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Google's Wacky Stock Split


Parsad
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If one looks at the long history of companies with dual class structures the outcome is almost certain, at some point the non voting shareholders get screwed. One is reminded of the of the teen age boys promise of "I'll only put the head in". Even with FFH and BRK ,can shareholders be certain with the founders passing their estates will treat the lesser vote shareholders fairly. Warren has never sold a share of his voting stock but he is converting voting into non voting and then gifting the non voting to the Gates foundation. At some point control of BRK comes into play. One class of shares should be all that is allowed for public companies.

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One class of shares should be all that is allowed for public companies.

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Then you wouldn't have any preferred stock.

 

 

In my perfect world no, almost all investors however value pfds like super junior debt. The risks in pfd ownership are further complicated in some jurisdictions by different tax treatments on dividend income.

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One class of shares should be all that is allowed for public companies.

 

I tend to agree.  You either own the company or you don't.  If you own the company you should have a say.

 

IMHO companies should keep the ownership structure simply and straightforward and concentrate their time, effort, and resources on running the business.

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Google has never been a company that marched to the drumbeat of Wall Street (recall their IPO was not one that made Wall Street happy), and they don't seem to be too worried about not pleasing that crowd.  I'm not sure that it's such a bad thing.  I'd rather have founders with vision - and they do still seem to be making a lot of good calls - deciding they want to stick around longer (provided that vast majority of their net worth is still in the company, aligning their interests with shareholders), rather than having them lose control to others who may be more interested in maximizing short-term stock price, or dumping stock hand over fist as they rush to the exits.  Be careful what you ask for.

 

 

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Google has never been a company that marched to the drumbeat of Wall Street (recall their IPO was not one that made Wall Street happy), and they don't seem to be too worried about not pleasing that crowd.  I'm not sure that it's such a bad thing.  I'd rather have founders with vision - and they do still seem to be making a lot of good calls - deciding they want to stick around longer (provided that vast majority of their net worth is still in the company, aligning their interests with shareholders), rather than having them lose control to others who may be more interested in maximizing short-term stock price, or dumping stock hand over fist as they rush to the exits.  Be careful what you ask for.

 

good points.  I like this article here:

 

http://www.forbes.com/sites/stevedenning/2011/11/28/maximizing-shareholder-value-the-dumbest-idea-in-the-world/

 

There are some very interesting points in there:

 

"The change had the opposite effect from what was intended

The proponents of shareholder value maximization and stock-based executive compensation hoped that their theories would focus executives on improving the real performance of their companies and thus increasing shareholder value over time. Yet, precisely the opposite occurred. In the period of shareholder capitalism since 1976, executive compensation has exploded while corporate performance has declined.

 

“Maximizing shareholder value” turned out to be the disease of which it purported to be the cure. Between 1960 and 1980, CEO compensation per dollar of net income earned for the 365 biggest publicly traded American companies fell by 33 percent. CEOs earned more for their shareholders for steadily less and less relative compensation. By contrast, in the decade from 1980 to 1990 , CEO compensation per dollar of net earnings produced doubled. From 1990 to 2000 it quadrupled.

 

Meanwhile real performance was declining. From 1933 to 1976, real compound annual return on the S&P 500 was 7.5 percent. Since 1976, Martin writes, the total real return on the S&P 500 was 6.5 percent (compound annual).  The situation is even starker if we look at the rate of return on assets, or the rate of return on invested capital, which according to a comprehensive study by Deloitte’s Center For The Edge are today only one quarter of what they were in 1965."

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