there isn't enough info in the article to even really do that.
Shareholder agreements can define 'Unanimous' in any variety of ways. So long as the agreement is approved, it can supersede Deleware shareholder laws.
Generally speaking laws supersede agreements, not the other way around. That's their whole purpose. Certain things can't be done and certain rights can't be forefit if specifically disallowed by laws
There is room for confusion. From Wikipedia "Unanimity":
"Unanimity may be assumed explicitly after a unanimous vote or implicitly by a lack of objections."
"Practice varies as to whether a vote can be considered unanimous if some voter abstains."
Unanimous consent as stated by Theranos means (a) the majority / necessary number of shareholders gave a response and (b) none of those responses were of dissent. The quoted shareholder may still be surprised that the shareholders who did vote were a large enough group and in unanimous agreement; it's not necessarily wrong of the author to include this. Edit: The wording of the quote however does come across as though they misunderstood the consent part however.
"Unanimity may be assumed explicitly after a unanimous vote or implicitly by a lack of objections."
"Practice varies as to whether a vote can be considered unanimous if some voter abstains."
Unanimous consent as stated by Theranos means (a) the majority / necessary number of shareholders gave a response and (b) none of those responses were of dissent. The quoted shareholder may still be surprised that the shareholders who did vote were a large enough group and in unanimous agreement; it's not necessarily wrong of the author to include this. Edit: The wording of the quote however does come across as though they misunderstood the consent part however.
Forbes of all outlets, especially Peter Cohan, should know the difference and that this isn't abnormal at all.
and so should an investor in a privately owned company.
the "shareholder" could be an employee with equity and no voting rights, in which case the article is just here to surf on the buzz surrounding theranos and adding to the bad press. Or it could be a meaningful investor, in which case he/she should be blaming noone but him/herself for not reading the fine prints/asking a lawyer
the "shareholder" could be an employee with equity and no voting rights, in which case the article is just here to surf on the buzz surrounding theranos and adding to the bad press. Or it could be a meaningful investor, in which case he/she should be blaming noone but him/herself for not reading the fine prints/asking a lawyer
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Would you mind clarifying what you mean about the definition of "unanimous" in this context? Even if it technically means "not actually unanimous" it still seems pretty misleading to me. Why would they explicitly say that every shareholder supports the decision when they mean that a majority of shareholders support it?
In a parliamentary context, "unanimous consent" means "no dissenting voices" - ie, no "no" votes, not accounting for those silent or absent.
In the times that we have sent shareholder consents it's the case that they sign a document that says "I agree to this change." It's not, "do you agree? check yes or no."
If the majority sign, then you have unanimous consent. The ones who don't sign are basically abstaining, in practice usually cause they are too busy and just never get around to it, not because they express dissent.
The language is confusing because it sounds more like a vote than it is.
If the majority sign, then you have unanimous consent. The ones who don't sign are basically abstaining, in practice usually cause they are too busy and just never get around to it, not because they express dissent.
The language is confusing because it sounds more like a vote than it is.
If there's no consent that isn't unanimous, you're abusing the term. When the options are "consent" or "shut up, we don't want to hear from you", there's no justification for calling that "unanimous consent".
Unfortunately it's not the case. The alternative isn't "shut up, we don't want to hear from you" it's, "you were given the same amount of information as everyone else and didn't respond by the cutoff - and by the way the majority of respondents consented so any response is moot."
Where it would matter is if there were abstentions for dissent, which I have never dealt with, so I can't say anything about it. My guess is that you wouldn't send something out in such a manner anyway if you expected resistance.
Where it would matter is if there were abstentions for dissent, which I have never dealt with, so I can't say anything about it. My guess is that you wouldn't send something out in such a manner anyway if you expected resistance.
That seems like a distinction without a difference to me. As I read your posts there's no way for a shareholder to voice dissent; you can either agree or abstain. Maybe this is some legal term I am not understanding, but I don't see how that's unanimous under the layman's definition of the word.
It's not a layman's definition. The word "unanimous" has a different meaning in corporate governance (and generally in Parliamentary procedure).
It's also not at all uncommon to be presented with a proposal where the only options are "yes" and "abstain." There is no need for a no option, because you need a majority of yes votes for the measure to pass. Abstaining is the same as voting no.
It's also not at all uncommon to be presented with a proposal where the only options are "yes" and "abstain." There is no need for a no option, because you need a majority of yes votes for the measure to pass. Abstaining is the same as voting no.
So, either a vote passes unanimously or it doesn't pass at all? In all cases (of the scenarios you're describing). That doesn't make a lot of sense to me, even as terminology specific to corporate governance. The word 'unanimous' is completely superfluous in that context, and words are not usually defined in ways where they have superfluous meanings.
It doesn't sound like there was a mechanism to vote "no" or object. I'm with you.
There doesn't need to be. If you don't get a majority of shares voting yes, then the measure doesn't pass. If you do, then it does.
As you say, with the ability to respond "yes" and "abstain" the only possible outcomes are 'it passes' and 'it doesn't pass.'
You can't have 'passes unanimously' because that would be a third outcome that can't be obtained with only two possible responses. To add that possibility to our outcome set, we have to introduce a third response called "no."
The name of the "it passes" token may be arbitrary, but calling it "passes unanimously" is deceptive because it implies there were three ways to respond, not only two. If it is possible to pass unanimously, then to pass without qualification must mean something else.
If there is a large group of people that regularly makes use of that usage, the simplest conclusion is that they're all trying to deceive someone.
You can't have 'passes unanimously' because that would be a third outcome that can't be obtained with only two possible responses. To add that possibility to our outcome set, we have to introduce a third response called "no."
The name of the "it passes" token may be arbitrary, but calling it "passes unanimously" is deceptive because it implies there were three ways to respond, not only two. If it is possible to pass unanimously, then to pass without qualification must mean something else.
If there is a large group of people that regularly makes use of that usage, the simplest conclusion is that they're all trying to deceive someone.
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sounds like something that Dell did while taking private the Dell - the abstentions were changed from default "no" to just not counted at all.
This company's sketchiness is like an onion - you can keep peeling layer after layer...
"PT Barnum in a Jobs turtleneck" has so far been my favorite comment about Holmes.
I feel like a broken record, but Theranos really reminds me of Terraliance Technologies. If you havent heard/read about that company, I highly recommend the following:
http://archive.fortune.com/2010/03/26/news/companies/terrall...
It is tempting to look at big VC and names like Kissinger and think "these people are too smart to get conned". Truth is so much of their success is riding on past acheivements and they make great targets because getting one of them to support something starts a feedback loop akin to highschool social dynamics.
I feel like a broken record, but Theranos really reminds me of Terraliance Technologies. If you havent heard/read about that company, I highly recommend the following:
http://archive.fortune.com/2010/03/26/news/companies/terrall...
It is tempting to look at big VC and names like Kissinger and think "these people are too smart to get conned". Truth is so much of their success is riding on past acheivements and they make great targets because getting one of them to support something starts a feedback loop akin to highschool social dynamics.
I agree.
With all of the articles coming out on them now, I wouldn't be surprised if it's revealed this is a total sham, from top to bottom.
With all of the articles coming out on them now, I wouldn't be surprised if it's revealed this is a total sham, from top to bottom.
We know of examples where companies have wildly exceeded their hype, even though we later find out that the hype was unjustified at the time. There are also examples where it can be argued that shareholders did so well because founders maintained unusual levels of control through slippery methods, then made decisions that no one else in their right mind would have made.
I don't have a prediction about the future of Theranos, yet when new information confirms shadiness in one context or confirms that it is in the mould of other successes in another context, then thinking that it proves the context is the definition of confirmation basis.
I don't have a prediction about the future of Theranos, yet when new information confirms shadiness in one context or confirms that it is in the mould of other successes in another context, then thinking that it proves the context is the definition of confirmation basis.
It is a story gaining traction - you will hear a lot more about Theranos. Not because they are worse in any practice than the rest of the herd, but because they have spotlight. One of the things about getting past 30 is spotting patterns in the newscycle. Theranos is indeed a juicy target so expect a lot of dirty laundry to see light of day.
Young chic blonde CEO doesn't hurt the spotlight either.
Does this company have any other employees? Who are these investors rubber stamping BS like this?
I don't know why everyone keep implying that Theranos is on a bad position. The company really worth its valuation... they aren't doing something exceptional on the tech world but they are just fine financially. It's a known company on a with a big market and you won't ever struggle with a business model (traditional one) on that type of tech companies.
At $9B, Theranos has the same valuation as Quest Diagnostics. One of these two companies is the largest medical diagnostics company in the USA, probably the world, with revenues of $1.9B in the last quarter. The other offers tests in less than 50 drug stores in two states, and just had all but one of its proprietary tests disqualified by the FDA.
One of them is a strong solid workhorse, the other is a magical unicorn.
The problem is that there is little proof that they are doing fine financially because they are not public therefore not obligated to share information.
If you have some proof they are doing fine financially then please share it.
These deals don't need 100% response or signature to get "unanimous consent" - only a majority. That this was highlighted is either sloppy on the part of Forbes or deliberately trying to stir the pot.
As much as we love down in flames stories (for some grotesque reason) I don't think there is much to see here.