Google Stockholders: Selling Class A Shares, Class B Rights
A Monthlong Magnification of Google: the Company, the Technologies, and the Extracurricular Activities
We’ve been talking about Google, their business, their practices and products, and their future, but what we haven’t talked about is who is making the big decisions.
Google is a multi-billion dollar corporation with thousands of employees, executives, directors and corporate officers – this can’t be a three man show. As a publicly traded company, stockholders would expect to have some influence in major business decisions.
Taking a look at Google’s stock structure and considering all of the questions that our Google series has raised, it seems that, whatever the future intentions and direction of Google, there may not be an effective way to change the direction of their business.
When you buy stock in a company, whether it is one share or thousands, you want to make sure your investment is protected and managed appropriately. Typically, companies issue voting rights to stockholders so that each stockholder has a say in how the company acts, who runs the company, and/or how the company handles major decisions. And, companies will often share profits with shareholders by issuing dividends for each share of stock.
Google has two classes of stock; Class A common stock and Class B common stock. Google’s Class A stock is what is traded on the NASDAQ under the “GOOG” symbol. If you own Google stock, you own Class A stock. Google’s Class B stock is held primarily by Google’s executive officers, directors, management and employees and the rights given to Class B stockholders are very different from that of Class A common stock.*
* 1 vote per share
* Publicly traded
* 2,776+ stockholders of record
* No dividends
* 10 votes per share
* Not publicly listed or traded
* 111 shareholders of record
* All held by founders, directors and executives
How does the Class A and B common structure and rights affect Google Class A stockholders? The Company?
The founders, executive officers and directors of Google together owned shares of Google’s Class A and B stock that represents around 70% of the stockholder voting power. And, of that 70%, Eric Schmidt, Larry Page and Sergey Brin own both Class A and B common stock representing about 67% of the voting power as of December 31, 2007 – leaving about 3% of the voting power for the rest of the directors and executive officers to share.
This means that whether stockholders are voting on major corporate transactions, mergers, the sale of assets or the election of directors of the company, it would be almost impossible for other stockholders to influence a vote where Schmidt, Page and Brin were voting together. *
Food For Thought
Google is aware that Class A stockholders won’t necessarily be happy if Google uses the voting power they have with the Class B shares to take actions that the Class A stockholders do not agree with. In their 2007 Annual Report, Google describes how the stocks work and concludes that if they took this type of action, “the price of Class A common stock could be adversely affected.”* Google has gone further to keep stockholders from influencing certain business decisions. The board of directors fills vacancies on the board in many circumstances – stockholders cannot vote to elect those members.*
* December 31, 2007 Google Annual Report (Filed 02/15/08).