Hacker News Reader

Comment by bogomipz | Hacker News Reader

From the article"

>"Google’s Class B shares have 10 times the voting power of normal shares, enabling the founders, Larry Page and Sergey Brin, to retain control of the holding company Alphabet without owning a majority stake."

This implies that these two are the only two posses shares with voting power, is this accurate?

The article also references FB and the consolidation of voting stock in one individual. My question is what is the protocol if something were to happen to person or persons who retain all these voting shares - death, or incapacitated etc?

View on HN

It's not quite true - holders of Google Class A shares ("GOOGL") also have voting power. However, Page, Brin, and Schmidt together control more than 50% of the voting power of the company, which means that as long as those 3 are united, it doesn't matter how many GOOGL shares activist investors can control.

Where this might matter, hypothetically, is if you can separate one of the 3 from the other on an issue. If, for example, Larry did such a terrible job running the company that even Sergey believed he should be replaced, then an activist investor coalition together with Sergey's Class B shares could force a change in leadership. In such a situation, it's likely that GOOGL (class A, with voting privileges) would fetch a very hefty premium over GOOG (class C, no voting privileges), because an activist investor coalition would need to own nearly all the class A shares plus have the support of Sergey or Eric to effect change.

>" In such a situation, it's likely that GOOGL (class A, with voting privileges) would fetch a very hefty premium over GOOG (class C, no voting privileges), because an activist investor coalition would need to own nearly all the class A shares plus have the support of Sergey or Eric to effect change."

Can voting shares be sold on the open market the same as the non-voting shares? Wouldn't a company that opted for a two tier structure restrict the sale of voting shares as part of their corporate charter? I'm not sure of charter is the correct term here so please correct me if that's wrong.

Sorta. The class-B supervoting shares that Larry/Sergey/Eric own convert to class-A voting shares when they're sold on the open market (I think; it may be class-C nonvoting shares now). The class-A shares retain their voting rights, and trade under a different ticker symbol (GOOGL vs. GOOG).

I see, thanks!

these two are the only (ones) with voting power

Yes. They have voting control of Google.

My question is what is the protocol if something were to happen to person or persons who retain all these voting shares - death, or incapacitated etc?

That's a real question. Google's proxy statement mentions management succession [1, p. 29] but doesn't say anything useful. It's not at all clear how Alphabet and Facebook will handle succession.

Ford Motor Company has a two-tier stock scheme, and has for over a century. The control stock is restricted so that it can't be sold outside the family. That's been in place for a century, and they're on the fourth generation of Fords owning Ford Motor. For most of the company's history, a Ford was the CEO of Ford Motor - Henry Ford I, Henry Ford II and William Clay Ford Jr ran the company. Currently, a non-family member is CEO, although a family member is head of global marketing.

[1] https://www.sec.gov/Archives/edgar/data/1652044/000130817917...

Which can be redefined in simpler terms, as "they just have ten times as many fucking shares."

Fine print is just deception wearing a tuxedo.

If Alphabet paid a dividend, it would make a big difference. 10x voting rights per share, but 1x dividend.[1] In 2000, Ford Motor paid a $10 billion special dividend, and most of that went to regular shareholders.

[1] http://www.latimes.com/opinion/editorials/la-ed-de-incarcera...

Or acquisition, which is also paid out per share.

The link in your source is about the cost of incarceration in California. Am I missing something?

I don't understand you comment in voting shares being a "big difference." Everyone gets that dividend if its paid out regardless of whether its a class A holder or class B holder no?

Oops, wrong link. Correct link: [1] The point is that the insider Alphabet shares have 10x the voting power per share as regular shares, but get the same dividend per share as other shares. The shares issued to ordinary employees with stock options (class C) have no voting power at all, which is quite unusual. This prevents dilution of control.

[1] https://www.sec.gov/Archives/edgar/data/1652044/000130817917...

Thanks! Shows how much I know about trading stocks...

Iirc Schmidt Page Brin combine to control the majority of votes. This tight control will lapse when the Schmidt estate goes through a generational estate transfer event and liquidates shares to conver taxes (since he is the oldest of the three).

In anticipation of that, though, the three could form a new share structure that consolidates power in Brin and Page.

Thanks for the responses. I guess an additional question I have is - if a small minority or in FB's case an individual control the voting stock do they automatically control who sits on the board?

I guess if that's the case, why have a board at all? Is it just for optics?

Reply on news.ycombinator.com