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Dual-class stock = enlightened dictatorship

excerpt I like Marc Andreessen a lot. I think he writes some deep and thoughtful posts at his blog, and as more than one person has pointed out, his analysis of the Microsoft-Yahoo brouhaha has been second to none (except maybe Kara Swisher at All Things Digital). And his latest post on dual-class s ...

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    Brian Sullivan 2 months ago with 1 point
    Is the "Don't go Public" option really an option? I think in the US anyway once you get to a certain number of individuals holding shares -- like when you give key employees shares you end up having to report as a public company with none of the benefits.

    If I recall this drove Google (and maybe Yahoo) public (or was a significant factor in the decision).

    I am not totally sure I understand this dual class share option as it relates to public companies anyway. Doesn't fiduciary duty still apply?
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    mathewi 2 months ago with 1 point
    Brian, you are right about the public reporting aspect, in which as
    you get larger you eventually have to start filing public financial
    statements -- although of course that assumes you have issued shares
    to lots of people, which isn't always necessary either. And that was
    part of the impetus for Google to do an IPO, although the desire of
    their backers to get some liquidity was also a factor.

    As for fiduciary duty, I'm not a lawyer so I don't know the exact
    details -- but I assume that having voting control simply makes it
    easier to do certain things, and then it's up to the non-voting or
    restricted shareholders to make a case for why it might be harmful to
    them (in the same way that eBay is arguing in its case against
    Craigslist).
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    Mark Dykeman 2 months ago with 1 point
    Mathew, I would reword your core argument to say: "multiple-voting shares protect incompetent, complacent or simply unsuccessful owner/managers that should be replaced, but cannot be." It seems like you're attributing personality or sentience to an organization, but perhaps we're saying the same thing anyway.

    Another thought: your concern about centralization of power, though a good one, is virtually inescapable from a practical point of view because a large class of shareholders cannot direct the day-to-day operations of a corporation. You can still have decentralized decision making and activity, but standards, strategy, and overall direction has to occur from a central source. At best, boards are part coach, part watchdog, and part referee. They can throw incompetent management out of the game, guide them, or reprimand them, but they really can't play the game themselves.

    Having said that... I would be wary of investing heavily in a company with such a control and ownership structure. If I had confidence in the individuals involved, I'd be OK with it, but it would take significant trust.

    Now I've got to go check my mutual funds....
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    mathewi 2 months ago with 1 point
    Thanks, Mark. I think your wording would work as well.
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    John K 2 months ago with 1 point
    I had similar thoughts - didn't express it as well as "dictatorship", but I think the "commitments" that Andreessen pre-supposes would be totally un-enforceable.

    http://gotads.blogspot.com/2008/05/andreessen-l...
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    bbluesman 2 months ago with 1 point
    Dude I love your writing but if you mention Kara Swisher, Mike Arrington or Louis gray one more time I think I'll scream. Kthxbai!
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    mathewi 2 months ago with 1 point
    Come on -- I hardly mention Louis Gray at all :-)
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    bbluesman 2 months ago with 1 point
    haha! I mean I don't mind links to them or whoever but just get tired of seeing the same names over and over. My gag reflexometer starts going wild.
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    Markus 2 months ago with 1 point
    Is there a single powerful web company without a dictator/dictators at the top ?

    Microsoft
    Oracle
    Apple
    Google ?

    Visionary people are people who do what everyone else thinks is impossible. What group of common share holders want to let someone go off and do what is "impossible"
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    mathewi 2 months ago with 1 point
    A strong, visionary leader is one thing, Markus -- someone with
    complete dominance through absolute voting control is another.
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