6 ms·

> Yes I know Zuckerberg cannot be ousted by typical corporate maneuvering Why is that? I am not aware of Facebook's corporate structure so I am curious. - Yes

by erklik 5y ago

> Yes I know Zuckerberg cannot be ousted by typical corporate maneuvering Why is that? I am not aware of Facebook's corporate structure so I am curious. - Yes, this is a LMGTFY question, but I find that people can often provide a better answer, that's easier to understand especially when the question is more of a curiosity rather something I wish to find the answer of rapidly.

exolymph 5y ago
He controls the voting shares.
scheme271 5y ago
To expand on the sibling comment, Facebook has two classes of shares. Class A shares have one vote and are the shares that are traded on stock exchanges. Class B shares get 10 votes each and are held by Zuckerberg and friends. Zuckerberg has enough Class B shares that he really can't be outvoted by other investors.
- matheusmoreira 5y ago
  > Facebook has two classes of shares I had no idea companies could legally create vastly unequal schemes like that. How do people even find out about things like this? Is this information available somewhere? Impossible to make good investment decisions without this sort of knowledge.
  - jsmith99 5y ago
    The London Stock Exchange doesn't allow such dual class share structures for exactly this reason. That's partly why it has become so unpopular with tech companies. They are considering changing the rule but many of London's brokers and institutional investors strongly oppose it.
    - 1vuio0pswjnm7 5y ago
      Tne NYSE used to restrict it. They relaxed the restrictions in the 1980's. Google was the company that started the trend in 2005. (Note they were sued by their shareholders and settled.) The percentage of companies using this type of structure was like 1% in 2005. By 2017 it was 22%. It is probably even higher today. It is used outside of Silicon Valley, too, but those non-tech companies have real products and services that produce revenue. They don't bait people with "free", spy on them and sell ads. If I'm not mistaken there are some index funds that will exclude companies with dual class shares. This is why "tech" companies can pursue outlandish projects that produce no revenue. Shareholders effectively have insufficient rights to question such decisions and hold the founders to account.
  - ageek123 5y ago
    This is always disclosed when a company files to go public. It's not secret. It's actually good for long term shareholder value in most cases.
    - Thorrez 5y ago
      On the other hand, the S&P500 will be excluding future companies that do this, so some powerful people in the finance community must think it's bad. https://www.cnbc.com/2017/08/01/sp-500-to-exclude-snap-after-voting-rights-debate.html https://www.cnbc.com/2017/08/01/sp-500-to-exclude-snap-after...
      - ReptileMan 5y ago
        Some powerful people in finance think it is bad for THEM. Not bad per se.
    - roenxi 5y ago
      Weeeeeell... it isn't a secret, that is true. And technically speaking there is no problem here. But it is easy to imagine that this happened to be able to hoodwink someone with the "Zuckerburg only controls 10% of the shares!" style soundbites without being forced to point out that means control of the company. Realistically this practice should probably be banned on the basis that Facebook could achieve a similar outcome with something like one class of shares and selling bonds to the public, or something. Allowing a "share" to break the one-share-one-vote principle is unnecessarily confusing and misleading. Lawyers shouldn't be redefining words. These words are meant to mean something. Although this is unlikely to be a new practice, I think Berkshire had different classes of share.
      - easton 5y ago
        Berkshire has different classes of share so that people could invest at something lower than $250k+ a share (Buffett didn't want to split the stock).
      - wcunning 5y ago
        Ford famously pioneered it over a hundred years ago to keep control in the Ford family, which is still true today, though the family is now spread out enough that they don’t necessarily vote as a block on all matters.
  - sandworm101 5y ago
    It adds a level of stability. Some institutional investors don't want shareholders to have power over a company because that opens the doors to things like hostile takeovers. Having all the voting power vested in the core "founders" means the company won't ever be subject to change from outside. So, if you like things as they are, you can rest assured that things likely will never change. Only a long term investor, someone willing to retain shares during a corporate crisis, really cares about actually voting out one board for another. A short term investor wants to ride on the coattails but will jump rather than attempt to change where those coattails are headed.
    - matheusmoreira 5y ago
      What is the point of publicly trading a company if the public can never actually gain control of it? That would make it solely about speculation.
      - sandworm101 5y ago
        >> it's just about speculation. As opposed to all the other reasons people buy publicly-traded shares?
        matheusmoreira 5y ago
        I thought the power to affect corporate decision making was an important part of investing. Apparently not.
        sandworm101 5y ago
        That power is still there. By selling their non-voting shares investors lower their price, which has knock-on impacts on the corporation. What is lost is the power to directly make corporate decisions.
        matheusmoreira 5y ago
        > What is lost is the power to directly make corporate decisions. That's what I meant.
  - motoxpro 5y ago
    Not just Facebook that is structured like this. And as someone said, it's very public. You must be making investment decisions without looking at any corporate documents.
    - matheusmoreira 5y ago
      > You must be making investment decisions without looking at any corporate documents. Well, I've never actually invested in any company before. Mostly because of stuff like this. I always assumed there's some insider information I'm missing out on.
      - yuliyp 5y ago
        As a start, every publicly traded company in the US publishes an annual and quarterly report that is available to anyone for free. Those generally have quite a bit of information about what's going on with the company, its structure, financial situation, management, etc. Searching for `$COMPANY_NAME annual report` is a good start
        matheusmoreira 5y ago
        Thanks.
  - 1vuio0pswjnm7 5y ago
    Someone asked the other day about who owns the Facebook "super-voting" shares, besides Zuckerberg. These shares are not traded on any public exchange so the ability to track them is limited. In the Facebook registration statement from 2012, one can get an idea of who owns these class B shares. https://www.sec.gov/Archives/edgar/data/1326801/000119312512034517/0001193125-12-034517.txt#toc287954_15 https://www.sec.gov/Archives/edgar/data/1326801/000119312512...
  - lakecresva 5y ago
    This information is required to be in the articles of incorporation which are filed with the secretary of state. For public companies you can usually just google e.g. "Apple articles of incorporation" and the sec's copy will show up.
1vuio0pswjnm7 5y ago
https://www.sec.gov/Archives/edgar/data/1326801/000132680121000049/0001326801-21-000049.txt https://www.sec.gov/Archives/edgar/data/1326801/000132680121... "In addition, our current restated certificate of incorporation and bylaws contain provisions that may make the acquisition of our company more difficult, including the following: - until the first date on which the outstanding shares of our Class B common stock represent less than 35% of the combined voting power of our common stock, any transaction that would result in a change in control of our company requires the approval of a majority of our outstanding Class B common stock voting as a separate class; - we currently have a dual class common stock structure, which provides Mr. Zuckerberg with the ability to control the outcome of matters requiring stockholder approval, even if he owns significantly less than a majority of the shares of our outstanding Class A and Class B common stock; - when the outstanding shares of our Class B common stock represent less than a majority of the combined voting power of common stock, certain amendments to our restated certificate of incorporation or bylaws will require the approval of two-thirds of the combined vote of our then-outstanding shares of Class A and Class B common stock; - when the outstanding shares of our Class B common stock represent less than a majority of the combined voting power of our common stock, vacancies on our board of directors will be able to be filled only by our board of directors and not by stockholders; - when the outstanding shares of our Class B common stock represent less than a majority of the combined voting power of our common stock, our board of directors will be classified into three classes of directors with staggered three-year terms and directors will only be able to be removed from office for cause; - when the outstanding shares of our Class B common stock represent less than a majority of the combined voting power of our common stock, our stockholders will only be able to take action at a meeting of stockholders and not by written consent; - only our chairman, our chief executive officer, our president, or a majority of our board of directors are authorized to call a special meeting of stockholders; - advance notice procedures apply for stockholders to nominate candidates for election as directors or to bring matters before an annual meeting of stockholders; - our restated certificate of incorporation authorizes undesignated preferred stock, the terms of which may be established, and shares of which may be issued, without stockholder approval;"
JumpCrisscross 5y ago
I wonder if there is a simple fix to this: ban super-voting shares for social media companies over a certain size and age. Public, or private. Maybe the core of the problem is Zuckerberg using Facebook to accumulate power. Not the company per se.
- bradknowles 5y ago
  I like the idea, but I think it needs to be expanded to all US corporations. The page at https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?locations=US https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?location... says that the total US GDP for 2020 was almost $21T dollars. Specifically, $20,936B. The page at https://www.macrotrends.net/stocks/charts/FB/facebook/market-cap https://www.macrotrends.net/stocks/charts/FB/facebook/market... shows that the current market cap for Facebook is about $967B, but in 2020 it peaked just over $600B. Let’s use the 2020 numbers for illustration. If the total worldwide market cap of a company exceeds 1.0% of the total US GDP for a given year, then I think they should be required to liquidate all preferred stocks, preferably trading them 1-for-1 with the regular stocks, although I would also concede that it might be fair to trade them for an equal value. At US GDP for 2020 being just under $21T, this would mean that any company with a global market cap of slightly more than $200B would be affected — $209.63B, to be more exact. If you want to shift the point at which this rule is applied, then adjust the percentage, but I think you want it to be tied to something that will vary and adjust in the future, to account for inflation, etc…. And I suggest global market cap as the comparison base, because some companies have a habit of using multiple shell companies in a wide variety of foreign countries, in order to try and hide their revenue and protect it from governmental taxes. I think we want to account for those kinds of shenanigans from the start. Anyway, it’s just an idea. But I hope this general concept does take off.

by erklik 5y ago

exolymph 5y ago

He controls the voting shares.

scheme271 5y ago

To expand on the sibling comment, Facebook has two classes of shares. Class A shares have one vote and are the shares that are traded on stock exchanges. Class B shares get 10 votes each and are held by Zuckerberg and friends. Zuckerberg has enough Class B shares that he really can't be outvoted by other investors.

matheusmoreira 5y ago
> Facebook has two classes of shares I had no idea companies could legally create vastly unequal schemes like that. How do people even find out about things like this? Is this information available somewhere? Impossible to make good investment decisions without this sort of knowledge.
- jsmith99 5y ago
  The London Stock Exchange doesn't allow such dual class share structures for exactly this reason. That's partly why it has become so unpopular with tech companies. They are considering changing the rule but many of London's brokers and institutional investors strongly oppose it.
  - 1vuio0pswjnm7 5y ago
    Tne NYSE used to restrict it. They relaxed the restrictions in the 1980's. Google was the company that started the trend in 2005. (Note they were sued by their shareholders and settled.) The percentage of companies using this type of structure was like 1% in 2005. By 2017 it was 22%. It is probably even higher today. It is used outside of Silicon Valley, too, but those non-tech companies have real products and services that produce revenue. They don't bait people with "free", spy on them and sell ads. If I'm not mistaken there are some index funds that will exclude companies with dual class shares. This is why "tech" companies can pursue outlandish projects that produce no revenue. Shareholders effectively have insufficient rights to question such decisions and hold the founders to account.
- ageek123 5y ago
  This is always disclosed when a company files to go public. It's not secret. It's actually good for long term shareholder value in most cases.
  - Thorrez 5y ago
    On the other hand, the S&P500 will be excluding future companies that do this, so some powerful people in the finance community must think it's bad. https://www.cnbc.com/2017/08/01/sp-500-to-exclude-snap-after-voting-rights-debate.html https://www.cnbc.com/2017/08/01/sp-500-to-exclude-snap-after...
    - ReptileMan 5y ago
      Some powerful people in finance think it is bad for THEM. Not bad per se.
  - roenxi 5y ago
    Weeeeeell... it isn't a secret, that is true. And technically speaking there is no problem here. But it is easy to imagine that this happened to be able to hoodwink someone with the "Zuckerburg only controls 10% of the shares!" style soundbites without being forced to point out that means control of the company. Realistically this practice should probably be banned on the basis that Facebook could achieve a similar outcome with something like one class of shares and selling bonds to the public, or something. Allowing a "share" to break the one-share-one-vote principle is unnecessarily confusing and misleading. Lawyers shouldn't be redefining words. These words are meant to mean something. Although this is unlikely to be a new practice, I think Berkshire had different classes of share.
    - easton 5y ago
      Berkshire has different classes of share so that people could invest at something lower than $250k+ a share (Buffett didn't want to split the stock).
    - wcunning 5y ago
      Ford famously pioneered it over a hundred years ago to keep control in the Ford family, which is still true today, though the family is now spread out enough that they don’t necessarily vote as a block on all matters.
- sandworm101 5y ago
  It adds a level of stability. Some institutional investors don't want shareholders to have power over a company because that opens the doors to things like hostile takeovers. Having all the voting power vested in the core "founders" means the company won't ever be subject to change from outside. So, if you like things as they are, you can rest assured that things likely will never change. Only a long term investor, someone willing to retain shares during a corporate crisis, really cares about actually voting out one board for another. A short term investor wants to ride on the coattails but will jump rather than attempt to change where those coattails are headed.
  - matheusmoreira 5y ago
    What is the point of publicly trading a company if the public can never actually gain control of it? That would make it solely about speculation.
    - sandworm101 5y ago
      >> it's just about speculation. As opposed to all the other reasons people buy publicly-traded shares?
      - matheusmoreira 5y ago
        I thought the power to affect corporate decision making was an important part of investing. Apparently not.
        sandworm101 5y ago
        That power is still there. By selling their non-voting shares investors lower their price, which has knock-on impacts on the corporation. What is lost is the power to directly make corporate decisions.
        matheusmoreira 5y ago
        > What is lost is the power to directly make corporate decisions. That's what I meant.
- motoxpro 5y ago
  Not just Facebook that is structured like this. And as someone said, it's very public. You must be making investment decisions without looking at any corporate documents.
  - matheusmoreira 5y ago
    > You must be making investment decisions without looking at any corporate documents. Well, I've never actually invested in any company before. Mostly because of stuff like this. I always assumed there's some insider information I'm missing out on.
    - yuliyp 5y ago
      As a start, every publicly traded company in the US publishes an annual and quarterly report that is available to anyone for free. Those generally have quite a bit of information about what's going on with the company, its structure, financial situation, management, etc. Searching for `$COMPANY_NAME annual report` is a good start
      - matheusmoreira 5y ago
        Thanks.
- 1vuio0pswjnm7 5y ago
  Someone asked the other day about who owns the Facebook "super-voting" shares, besides Zuckerberg. These shares are not traded on any public exchange so the ability to track them is limited. In the Facebook registration statement from 2012, one can get an idea of who owns these class B shares. https://www.sec.gov/Archives/edgar/data/1326801/000119312512034517/0001193125-12-034517.txt#toc287954_15 https://www.sec.gov/Archives/edgar/data/1326801/000119312512...
- lakecresva 5y ago
  This information is required to be in the articles of incorporation which are filed with the secretary of state. For public companies you can usually just google e.g. "Apple articles of incorporation" and the sec's copy will show up.

1vuio0pswjnm7 5y ago

https://www.sec.gov/Archives/edgar/data/1326801/000132680121000049/0001326801-21-000049.txt https://www.sec.gov/Archives/edgar/data/1326801/000132680121... "In addition, our current restated certificate of incorporation and bylaws contain provisions that may make the acquisition of our company more difficult, including the following: - until the first date on which the outstanding shares of our Class B common stock represent less than 35% of the combined voting power of our common stock, any transaction that would result in a change in control of our company requires the approval of a majority of our outstanding Class B common stock voting as a separate class; - we currently have a dual class common stock structure, which provides Mr. Zuckerberg with the ability to control the outcome of matters requiring stockholder approval, even if he owns significantly less than a majority of the shares of our outstanding Class A and Class B common stock; - when the outstanding shares of our Class B common stock represent less than a majority of the combined voting power of common stock, certain amendments to our restated certificate of incorporation or bylaws will require the approval of two-thirds of the combined vote of our then-outstanding shares of Class A and Class B common stock; - when the outstanding shares of our Class B common stock represent less than a majority of the combined voting power of our common stock, vacancies on our board of directors will be able to be filled only by our board of directors and not by stockholders; - when the outstanding shares of our Class B common stock represent less than a majority of the combined voting power of our common stock, our board of directors will be classified into three classes of directors with staggered three-year terms and directors will only be able to be removed from office for cause; - when the outstanding shares of our Class B common stock represent less than a majority of the combined voting power of our common stock, our stockholders will only be able to take action at a meeting of stockholders and not by written consent; - only our chairman, our chief executive officer, our president, or a majority of our board of directors are authorized to call a special meeting of stockholders; - advance notice procedures apply for stockholders to nominate candidates for election as directors or to bring matters before an annual meeting of stockholders; - our restated certificate of incorporation authorizes undesignated preferred stock, the terms of which may be established, and shares of which may be issued, without stockholder approval;"

JumpCrisscross 5y ago

I wonder if there is a simple fix to this: ban super-voting shares for social media companies over a certain size and age. Public, or private. Maybe the core of the problem is Zuckerberg using Facebook to accumulate power. Not the company per se.

bradknowles 5y ago
I like the idea, but I think it needs to be expanded to all US corporations. The page at https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?locations=US https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?location... says that the total US GDP for 2020 was almost $21T dollars. Specifically, $20,936B. The page at https://www.macrotrends.net/stocks/charts/FB/facebook/market-cap https://www.macrotrends.net/stocks/charts/FB/facebook/market... shows that the current market cap for Facebook is about $967B, but in 2020 it peaked just over $600B. Let’s use the 2020 numbers for illustration. If the total worldwide market cap of a company exceeds 1.0% of the total US GDP for a given year, then I think they should be required to liquidate all preferred stocks, preferably trading them 1-for-1 with the regular stocks, although I would also concede that it might be fair to trade them for an equal value. At US GDP for 2020 being just under $21T, this would mean that any company with a global market cap of slightly more than $200B would be affected — $209.63B, to be more exact. If you want to shift the point at which this rule is applied, then adjust the percentage, but I think you want it to be tied to something that will vary and adjust in the future, to account for inflation, etc…. And I suggest global market cap as the comparison base, because some companies have a habit of using multiple shell companies in a wide variety of foreign countries, in order to try and hide their revenue and protect it from governmental taxes. I think we want to account for those kinds of shenanigans from the start. Anyway, it’s just an idea. But I hope this general concept does take off.