Summary
Facebook chose the perfect moment to unveil its plan to shore up Mark Zuckerberg’s reign over the world’s largest social network.
The company proposed a new third class of stock on Wednesday with no voting rights, setting up the Facebook founder and chief executive to maintain his votes even as he embarks on a plan to sell down his shares. He says the move is designed to help him pursue philanthropy, after he pledged in December to give away 99 per cent of his Facebook stock in his lifetime.
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Joseph Grundfest, a law professor at Stanford and senior faculty at the Rock Center for Corporate Governance, says Facebook is proposing a share structure that is very similar if not identical to the one adopted by Google.
“Whether a shareholder favours or opposes this idea depends almost entirely on the shareholder’s faith in Mark Zuckerberg,” he says.
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Prof Grundfest says there was no evidence the market would accept these changes in other companies, though it is likely that some might try to adopt a three-class structure even before an initial public offering.
“The important thing to recognise is that Google and Facebook are wildly successful companies led by management teams who are generally viewed as being at the top of their game,” he says.
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