Several months ago Facebook announced a plan to create a new, third class of nonvoting shares, designed to further strengthen Mark Zuckerberg’s voting control. According to the latest proxy information, he already holds approximately 60 percent of the voting power in a two-class stock structure.
A trial for a class action lawsuit, seeking to block the plan to go to a third class of nonvoting shares, was scheduled to begin on Sept. 26, 2017. Faced with the prospect of defending the effort to further perpetuate voting control in court, Mr. Zuckerman and Facebook’s board have decided to drop the plan.
A lawyer for the plaintiffs said that he now expects the case to be dismissed as the latest board decision provides all of the relief that was being sought.
Facebook’s decision to back away form the third class of nonvoting shares clearly represents a win, albeit a modest one, for public investors. Corporate governance remains an issue, as we have discussed previously in our March 15 and July 15 blogs, and Snap still holds the prize for shareholder disdain, having issued shares with no voting rights.
Nevertheless, progress is progress.