Google Inc’s latest move has raised concerns among corporate-governance watchdogs, who say the new stock structure cuts shareholders out of the loop. For investors, the result is a lack of input on decision making, said Charles Elson, director of the University of Delaware’s John L Weinberg Centre for Corporate Governance.
“Shareholder voting rights are pretty limited in Google,” he said. “And this basically perpetuates that reality.”
Together with chairman Eric Schmidt, Google’s co-founders have about two-thirds of the company’s voting power, thanks to a dual-class stock structure that was created before its initial public offering eight years ago. The company already had one class of stock with less voting power, Class A. The new type, Class C, will have none at all. It’s hard to tell why the additional step was necessary, said Tim Ghriskey, a co-founder of the Solaris Group who helps oversee about $2 billion in assets, including Google shares.
He would rather see Google pay a cash dividend, Ghriskey said. Still, if investors aren’t happy, they can always sell their shares, he said.
“We live with it,” Ghriskey said. “It wouldn’t be our first choice. Our first choice would be split the stock and don’t create two classes, and start paying a dividend.”
Google put in the original dual-class structure to insulate the company from outside pressures while it made potentially risky investments, such as the video-sharing site YouTube or the Android mobile operating system, Page and Brin said yesterday in a statement. The latest change solidifies those protections.