Google holders reject share structure reform
SAN FRANCISCO, May 12: Shareholders of Google Inc., the world's most popular Web search provider, on Thursday rejected a dissident investor proposal to end a two-tier ownership structure that vests power in its founders.
A majority of the shareholders participating in the company's annual shareholder meeting voted against a proposal by a union pension fund that would have diluted control of the company's brain trust, its top three executives.
The trio -- co-founders Larry Page and Sergey Brin, plus Chief Executive Eric Schmidt -- hold a privileged class of stock that gives them more than two-thirds of voting power.
Google General Counsel David Drummond told the shareholder meeting that a majority of holders present or qualified to vote by proxy had voted against the one-share, one-vote proposal by the Bricklayers&Trowel Trades International Pension Fund. The fund held 4,735 shares of Google's Class A common stock.
An exact tally of the vote was not immediately available.
John McIntyre, a representative of the Bricklayers fund, argued in the favor of the proposal by praising Google's ''remarkably democratic software.'' But he said it is ironic that a company that ''builds its success on the wisdom of crowds'' doesn't have a democratic shareholder structure.
Corporate governance experts view dual-class voting structures as partly to blame for financial scandals at cable television operator Adelphia Communications and newspaper publisher Hollinger Inc..
''It is the potential inbreeding of ideas that can be engendered.
We have all the confidence in the world (in the current leadership of this company), but they aren't perfect,'' said McIntyre, an assistant to the secretary-treasurer of the International Union of Bricklayers and Allied Craftworkers.
Ahead of its initial public offering in August 2004, Google set up a two-tier structure made up of Class A common stock available to public shareholders and a non-public Class B stock held by insiders in which company voting power is vested.
In an ''Owner's Manual for Google Shareholders'' filed as part of Google's IPO prospectus, Page argued that the company's ''long-term focus'' on ''serving end users'' required a dual-class voting structure to ward off hostile takeovers.
During a question-and-answer session with shareholders attending the annual meeting at the company's Mountain View, California headquarters, Brin, Google's president of technology, said the company has no plans to split its stock.
Google shares closed at 7.00, down .98, or 4 percent in Nasdaq trading ahead of the meeting on Thursday.
As a matter of policy, the company has deliberately priced its shares out of the traditional ranges for U.S. stocks. ''We would rather not have shareholders who have bucks to invest on a whim, but don't go through the personal analysis'' of evaluating the company's finances before investing, Brin said.
Several smaller shareholders who spoke at the meeting praised Google's product innovation, while one critic challenged a move this year by Google to censor search results in China in order to build its business inside the country.
Google barred journalists from attending the meeting, but made an audio recording available via a Webcast on its site.
A survey by Reuters of 25 of the largest U.S. and European tech, media and telecommunications companies -- including all of Google's closest peers -- found Google alone has a policy of barring the press from attending shareholder meetings.
Financial reporters attend such events to meet and speak with retail investors in the annual corporate governance ritual.
At a five-hour briefing for journalists on Wednesday, executives declared they wanted to promote greater transparency -- within limits -- for the press.
''Google has concluded that our interest as a company is best served by being more open about what we are doing and what we aren't,'' said Elliot Schrage, the company's recently hired head of communications.
A Google spokesman said the shareholder meeting was the company's chance to communicate directly with shareholders.
''Having the chance to listen to their concerns, to listen to them in a way that is not a (media) spectacle, is our goal in the day,'' Google spokesman Jon Murchison told Reuters.