Google Creates New Classes of Stock
Google has definitely made its mark on mankind. Many can’t imagine using the Internet without the assistance of Google. It appears Google continues to lead in trend-setting tactics for technology companies with its introduction of Class C stocks.
The company announced its issuance of nonvoting shares (Class C) that will be made available as a part of its employee stock incentive structure but also to the public. Its founders want to tighten their control of the company’s long-term vision.
The company’s co-founders, Sergey Brin and Larry Page, already control the Class B stock, which have 10 votes per share. Class A stocks have 1 vote per share, trading under the symbol Goog. Currently, Mr. Brin and Mr. Page only control 50 percent of the company’s votes. They want to maintain more authority over the shareholder’s decision making.
Dual-class share structures are common among media and technology companies. However, this announcement could lead to an uncertain future for other companies who follow in Goggle’s steps.
“Academic studies have also found that dual-class companies tend to pay their chief executives more and make more value-destroying acquisitions because of this freedom” (New York Times, April 13, 2012). Will this produce tyranny in publicly traded technology companies?
It will also serve as a test to the stock market as to which class of stocks gain in popularity. Do stockholder’s truly value their vote or is the greater concern quarterly profits?
Will other companies follow suit to their own detriment or benefit? History indicates the dual-class capitalization of the 1980s were used to steer clear of hostile company takeovers. “The Securities and Exchange Commission tried to ban these maneuvers, but a rule was struck down by the courts” (New York Times, April 13, 2012).
Only time will tell the true effect Google’s new stock creation will have on the market and the technology industry.
