However, Google's board of directors is advising that shareholders reject the motion at the company's annual shareholder meeting scheduled for May 11. A Google representative who was asked to comment on Thursday referred to the company's proxy statement from when it was preparing to go public in 2004. The proxy defended the dual-class stock structure.
The Bricklayers & Trowel Trades International Pension Fund, which owns 4,735 shares of Google's Class A common stock, has informed Google that it will submit a proposal urging shareholders to adopt a recapitalization plan that would provide for all of the company's outstanding stock to have one vote per share. Under the current structure, Class A stock has one vote per share and Class B stock, owned only by Chief Executive Eric Schmidt and founders Larry Page and Sergey Brin, has 10 votes per share.
"By their ownership of 86,753,907 shares of Class B common stock, three of the company's executives (Eric E. Schmidt, Larry Page and Sergey Brin) controlled 66.2 percent of the total voting power of all the company's shares...even though they owned only 31.3 percent of the total shares outstanding," the proposal says, according to Google's filing with the U.S. Securities and Exchange Commission.
"We believe this disproportionate voting power presents a significant danger to shareholders. As Louis Lowenstein observed in 'What's Wrong With Wall Street' (1988), dual-class voting stocks like our company's reduce accountability for corporate officers and insiders," the union pension fund said. "In our view, the danger of such disproportionate voting power was illustrated by the recent fraud charges brought against top executives at Adelphia Communications and Hollinger International."
In his founder's letter from 2004, Schmidt said the company was adopting a dual-class stock structure to make it harder for outside parties to take over or influence Google and to make it easier for management to follow a long-term, innovation-based growth strategy.
"While this structure is unusual for technology companies, similar structures are common in the media business and (have) had a profound importance there," Schmidt wrote. "The New York Times Company, The Washington Post Company and Dow Jones, the publisher of The Wall Street Journal, all have similar dual class ownership structures. Media observers have pointed out that dual class ownership has allowed these companies to concentrate on their core, long-term interest in serious news coverage, despite fluctuations in quarterly results. Berkshire Hathaway has implemented a dual class structure for similar reasons.
"From the point of view of long-term success in advancing a company's core values," he said, "we believe this structure has clearly been an advantage."