[fnordprefect]

Don't worry - the conversation in the anecdote does not reflect the true position in the major common law countries at least. The public shareholder model is not doomed or flawed on this account.

If an acquirer wants to acquire shares in a public company (or any company actually) it makes the offer to the shareholders and they are the ones who decide to accept or not. The proposed transaction is between the acquirer (who wants to buy the shares) and the current owner of those shares (the shareholder). The Board manages the company but is not itself an entity (it's a group of people) and cannot therefore own shares (tho individual directors can and usually do).

The Board can make a recommendation to its shareholders about whether it thinks the offer is fair or not (based on their usually greater knowledge of the company and its worth), but it is the shareholder who decides whether to accept.

The underlying suggestion that a Board or CEO is essentially forced to do something bad for the company because of some underlying obligation to make shareholders money etc etc is false. Directors owe fiduciary duties, but they are proscriptive, not prescriptive in this way. One of the most commonly repeated falsehoods is that the Board is under some duty to maximise profits etc - that is proved wrong not least by the existence of non-profits...

The closest analogy is someone owns and investment property being managed by a real estate agent. A buyer approaches and says "I will pay you $x for the land". The agent can say "Hey I rent this out all the time, it can earn $z over t years, so I think it's worth $x + y, or $x - y" but it's up to the owner to say yes or no.

The above ignores eg competition law issues (laws that prevent an acquirer buying companies where there is likely to be a substantial lessening of competition), potential conflicts for share-owning directors, and the myriad statutory considerations etc but is the basic underlying position.

[eviks]

Non-profits don't prove anything regarding for-profits since they live explicitly under different legal regimes and obligations

[Reubend]

Thanks for this well written and insightful post! I had a lot of misconceptions about this that are cleared up now.