Is Mark Zuckerberg being greedy? Let shareholders decide

{"text":[[{"start":4.04,"text":"The conventional way of structuring a company is to issue shares that confer one vote, thus treating all investors equally. Anyone who believes strongly in this principle, though, is having a bad decade. And they definitely ought not to be a shareholder in Meta Platforms."}],[{"start":19.42,"text":"Founder Mark Zuckerberg has 61 per cent of Meta’s votes with 13 per cent of its equity. Most of his shares are of a special class that comes with 10 votes, while everyone else’s have just one. Now, Meta is going to issue a third, non-voting kind of share and hand an initial batch out to existing shareholders on a one-for-one basis. That will allow Zuckerberg to raise new capital for Meta in future, and sell some of his own stock to pay a potential wealth tax in California — and is designed to ensure he does not lose any voting power."}],[{"start":50.82,"text":"Shareholders might not like this. Last time then-Facebook tried something similar in 2016, some of them sued, and the company backed down. But why were they so angry? After all, it might seem that giving out new shares to everyone according to their holding, or issuing new non-voting stock at the market price, means no economic value or control is given away."}],[{"start":71.78,"text":"The answer relates to something called “the wedge”. Researchers affiliated with the European Corporate Governance Institute define this as the gap between the voting stake and economic stake held by an insiders. Some studies show that a growing wedge can weigh on a company’s share price. So if Zuckerberg sells shares but not votes, other shareholders might suffer."}],[{"start":93.36,"text":"In this case, it’s hard to believe the wedge really makes much difference. The average dual-class share company in the ECGI study sported a wedge of 24 per cent; Meta’s is 47. If Zuckerberg were allowed to sell his entire allotment of the new non-voting shares — which he isn’t, because the board has only allowed him to sell a fifth of them for now — the wedge would only rise to 54 per cent. A governance discount, if such a thing exists at Meta, is already in the stock."}],[{"start":null,"text":"

"}],[{"start":120.56,"text":"Even so, the billionaire Meta founder’s mercenary approach won’t win any fans. During negotiations he repeatedly insisted new capital raises should not dilute his control at all — never mind push it below 50 per cent. He threatened to leave California, noting that the optics of this would “raise questions for management”. Zuckerberg also proposed, as an alternative, a new pay package inspired by founders “of similar stature”, presumably thinking of Elon Musk."}],[{"start":152.14,"text":"And while the basic idea of voteless shares is reasonable, it’s not clear there is reason to rush. Even if Zuckerberg sold $15bn of super-voting stock to cover his tax bill at the current share price, and Meta raised $100bn by issuing new shares of the regular one-vote variety, he would still have about 55 per cent of the votes, Lex reckons, easily enough to keep control."}],[{"start":177.14,"text":"If Zuckerberg cares what people think, there is a more equitable way to get what he wants: persuade his fellow investors to back his vision, and let them — and only them — vote on it. When Musk’s $1tn bonus was put to the ballot last year, a majority of independent shareholders endorsed it, because they like what he is selling. Assuming Zuckerberg is as valuable as he and his board believe, he has nothing to fear."}],[{"start":205.22,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1792740232_6833.mp3"}