I discussed Facebook a bit and how Mark Zuckerberg successfully has made it to the IPO with over 50% of the votes. All of that with about 30% of the shares. How did he manage? Issuing non voting shares that give shareholders the possibility of gaining ownership and rights to profits and dividends but no votes regarding any leadership change, corporate action, etc.
Google has just announced it would also be trying a similar strategy by issuing non voting shares in order to keep control as much as possible.
Why They Don’t Want You And I To Vote?
There are many different reasons of course but I’d say the main one is that leaders such as Mark Zuckerberg and Larry Page want to be extremely flexible, to be able to make a $1B purchase of a company like Instagram without going through the board, to trust their instincts when launching products, etc.
The big downside for non-voting shareholders is that they have little control if things start going wrong and in a company such as Facebook, Zuckerberg could do a ton of things that most shareholders would disagree with.
In The End
It has to be about trust. There is clearly more risk in such a structure for shareholders but having a flexible company can also help it remain competitive. Even having a board with control can not be enough to fix things as Yahoo ($YHOO) has proven too many times.
I guess it becomes a matter of opinion really. I know that many of you mind a great deal but I’d love to hear why. Added flexibility and added risks seem like a fair compromise from my perspective.
What Are Your Thoughts? Do you mind buying non-voting shares?