I almost feel like I could just republish the article I wrote in January. At the time, Cablevision
What was the holdup in the middle? Actually, it's an interesting, cautionary story for all investors who hold shares in companies with dominant manager/shareholders. While some have enough humility to place their own interests beneath that of the company's, others take on just enough Napoleonic l'etat,c'est moi self-identification that they are unable or unwilling to concede that the company can survive without them, or that others' counsel is necessary. It can be quite costly for shareholders when an emperor chooses to exercise his power to their detriment. Witness what has taken place at AIG
At Cablevision, founder, former CEO, and Chairman Charles Dolan spent hundreds of millions of dollars trying to launch Voom. He generated paltry consumer interest and copious red ink. The board, along with Cablevision's CEO, Dolan's son, James, determined that the bet that Voom would eventually pay off was not a good one and voted to terminate the deal. That was January, and Charles Dolan -- who started the company by wiring New York City for cable television service at a time when people thought he was nuts for doing so -- was unhappy enough with the decision that he began to try to put together a deal to buy the service from Cablevision himself.
This is not to say that dominating shareholders are always bad. One cannot say, for example, that the natural inclinations of the Larry Page and Sergey Brin at Google
Charles Dolan did this very thing, and rather than back down, he absolutely roiled the Cablevision board. The result is that his pet project will end up costing shareholders in the realm of $800 million. In essence, he was willing to bet the farm on Voom. Shareholders are lucky that the end cost was just a barn or two, because it should be clear that he was not going to take no for an answer -- not from his son, not from management at Cablevision, not from his fellow directors, and not even from the marketplace.
Bill Mann owns none of the companies mentioned in this article. He is the guest analyst for the next four months for the Motley Fool Hidden Gems newsletter. Interested?A free trial is but a click away.