Google founders to sell stock, cede majority control by 2014

Larry Page and Sergey Brin will still be in firm control of Google by the end of a five-year stock trading plan, but together, they will own less than half of the company voting rights.

By 2014, Google founders Larry Page and Sergey Brin will have sold enough of their stock to give up majority control of the company, Google announced Friday evening.

In November, Page and Brin entered long-term stock disposal agreements, a very common move designed to give uber-rich executives the ability to diversify their portfolios over time without scaring the stock market. But what's significant about this particular plan is that by the end of it--assuming that everything goes as planned--Page and Brin will control less than half of the voting power of Google shares, according to a filing with the U.S. Securities and Exchange Commission.

Google co-founders Larry Page (left) and Sergey Brin Google

"Today, we disclosed that Larry and Sergey have entered into plans to sell 5 million Google shares, each over the next five years--these shares represent about 17 of their overall Google holdings," Google said in an e-mailed statement. "They are both as committed as ever to Google and are integrally involved in our day-to-day management and product strategy. The majority of their net worth remains with Google. These pre-arranged stock-trading plans were adopted in order to allow Larry and Sergey to sell a portion of their Google stock over time as part of their respective long-term strategies for individual asset diversification and liquidity."

Google created a dual-class stock structure when it filed for an initial public offering in 2004. Class A shares are the ones that were offered to the public, granting the owner the value of one vote for one share. Class B shares, owned by Brin, Page, CEO Eric Schmidt, directors, early investors, and key managers, grant their owners 10 votes per share.

Page and Brin currently control 59 percent of the voting power of Google's stock, according to Friday's filing. By the time they have disposed of all the shares involved in the plan, they will control 48 percent of the voting power of Google's stock.

Now, according to Google's 2009 proxy statement, Schmidt owns enough Class B shares to control 9.5 percent of the voting power, so the triumvirate that runs Google still controls more than 50 percent of the voting rights. And when you add up directors and key managers, Google insiders currently own enough stock to control 70.9 percent of the voting rights associated with Google's stock, according to the same proxy statement.

Still, the voting rights currently possessed by the founders could theoretically allow the two to push through basically any corporate policy that regular shareholders might not like, such as the company's decision to present the Chinese government with an ultimatum over censorship two weeks ago.

In fact, Google warned prospective shareholders of that intention in 2004, saying in their IPO letter that "new investors will fully share in Google's long-term economic future but will have little ability to influence its strategic decisions through their voting rights."

In the real world, such a showdown between shareholders almost never happens. But should all go according to plan, by 2014, it will still be a milestone for Google.

 

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