Paul Allen's Microsoft Experience

theodp writes "Just in case Microsoft bashers don't have enough ammo, Robert X. Cringely has a couple of interesting tales in this week's column. The first explains how Bill Gates used Paul Allen's moonlighting at MITS to justify awarding himself 64% of Microsoft's stock vs. Allen's 36% (and Gates' failure to adjust the shares after he accepted a $10/hour part-time MITS job). The second heart-warming tale concerns a conversation Allen reportedly overheard late one night (as he was finishing up DOS 2.0) between Gates and Steve Ballmer discussing how to get Allen's Microsoft stock back if the Hodgkins disease Allen was battling killed him. Yikes."

Re:flamebate?

[Ctrl-Alt-Del]

I suppose it could be worse - it could be another Intelligent Design vs Evolution flame-fest. Guess it's all Slashdot is good for these days...

Re:Question for someone knowledgable

[spiritraveller]

This would be totally legal, and 100% possible given majority voting rights.

Majority rule is not the only rule. Nor is it the most important.

Not sure where you got the idea for this, but it's very far from legal. As a majority shareholder, you have a fiduciary duty to all shareholders in how you govern the company. That means you have a legal obligation to look out for their best interests. Ripping people off is obviously not looking out for their best interests.

Also, you cannot discriminate against shareholders within a class of shares. They have to be treated as one group.

Re:The pink can be yours!

[christopherfinke]

Or you could just download the newest version of Slashdotter [efinke.com], which has the Ponies theme supported out of the box.

Or you could just change the extensions.slashdotter.stylesheet preference in about:config to "fool". But that way, you don't get the bugfixes in the new version.

Re:Wishful thinking

[smartin]

But to believe that one lawyer in Iowa is going to bring them down, when the full weight of the U.S. Department of Justice couldn't do it, and the E.U. is still trying to do it, is wishful thinking.

Actually if i remember correctly the DOJ did bring them down, had them up against the wall and could have done anything they wanted. Then the administration changed and they were let off.

I call Bullshit

[LibertineR]

You certainly were not there. You might check out the link between Microsoft and the United Way and when it started, and how Bill and his mother were the driving force behind that long before Melinda became Mrs Gates.

I know few people here like or appreciate Gates, but must we make shit up to slime the dude?

Re:Bill Gates is a better man than Paul Allen

[chadamir]

From wikipedia article on Paul Allen: Much of Paul Allen's philanthropy has been dedicated to health and human services and toward the advancement of science and technology. The Paul G. Allen Family Foundation was established in 1986 to administer much of the giving. Through the Foundation, Allen awards nearly $30 million in grants annually. Approximately 75 percent of the Foundation's money goes to non-profit organizations in Seattle and the state of Washington. The remaining 25 percent is distributed to Portland, Oregon and other cities within the Pacific Northwest. Allen also contributes through other charitable projects known as venture philanthropy. The most famous of those projects are the Experience Music Project, the Allen Institute for Brain Science, and SETI. Paul Allen's total philanthropy as of 2005 is estimated to be over US$815 million. The University of Washington has been a major recipient of Paul Allen's giving. In the late 1980's, Allen donated US$18 million to build a new library named after his father, Kenneth S. Allen. In 2003 US$5 million was donated to establish the Faye G. Allen (his mother) Center for Visual Arts. Paul Allen also was the top private contributor (US$14 million) and namesake of the Paul G. Allen Center for Computer Science & Engineering (completed in 2004). Throughout the years, Allen has contributed millions of US dollars to the University of Washington Medical School, most recently US$3.2 million for prostatitis research. http://en.wikipedia.org/wiki/Paul_Allen#Philanthro py [wikipedia.org] But yes Gates has given away more of his money and is therefore a better person... I guess?

Re:MS grew more evil when Ballmer stepped in

[Slithe]

Microsoft dropped Xenix about the time of the AT&T divestiture. When AT&T was freed from their agreement to not compete in the software business, they clamped down on the Unix source code and began to market it. To compete with in the Unix market, Microsoft would have had to reimplement every feature AT&T added, and people at Microsoft realized that it was not good business sense to play a constant game of catch-up, so they sold Xenix.

What a Whingely

[FishandChips]

This is a non-article. It has a pompous title, "Prisoner of Redmond", followed by some tittle-tattle from 20-30 years ago that only gives one side of the story, then it cuts to today and a court case that has no real connection with the rest of the article. The end is pure opinion: "Based purely on character (or lack of it), I confidently predict that Microsoft is going down."

I'm no fan of Microsoft (Linux here) but you don't get to where Gates is today by being a man with no talent or qualities. I'm still waiting for a lot of Cringely's oh-so-confident predictions about Google and their alleged container-size data centers to pan out. He seems to have gone very quiet on that front lately. Spinning a highly dubious yarn from yesteryear is no substitute for some journalism. Just my 2 cents, but I think Cringely is getting lazy.

Re:flamebate?

[Stormwatch]

Thanks. After reading your link, I have a new favorite sig ;)
--
"We believe Internet Explorer is a really good browser. Internet Explorer is my browser of choice." -- Steve Jobs

I know it sounds wrong now, but in 1997 it was true. Back then, Internet Explorer was the best web browser on the Mac; Netscape Communicator had become a bloated, crash-prone mess; there was no Opera for Mac, no iCab, no Firefox - there was pretty much no alternative... unless you count Mosaic or Cyberdog (yea right).

Re:Question for someone knowledgable

[Beryllium Sphere(tm)]

That question is answered in incredible detail in a book titled "O'Neal's Oppression of Minority Stockholders". Everyone who gets stock in compensation should look through a copy.

Re:The man has $15 billion with a "b" dollars

[Anonymous Coward]

Well I have $15 and was once stung by a b

Re:Question for someone knowledgable

[CDarklock]

> Cringely seems to be making a mountain out
> of a molehill (and I'm not a MS fanboy).

I agree, and I'm a Microsoft Partner.

Basically, the question they were facing is a very real question. Whenever you have several people involved in a startup and one of them faces health issues, it is highly important to create a contingency plan in the event of their death.

A common version of such a plan is to take out life insurance on the individual which pays sufficient benefits to purchase his share of the company outright. This generally gives his heirs something in excess of the cash value of the shares, which makes them happy, and keeps the shares themselves within the company family - which makes it happy.

See, some of us *can* think rationally.

Re:Where is the stock for employees and investors?

[WhiteWolf666]

Usually founders of a company start with around 5% or so, and leave the rest for investors, and stock awards for employees.

Stock dilution.

Here's how it works:

You (General Alcazar) have a company. GA Enterprises. You hold 100% of the shares. Lets say you want to raise money from an investor. Investor Bob offers you $50 for 20% of the company. Since you are the only stock holder, you can easily give him 20% of the stock, for a $50 investment. There are two ways you can do this, however.
1) Lets assume there are 100 shares at incorporation. You have 100 shares. You transfer 20 shares to Bob, so that you have 80 shares, and bob gets 20 shares. That's 20 %.
2) Lets assum 100 shares. You hold all of them. Instead of transferring 20 shares, however, you create additional shares. It's your company, after all; all you have to do is pass a resolution issuing 25 additional shares, and granting them to Bob. You have 100 shares, Bob has 25 shares. This once again works out to a 80/20% split. You haven't devalued your shares, because the assets of the company those shares represent have increase by $50, and if you are agreeing to Bob's proposal, you believe that $50 = 20% of the value of the company.

Now, lets say you, me, and 8 other people have equal shares in your company, GA enterprises. We each hold 10% of the shares. Bob offers you $50 for 20% of the company.

There are two ways to do this; each of the investors could give up 2 of their shares, through a fairly painful process of negotiation. Or, the board of directors (probably just you, see you started the company, and are a greedy bastard (just kidding, but it makes the example easier ;-) ) passes a resolution issuing 25 additional shares. Each original investor still holds 10 shares, and Bob gets 25. Each original investor will hold 8% of the company after the shares are issued; but they still have 10 shares each.

Make sense?

Of course, during incorporation, different companies establish different policies on the issuance of new shares. Some require unanimous approval of all investors, some require a majority decision, some require voting (2/3? 1/2? 3/4?) by the board of directors.

I hope this clarifies things :) Usually, startup companies don't hold shares in "storage" for the purpose of raising money. A company may issue additional shares at various points in order to seek investors, but it doesn't really serve any purpose to have 'unowned' shares hanging out there, and it can lead to additional complications.

Of course, most companies don't use pure stock dilution, either; because that devalues the founders shares too much. They'll often use a combination of dilution and stock splits, as you can dilute to create %% of new shares, and than stock splits to allow finer granulity in ownership.

Re:Wishful thinking

[Anonymous Coward]

Actually if i remember correctly the DOJ did bring them down, had them up against the wall and could have done anything they wanted. Then the administration changed and they were let off.

You left out some key pieces. The DOJ got a very strong ruling against them from Judge Jackson, but most of his ruling was overturned by the Court of Appeals because he'd spoken to the media and was percieved to be biased against Microsoft (a bias he says he obtained as a result of Microsoft's actions during the trial). The Appellate Court remanded the case back to the circuit court for another judge to try. Faced with having to essentially re-run the trial under a new judge in order to get the breakup, the DOJ backed off and negotiated a much weaker settlement. How much of this change was due to decisions from the new administration and how much was due to not wanting to delay several more years before imposing any restrictions on Microsoft isn't really clear. It seems clear that both issues played at least some role in the decision.

No

[Anonymous Coward]

The Court of Appeals threw out the punishment part of the verdict, but let the verdict stand. Microsoft remained a convicted illegal monopolist in the eye of the law, and only when the Bush team came into office and criticized the effort to go after Microsoft did their punishment get eviscerated. Had the Bush team not done that, serious punishment could have followed.