SPOTLIGHTED PODCAST ALERT (YOUR ARTICLE BEGINS A FEW INCHES DOWN)...
I’ve written and re-written this article three times since proposing it to editor Wade Keller here at PWTorch because developments have changed the details I should use as part of what I hope will be a balanced review of the WWE relationship with Saudi Arabia.
I even had to re-watch the stadium house show that was the Greatest Royal Rumble.
I am going to go after the argument that the WWE has a duty to make money even if it involves getting involved with a monarchy.
Here are some facts:
WWE is a “public company,” but is owned and absolutely controlled by the McMahons.
Here’s a WWE statement after Vince McMahon sold some of his shares to fund the XFL:
The shares sold by Mr. McMahon represent approximately 4.3% of the Company’s total outstanding shares of Class A and Class B common stock. After the sale, Mr. McMahon beneficially owns 32,193,375 shares of the Company’s Class B common stock, which represents approximately 82.8% of the Company’s total voting power and approximately 41.8% of the Company’s total outstanding shares of common stock.
It’s important to note that not all shares are equal. Founders often give themselves special stocks which have increased voting rights – say 10 votes from Class B are worth the same as one vote from Class A and this is the case with WWE. This is an unfair but common structure. Mark Zuckerberg, for instance, has this structure with Facebook. For comparison, the world’s richest man, Jeff Bezos, owns 78.88 million shares in Amazon out of 284 million; that’s 36 percent, but he doesn’t have special voting rights.
Vince has total absolute control of the company via his voting power. And his family owns the majority of stock anyway – even after the XFL funding. As of this writing, they may be slightly over or under majority but that doesn’t matter. It’s difficult to oust a CEO via shareholder action even if he doesn’t have 80 percent of the votes…
Updated WWE ownership pie chart is in Beginner's Guide to WWE Business, just posted today. https://t.co/yPrwvDijBz pic.twitter.com/Y7BDupDwg6
— Brandon Howard Thurston (@BrandonThurston) May 19, 2016
Vince is in total control of the company and benefits the most from any decision. Jim Cornette has in the past, in his podcast, labelled the WWE IPO as a scam.
Vince cannot and will not be removed by shareholders as CEO via a normal vote. So unless he goes on an Elon Musk type twitter rant, commits a felony, or is outed for molesting employees, he’s safe. Oh, by the way, remember that Chris Amann, the company head doctor, reportedly had a relationship with Jillian Hall, Diva champion, while being her doctor – completely violating professional ethics. Nothing has happened.
WWE response was: “We were not aware of this. We are investigating the matter and will determine if any action is warranted.” Sound similar to a recent statement?
So now we’ve determined that Vince McMahon has total control of his company, cannot be voted out of his position by shareholders, and gets basically half the financial benefits of anything that happens to his company. Let’s talk about fiduciary duty.
Some have been saying that WWE had a legal obligation to commit to the Saudi deal.
Fiduciary duty.
A term bandied about by people who have no idea what that means.
From a different example, “As in all publicly traded companies, TimkenSteel’s board and top executives have a fiduciary duty to shareholders to maximize both profits and investor returns.” (SOURCE)
Nope. Rubbish and nope.
There is no law that states you must maximize profits and investor returns.
There is no case law or precedent saying that you have to do this.
There is the case of Ford vs. Dodge, but we can read from the Wikipedia entry.
Dodge is often misread or mistaught as setting a legal rule of shareholder wealth maximization. This was not and is not the law. Shareholder wealth maximization is a standard of conduct for officers and directors, not a legal mandate. The business judgment rule [which was also upheld in this decision] protects many decisions that deviate from this standard. This is one reading of Dodge. If this is all the case is about, however, it isn’t that interesting. -M. Todd Henderson.
If there was a legal obligation to maximize profits and returns, Jeff Bezos – remember the world’s richest man with the best lawyers in the world – could not have just raised all his employees wages way above the minimum required by law. He would be liable. Anybody suing him? Heard of any class action suits against him and Amazon?
It’s also an absurd position. Companies can and do have mission statements which preclude them from maximizing profits and returns.
Here’s a simple guide to fiduciary duty: LINK
Directors of companies, a/k/a Vince McMahon, have a duty of loyalty and care. Care means you can’t turn up drunk and bang the secretary while ignoring phone calls. Loyalty means you can’t steal from the company. Which in Vince’s case would be stealing from himself and his children, but you get the point.
From the article I quoted, here is where shareholders can use to try to win a case against a company for breach of fiduciary duty: “That list includes fraud, illegality, and waste (something so irrational that no reasonable person could have thought it was a good idea), which are rare. It also includes conflict of interest and (gross?) negligence, which in practice means a failure of the board to inform itself adequately.”
Now imagine Vince McMahon gets a phone call from a Saudi prince while discussing the Women’s Revolution with Stephanie McMahon: “Vince, 50 million, but you can’t bring women, dirty Syrians [Sami Zayn], your daughter can’t come to dinner, oh and we want you to bring out some Iranian wrestlers to get beaten up by good Saudi wrestlers. Oh, and no women in any advertisements in the stadium or we will have words.” (Note that ALL of this happened.)
He listens, discusses, consults with his lawyers and bankers.
He is the absolute boss.
And he says, “No, that would be against my company’s ethics and especially our recent push for the Women’s Revolution. Also, we’ve got this thing called the #metoo movement in the U.S. Also we have issues about Sharia law. Sure, we’d love to work with you in the future, but maybe when some you have some real significant reforms, not ten women getting driving licenses.
Also, maybe stop with the public beheadings.
P.S.
I wrote the above part of the article before the Saudis murdered a U.S. resident and Washington Post columnist visiting their consulate.
I’m not going to be mealy-mouthed or write allegedly. The facts are pretty clear. He went in. He didn’t come out.
WWE reaction: “We are currently monitoring the situation.”
Sound familiar? Remember that doctor who broke the basic ethic rule and is still working for WWE?
WWE is saying, yeah, so what, maybe.
WWE is Vince McMahon. What he decides is law in the company.
If he refused to hold events in Saudi Arabia, China, Myanmar, North Korea, or in any other country that isn’t a democracy and engages in acts violating human rights or other behavior, he wouldn’t and couldn’t be sued.
Vince McMahon wouldn’t sue himself obviously. Other shareholders would not be able to because he acted loyally and carefully. He wasn’t drunk taking the Saudi call and he didn’t take 45 million from Iran to his own pocket not to have an event in Saudi Arabia.
WWE has been sued in the past, not for failing to “maximize profits” (find me an example of a company successfully being sued for failing that), but for allegedly lying to shareholders.
Talking about WWE having a duty, let alone a legal duty, to deal with the Saudi regime is ludicrous. Having the women have a their-gender-only event just before the next event without women and Sami Zayn is such a blatant sop that it only deserves the contempt it is rightfully getting.
At this point, WWE could stop its event in Saudi Arabia, saying we can’t take the backlash we’re getting from everything involved. You broke international and Turkish law and murdered a U.S. journalist and resident. Oh, by the way to readers who are constantly misled about this, a consulate or embassy isn’t foreign territory, it’s territory which the country around it isn’t normally allowed to enter into. The Russian embassy in Washington D.C. is still U.S. territory.
In the good old days, even the Soviet regime wouldn’t have sent a murder squad to chop up a dissident in a consulate. Or at least they wouldn’t have been caught. Remember Eichmann, a Nazi who continued killing Jews after being ordered to stop by Himmler? He got kidnapped and smuggled out of Argentina to go to a fair trial. Not hacked up in a basement by Jews who still remembered the Holocaust personally. A Jew killer. Not a newspaper columnist saying nasty things.
If WWE stepped away from their contract, they would never ever do any more business with the regime and would get their TV pulled from the airwaves as well as their websites and network blocked on the internet (by the way, the Saudis also have their own absolute and powerful censorship of the internet, just like other despot regimes). But they would not get sued by any of their investors who are probably still celebrating the incredible TV deals WWE just got. WWE is now horribly profitable with or without Saudi money. Nobody is going to complain. Well, Saudi Arabia’s agitprop agency, a/k/a the General Sport Agency which probably has the direct contract with WWE might sue WWE in Conneticut for breach of contract, but good luck with that with a jury trial.
Just Vince wants his money. Because half of the money coming from the Saudis is his money.
Corey Graves had to spout horrible non-stop propaganda during the last event. His reaction the day after sums up my feeling about Saudi Arabia.
https://www.instagram.com/p/BiIkioBjOQF/?utm_source=ig_embed
But WWE, like America, is up for sale.
Saudi message is that no critic of MBS is safe anywhere in the world. Trump message is that America – and by extension the priceless values we stand for – are for sale. https://t.co/iePnfU5Gr0
— Ben Rhodes (@brhodes) October 11, 2018
P.P.S.
This article was written while the Saudis were denying the murder. I wrote flat out that he was murdered. Then their version turned to “accidental killing during an illegal rendition attempt.” Nobody, including the Turks and even Trump, is buying this.
WME, the UFC owners, have pulled out of deal negotiations with Saudi Arabia. Fiduciary duty?
Virgin Galactic has said no to a Saudi investment.
Big tech companies are running scared of Saudi money.
Tech leaders have decided against traveling to Saudi Arabia’s investment forum – an event giving billions of dollars of money investment each year.
Fiduciary duty? Remember these are tech companies owned by very aggressive shareholders who love to sue. Any lawsuits threatened? Uber received 3.5 billion from the Saudis and they are not visiting. Vince is selling his soul and his company’s image, for much less, if he goes through with this show in Saudi Arabia.
At this point, running an event in Saudi Arabia could be considered a greater neglect of fiduciary duty than not running it. I still don’t believe you can sue WWE for doing the horrible propaganda event, but the damage to the company would probably draw so much hostile media attention like the John Oliver segment that it would damage the company more than a 50 million payment that needs to be returned or even the half billion or more the Saudis might funnel in over the next decade.
If John Cena wants to be a new Rock, he cannot appear and give the same horrible speech he gave last time. Hollywood (see WME) is particularly sensitive to the Saudi situation and his career will be in jeopardy.
It’s no coincidence that the WWE has removed any reference to Saudi Arabia from TV. The networks do not want any direct mentions.
So where is the fiduciary duty now? Eating hat, JBL? Maybe Randy Orton still thinks watching wrestling will stop the Crown Prince ordering his vice intelligence chief (arrested) and the two dozen other people who will pay for his hubris from murdering dissidents? Or bombing school buses in Yemen with U.S.-made bombs as part of the on-going genocide.
There’s a WWE investor call later today. Let’s hear what the investors think.
Google “Saudi Arabia WWE” and dozens of critical media articles will turn up. Nobody cares about Evolution and nobody will talk about it. But leading newspapers and media are covering WWE very negatively.
P.P.P.S
“All major private interests should review and relook their relationship with the Saudi Kingdom in light of its continuing pattern of abuse of civil rights and civil liberties, contempt for the rule of law, and bombing in Yemen using the United States military equipment and possible intelligence.”
– Senator Richard Blumenthal.
Fiduciary duty? Explain that JBL.
NOW CHECK OUT THIS RECENT EDITORIAL: KELLER’S TAKE: A realigned Raw without Roman Reigns is full of opportunities, and Monday set the stage well
Glad DDC wrote this and that PWTorch printed it.
excellent oped. thank you.