Kathleen Chaykowski FORBES
Mark Zuckerberg and Facebook's FB +0.53% board are making sure the brilliant founder won’t lose control of the social media giant.
As part of its first quarter earnings report, Facebook FB +0.53% announced on Wednesday its board has approved a proposal to create a new class of non-voting stock called Class C in a move to help ensure that Zuckerberg maintains control over Facebook's FB +0.53% future. Stockholders will need to approve the plan at the company’s annual stockholder meeting in June in order for the change to take effect. If it passes, which is essentially guaranteed because Zuckerberg already has more than 50% of stockholders’ voting power, Facebook plans to issue two shares of Class C stock as a dividend in respect to each outstanding share of Class A and Class B common stock. Class A and B common stock both contain voting rights.
The move ensures that if Facebook gives stock away to employees as compensation or uses stock in future acquisitions, Zuckerberg’s voting shares won’t be diluted. Also, if Zuckerberg wants to donate or liquidate shares for philanthropy, he can use his Class C stock and maintain majority voting control. This isn’t the first time public companies have created a dual-class structure that includes non-voting stock. Google GOOGL +0.42%, now called Alphabet, and Under Armour UA -7.54%have both adopted a similar structure to ensure their executives maintain voting control.
“This proposal is designed to create a capital structure that will, among other things, allow us to remain focused on Mr. Zuckerberg’s long-term vision for our company and encourage Mr. Zuckerberg to remain in an active leadership role at Facebook,” the company said in Wedneday’s release.
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