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When the news about the change in structure of the shares came out a while back I decided that this is a company that I could never invest in (a big enough disc

by cremnob 14y ago

When the news about the change in structure of the shares came out a while back I decided that this is a company that I could never invest in (a big enough discount to intrinsic value may change my mind). The execs can reduce their economic interest in the company while maintaining control, which isn't great for keeping their interests aligned with shareholders. e: Here's a study that shows that companies with dual-class share structures pay executives more in compensation than usual and make value destructive acquisitions. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1080361 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1080361

jmillikin 14y ago
http://investor.google.com/corporate/2012/founders-letter.html http://investor.google.com/corporate/2012/founders-letter.ht... > Larry, Sergey and Eric have agreed to subject their > shares to a Transfer Restriction Agreement. This > agreement will maintain the same link between their > voting and economic interests that exists today, even > if they sell some of their non-voting Class C shares. > If the founders or Eric wish to sell or transfer their > non-voting Class C shares, a “stapling” provision in > the agreement requires them to either sell an equal > number of Class B shares, or convert an equal number > of Class B shares into Class A shares. No other > stockholders will be subject to these restrictions > upon the transfer or sale of their shares.
- cremnob 14y ago
  While better than not having the agreement (which terminates when their share falls below 34% of voting power), the new share structure is not shareholder friendly. Class C shares can now be issued to employees or used for acquisitions, which would dilute the economic interest of shareholders without diluting their voting interest.
  - Evbn 14y ago
    The TC article says their voting power is already only 25% combined (8% each)
    - cremnob 14y ago
      The proxy statement says they collectively own more than half of the voting power.
magicalist 14y ago
This is kind of a weird way to evaluate Google in particular since they already have a dual class share structure. Just check their executive pay levels and acquisition patterns, which you should do anyways. You don't need to make a probabilistic argument when you have direct evidence. Meanwhile, in many instances shareholders tend to be capricious and uninterested in long term health, especially when particular shareholders are heavyweights but in unrelated markets (e.g. hedgefunds under plurality voting charters) edit: also what jmillikin said, which is particularly apt since the study you cite did not claim those results as more likely in dual-class companies, but found them correlated with the growth of the divergence between insider voting rights and cash-flow rights.
- cremnob 14y ago
  See my response to jmillikin. Your comment about the study's findings is semantic, because it does claim that its more likely to happen: "These findings support the hypothesis that managers with greater control rights in excess of cash-flow rights are prone to waste corporate resources to pursue private benefits at the expense of shareholders."

by cremnob 14y ago

jmillikin 14y ago

http://investor.google.com/corporate/2012/founders-letter.html http://investor.google.com/corporate/2012/founders-letter.ht... > Larry, Sergey and Eric have agreed to subject their > shares to a Transfer Restriction Agreement. This > agreement will maintain the same link between their > voting and economic interests that exists today, even > if they sell some of their non-voting Class C shares. > If the founders or Eric wish to sell or transfer their > non-voting Class C shares, a “stapling” provision in > the agreement requires them to either sell an equal > number of Class B shares, or convert an equal number > of Class B shares into Class A shares. No other > stockholders will be subject to these restrictions > upon the transfer or sale of their shares.

cremnob 14y ago
While better than not having the agreement (which terminates when their share falls below 34% of voting power), the new share structure is not shareholder friendly. Class C shares can now be issued to employees or used for acquisitions, which would dilute the economic interest of shareholders without diluting their voting interest.
- Evbn 14y ago
  The TC article says their voting power is already only 25% combined (8% each)
  - cremnob 14y ago
    The proxy statement says they collectively own more than half of the voting power.

magicalist 14y ago

This is kind of a weird way to evaluate Google in particular since they already have a dual class share structure. Just check their executive pay levels and acquisition patterns, which you should do anyways. You don't need to make a probabilistic argument when you have direct evidence. Meanwhile, in many instances shareholders tend to be capricious and uninterested in long term health, especially when particular shareholders are heavyweights but in unrelated markets (e.g. hedgefunds under plurality voting charters) edit: also what jmillikin said, which is particularly apt since the study you cite did not claim those results as more likely in dual-class companies, but found them correlated with the growth of the divergence between insider voting rights and cash-flow rights.

cremnob 14y ago
See my response to jmillikin. Your comment about the study's findings is semantic, because it does claim that its more likely to happen: "These findings support the hypothesis that managers with greater control rights in excess of cash-flow rights are prone to waste corporate resources to pursue private benefits at the expense of shareholders."