Two more things have caught my eye about the Laker feud which provide me a teaching moment for my Biz Org students.

Thing one is that according to some ESPN blog, AEG is a minority owner that “controls” two seats on the corporate board of directors.   The BOD remember is Jeanie, Johnny, and Joey Buss and two others.  I’m not sure how AEG “controls” the two seats.  It is either because it owns enough shares to vote in two seats using cumulative voting, or there is some shareholders agreement between the Buss Trusts and AEG that gives AEG two seats (completely enforceable as it would relate to voting at a shareholder meeting), or there could be more than one class of stock which allocates the board seats among the classes.

Thing two is that I heard someone this morning on the radio assuring everyone that “the documents” make it clear that Jeanie is firmly in control of the Lakers.    As I said in the last blog, she seems to be firmly in control as the “controlling owner” for NBA participation purposes, but why can’t AEG use its two board seats to support Johnny and Joey and Jim and appoint someone else as President of the Lakers corp leaving her on the board.  Unless the corp is a “statutory closed corp” in California, a shareholder’s agreement making Jeanie the President is unenforceable.  The BOD must do that.  Why can’t AEG join with Johnny etc to make someone else the “controlling owner”?  I assume they can but that would apparently violate Johnny etc’s fiduciary duties owed to these trusts.  That seems to raise a serious conflict issue if Johnny cannot vote as a board member on what is best for the Lakers’ corp because of duties he owes to some trust.  And it cannot be that the BOD’s hands are tied as to removing Jeanie (again unless there is an enforceable shareholder’ agreement – enforceable being the key word in that sentence).  Continue reading →

According the L.A. Times this morning, Jim and Johnny Buss tried to take over the Lakers and “oust [Jeannie Buss] as the Lakers’ president and controlling owner.”   Jeannie Buss responded by asking the court to issue a restraining order stopping the effort and that apparently was successful.

According to the article,

Jeanie Buss [had] removed Jim Buss from his role as Lakers vice president of basketball operations and hired Magic Johnson.  Three days later, according to court documents, Johnny Buss notified his sister of a March 7 meeting to elect the team’s board of directors.  He is listed as overseeing corporate development of the Lakers.

The brothers proposed four directors, according to court records, but didn’t include her.  In order to be the controlling owner, she also must be a director.

The family trusts that own 66% of the Lakers can elect three of the board’s five members.  The trusts mandate the co-trustees — Johnny, Jim and Jeanie — take all actions to ensure Jeanie Buss remains controlling owner of the Lakers.  She has occupied the role since their father, Jerry Buss, died in 2013.

Pretty fun.  So let’s put all of this in the terms we talk about in class.   The first thing we need to know is whether this is a corporation.  I went to the business search function of the California Secretary of State and found a corporation “The Los Angeles Lakers, Inc.” formed in 1979.  The form SI indicates that Jeannie Buss is the President and there are five board members:  Jeannie, Joey and Johnny plus two other persons whose names aren’t Buss.  No Jim. Continue reading →