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BHP Billiton Shareholders Are Suing?

Posted on 26th July 2017

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This story on the BBC reports that BHP Billiton shareholders are suing BHP Billiton. They are doing this to recover their losses due to the slide in share prices (around 22%) after the dam collapse at one of the company's mines in Brazil in 2015.

The dam failure at the Samarco mine (jointly owned by BHP and Vale, a Brazilian company) killed 19 people and led to Brazil's largest ever environmental disaster (supposedly - forest clearance is arguably Brazil's worst environmental catastrophe). Now shareholders are suing to recover lost shareholder value.

There are, however, several things wrong with this picture.

  1. It is well known and well publicised that share prices may go up, but may also go down. This is the risk that you take when you invest in shares. On that argument alone, the shareholders should expect to just eat their losses.
  2. The shareholders effectively own the company. This means that they are liable for damage, clean up and loss of life. They should consider themselves lucky not to be sued by the Brazilian government and the families of those killed.
  3. As the owners of BHP Billiton, they also effectively run the company. The shareholders' meeting appoints the directors. If the directors misled the stock market, broke the law and/or mismanaged the company, not only are the directors answerable, but so are the shareholders for appointing the wrong people, and being gullible enough to not see through the directors' lies.

Owning shares is not some children's game, where you make money if everything goes well, but if something goes wrong you will be bailed out by the courts or a government. Is is a game with potential rich rewords, but significant risks, and also with responsibilities. The power mostly lies with the big shareholders, not the small hobby investors, but these large shareholders are precisely who is behind this lawsuit.

Time to either get out of investing in shares, or man-up and face the consequences.