Google founder Larry Page threatened to leave if the company didn't find a way to keep him in control, newly unsealed court docs reveal
- Larry Page, Google's cofounder, threatened to leave the company in 2011, Bloomberg reported Wednesday.
- Together with fellow cofounder Sergey Brin and top executive Eric Schmidt, Page held shares with super-voting powers that gave the threesome control over Google.
- Page was worried he'd lose that control if Brin or Schmidt sold their shares, according to recently unsealed court records viewed by Bloomberg.
- At the time he made the threat, Page was pressing Google's board of directors to create a new class of stock that would allow him to retain control even if Brin and Schmidt sold their stock.
But under the terms of Google's corporate structure, if any of the three top officials sold their Class B shares, their stock would be converted into Class A shares, and the threesome would lose a portion of their control. Their control could also be diluted if Google issued new Class A shares as part of an acquisition.
Other tech companies have followed Google's leadGoogle, now a part of holding company Alphabet, ultimately created a third class of stock - Class C shares - that it distributed as a dividend to existing shareholders. Those shares come with no votes, meaning that Google can issue an endless number of them without affecting the voting control held by Page, Brin, and Schmidt.The revelation about Page's threat to leave the company was found in documents filed in a shareholder lawsuit over the establishment of the Class C stock. The investor who sued complained that Google was giving its founders additional control over the company at the expense of regular shareholders without compensating investors for it. The investor was also worried that the new shares would allow the founders to sell off significant numbers of shares - and thus dramatically decrease their economic stake in Google - while still retaining control of the company.
As part of a 2013 settlement of that suit, Google agreed to require Page, Brin, and Schmidt to sell their Class B shares whenever they sold Class C stock. It also agreed that any attempt to change the requirement would have to be approved by Google's entire board.
Google was one of the first tech companies to have a dual-class stock structure. But that set-up has since been copied by Facebook and Snap and has become increasingly popular among Silicon Valley startups looking to go public. Advocates have touted them as a way to allow corporate founders to focus on their organization's long-term success, rather than on the day-to-day concerns of short-term investors.But such stock structures have drawn increasing scrutiny and criticism of late, because they can insulate corporate insiders from legitimate shareholder and societal concerns. Such worries have been highlighted at companies including Facebook, which has seen a string of scandals over the last two years, and Snap, which has struggled financially and operationally since becoming a public company.
Some institutional investors have been pressuring stock markets and indices to exclude from their ranks companies that restrict the voting rights of everyday shareholders.Got tip about Google or other tech companies? Contact this reporter via email at firstname.lastname@example.org, message him on Twitter @troywolv, or send him a secure message through Signal at 415.515.5594. You can also contact Business Insider securely via SecureDrop.
- Cannes Lions 2021: India brings home a Gold, four Silver Lions and three Bronze Lions on Day 2
- E-commerce management platform CommerceIQ raises $60 million, looks to launch India operations by 2022
- Best power banks under ₹ 1000 to buy in India for 2021
- Best business laptops in India for 2021
- India is reportedly mulling over a new crypto tax which could make trading on foreign exchanges more expensive