TEN FOR ME, ONE FOR YOU
Marc Andreessen has a post well worth reading today explaining why he's gone from being an opponent of dual-class share structures for companies to being a support of them, especially for young tech companies with passionate founders interested in creating a major long-term franchise.
It's a comprehensive and well-argued position, covering everything from how it's worked so far for companies like Google and how it may have changed the merger dynamics between Microsoft and Yahoo! had Yahoo! had a similar structure.
Marc makes a particularly seductive argument on how the current public market environment has short-term forces that can be truly distracting to creating long-term shareholder value. And how dual-class structures would insulate world-class, deserving tech companies from these nasty market forces.
The whole argument works only if the founders turn out not to be bozos in the long-run, so ensconced in their own cocoon that they truly don't work in the best interests of their majority, long-term shareholders.
It works only if the founders stay wise and visionary, and are able to execute through both the short-term and and long-term challenges of running a large, fast-growing, world-changing technology company.
And the history of the markets, both public and private, have taught us that those folks are few and far between to be found.
And even visionary, extraordinarily capable founders invariably run into periods where their very successful companies are in a long period of funk. In the world of technology, Bill Gates, Michael Dell and Larry Ellison come to mind. Not to mention Steve Jobs, who got in to trouble enough to have to leave the company he founded. And go through a unique set of circumstances to be invited back and save the day.
And all those successful and rewarding companies where both founders and public share-holders did just fine without dual-class voting structures.
Problem is, no one is immune from turning into a bozo at least one time in their life. There's no guarantee that they won't do evil things regardless of any initial promises. People change, motivations change and so do the most initially aligned of shared interests. There are not guarantees, and dual-voting structures merely fore-stall and prolong the inevitable as in the case of the New York Times, which Marc eloquently discusses.
The other thing that is trouble-some about a dual voting structure is that goes against the very spirit of the compact with public market shareholders, regardless of whether these investors are large or small, short-term or long-term in their investment horizons. It's about creating efficient marketplaces after all, with all the bad that they sometimes entail with the good.
To paraphrase Ian Malcolm, the mathematician in Jurassic Park, "Markets find a way", despite all the best-intentions of visionary founders.
Marc goes on to explain how Google today is a poster-child for dual-class voting structures in tech companies. It is a good example in the here and now.
And there's no question that in the near-term, some emerging tech companies that are next in line to go public will be sporting dual-class share structures in their IPO. It'll be the fashionable thing to do for a while, until it isn't.
As an aside, it's interesting to bring up Facebook here, which has been fast emulating all things Google, hiring Google folks as fast as it can, including Google's global head of PR today. And if as Kara Swisher also reports today that Marc Andreessen has verbally accepted an offer to go on Facebook's board, a dual-class voting structure is almost a certainty for Facebook as and when it goes public.
In the meantime, the debate about the pros and cons of these structures will continue, I'm sure.
DISCLOSURE: I remain a long-time shareholder in dual-structure public companies like Google.