Google’s Stock Split Will Cause The New Half To Not Have Any Shareholder Voting Power

Posted Apr 13, 2012

When Google announced that they are splitting the company into two halves, it turns out that the newer half will not have any shareholder voting power. Google will be joining the likes of a liquor producer, home builder, and several other media conglomerates that are controlled by families. The current shareholders would have a new nonvoting share for every share they own. This will help Google CEO Larry Page, Google co-founder Sergey Brin, and Executive Chairman Eric Schmidt retain a lot of power.

The three would control over two-thirds of the voting power, which means that the three of them can make all of the company decisions. They would be able to hand on stock options to employees and make stock-based acquisitions without having to dilute their shareholder voting power too.

Other companies that have a nonvoting class of shares include Discovery Communications, Viacom, and Comcast. Comcast CEO Brian Roberts controls about one-third of the shareholder voting power while owning a small fraction of its shares. Cable maker Molex, Brown-Forman (known for making Jack Daniels whiskey and other liquors), and home-builder company Lennar have a similar structure.

?Investors need to come to this with their eyes open,? stated Stanford professor Joseph Grundfest. ?It?s not a surprise to anyone that when you invest in Google you?re investing in Larry and Sergey. And any good investor also knows that if you?re investing in [soon-to-be public] Facebook you?re investing in [CEO] Mark Zuckerberg, and if you invested in Zynga you invested in [CEO] Mark Pincus,?