From 3rd April onwards, Google will be initiating a new plan for creating a new class of non-voting capital stock, which will have a separate listing on the stock exchange. All existing stockholders will be provided some of these shares through a stock dividend. This means one new share will be awarded from the non-voting stock to the owner of one existing share of the company. In this manner, investors will be able to double the number of shares that they held in the company before this stock split. According to Google, this two-for-one stock split is something that investors have longed for.
Several corporate uses can be made with these non-voting shares such as equity-based compensation, which would have diluted the corporate governance structure of the company otherwise. This plan seems a bit strange to people and both media and investors have gone a little crazy in trying to understand why the company chose to undertake it. There are outright disagreements and even misinterpretations that have occurred as a result. This is because the voting authority of Larry Page and Sergey Brin, founders of the company and that of current chairman and former CEO Eric Schmidt will be solidified because of the split. There is doubt whether this will be a good or bad thing.
Page, Brin and Schmidt have held a near-controlling or controlling power at Google for a long time and this luxury has been given to them thanks to the dual-class stock structure of the company. Class B shares are owned by the three, which have voting power 10 times more than that of Class A stock. Until April 3rd, it was the Class A stock that was traded under the ticker GOOG on the public markets. After the split, these shares will be traded under a new ticker GOOGL, while the old ticker will be given to the new Class C shares.
In 2004, Google’s founders were careful in arguing in favor and explaining the system of dual-class shares when the company was getting ready to go public. The basic purpose was that Google wanted to enjoy all the benefits that public ownership would provide, but weren’t willing to jeopardize their own authority for the company’s strategy and direction. 37.6% of the company’s voting power was held by Brin, Page and Schmidt after the IPO while the remaining 61.4% had been held by the directors and executive management team.
Ostensibly, the power structure will remain unchanged because of the stock split and would only work to preserve the voting power of the people already in charge. Years of stock-based acquisitions and compensations ended up diluting the voting authority of Google’s principals and their grip over the company would have loosened gradually if they hadn’t issued this non-voting stock. This may seem as a contriving way for executives to try and maintain their control, but it is not that problematic because Brin, Page and Schmidt have been leading the company and it has worked out well so far for one of the world’s greatest and largest technology companies.
Google Inc. was able to get the term ‘Google Glass’ trademarked successfully when it started developing these spectacles. Last year, the company had also submitted another trademark request for just a single word ‘Glass’, which would be displayed in the same futuristic font used for the full term in its marketing campaign. However, the company’s bid is being held up by the US Patent and Trademark Office. Last fall, a trademark examiner wrote a letter to the company and raised two main objections to their application. One of these concerns was that the trademark boasted a similarity with other pending or existing trademarks of computer software that also contain the word ‘Glass’.
This would give rise to the risk of consumer confusion. It was also suggested by the examiner that even with the distinctive formatting, ‘Glass’ would remain a ‘merely descriptive’ term. This would create an issue because trademark protection is not granted to generic terms under US federal law. For instance, the term ‘shoe’ could not be trademarked by a company if they are selling shoes. A Google spokesman said that the company takes the routine steps like others for registering and protecting its trademarks. A limited number of these wearable computer devices have been sold by the company up till now, but a date hasn’t been announced as yet for retail sales.
Katie Kraject and Anne Peck, the trademark attorneys of the search engine giant wrote back to the examiner of the trademark office two weeks ago. In defense of the application, they attached a 1928-page letter. 1900 pages of this whole letter are simply articles written on Google Glass. The attorneys did not agree with the statement that consumers would be confused because of the company’s proposed trademark because the Glass device was garnering plenty of media and policy attention and has continued to do so in the past few years.
The attorneys also disputed the ‘descriptive’ point made by the examiner, mentioning in their letter that the display and frame components of Google Glass are not made with glass at all. Rather than glass, plastic and titanium has been used for making the device. It was also asserted by the attorneys that simply the term ‘glass’ was not sufficient for informing potential customers about the use, function and nature of the product that Google will sell to them. Google’s bid is being opposed by at least one company.
A notice of opposition was filed against Google in December by the developer of a browser extension. Border Stylo LLC’s product is called ‘Write on Glass’. Google struck back last month by filing a petition for canceling the trademark of the company. No comment was made by the company at this action of Google. A federal registration isn’t necessarily needed by Google if it wants to call its product ‘Glass’ and neither is it necessary for it to get a trademark according to a trademark attorney who doesn’t represent the company. But, the company could find it difficult to protect its own trademark from infringement if its bid is rejected.
Mark Zuckerberg, the CEO of the biggest social network of the world, has decided that he is a $1-a-year man. According to the Bloomberg Billionaires Index, Facebook’s head is actually the 22nd richest man of the world. But, as per the regulatory filing that was made with the US Securities and Exchange Commission, Mr. Zuckerberg was only paid a salary of $1 in 2013. This is down from the salary he was paid in 2012 before Facebook went public, which amounted to $503, 205. It seems that the brains behind Facebook is attempting to follow the path that was taken by other technology moguls of Silicon Valley who had also chosen to take an annual salary of $1 as a symbol because they were already wealthy.
The practice was popularized by Apple’s late co-founder Steve Jobs and it is also followed today by Google co-founders Sergey Brin and Larry Page, amongst others. All these individuals are in possession of sizable equities in their own respective companies. Having a total wealth of $27 billion, Mr. Zuckerberg holds the ownership of Facebook shares that give him about 61.6% voting power in the social network. This information was provided in the filing. It was last year that net worth of the social network’s founder ballooned as the stock of the company saw a double increase in its value.
The 29 year old, who created the social network in a college dorm with a bunch of his roommates, is also ramping up his philanthropy and public service by starting a group named Internet.org, which has undertaken the goal of connecting the whole world to the internet. Last year, the total compensation of Facebook’s CEO had been $653, 165, which was a reduction from $1.99 million in 2012. The filing states that apart from the $1 salary, the amount included fuel, passenger fees, catering and crew costs for using the private planes for personal reasons, which is a part of his security program.
The filing also mentioned that even last year; the chief executive officer had earned $3.3 billion when he had chosen to exercise stock options for purchasing 60 million shares. About 41.35 million of those shares had then been offered by Mr. Zuckerberg in a secondary offering by the social network in December. The company had said that at that time, the CEO would use most of the proceeds for paying the tax that were incurred in relation to the transaction. 18 million shares had also been gifted by Mark Zuckerberg to charity.
The compensation of other Facebook leaders also fell from the 2012 level. $16.2 million was given to Sheryl Sandberg, the chief operating officer of the social network as total compensation for 2013 as opposed to the $26.2 million that had been given a year before. However, the Bloomberg Billionaires Index indicated that Ms. Sandberg became a billionaire in January of this year when the stock value of the social network soared. Facebook seems to have come a long way since its IPO in May 2012.