Dual-Class Share Structures in Silicon Valley: Facebook, Inc.

23 Pages Posted: 15 May 2014

See all articles by Victoria Hu

Victoria Hu

Harvard University, Law School, Students

Harikrishna Mehta

Harvard University, Law School, Students

Sonal Mittal

Harvard University, Law School, Students

Jeffrey Wheeler

Harvard University, Law School, Students

Date Written: December 13, 2012

Abstract

In most public corporations, shareholders own voting and cash flow rights in proportion to their investments. Dual-class share structures disrupt this proportionality. In corporations with dual-class share structures, voting and cash flow rights vary by type of share, and owners of smaller proportions may exercise voting power beyond their ownership stake. Concerns about disproportionate control are well documented in the academic literature on dual-class share structures. Nevertheless, this structure is becoming the “new normal” for technology companies in Silicon Valley. Since Google adopted the model in 2004, more than 27 Internet and technology companies — including Facebook, the largest Internet IPO in history — have gone public with dual shares. In this paper, we explore the traditional concerns about dual-class share structures in the new context of technology companies. We examine Facebook’s share structure in particular because of the company’s status in Silicon Valley and relevance as an example of corporate governance for other technology companies.

Keywords: Dual-class shares, share structure, corporations, public companies, Facebook, Silicon Valley, corporate governance

Suggested Citation

Hu, Victoria and Mehta, Harikrishna and Mittal, Sonal and Wheeler, Jeffrey, Dual-Class Share Structures in Silicon Valley: Facebook, Inc. (December 13, 2012). Available at SSRN: https://ssrn.com/abstract=2371759 or http://dx.doi.org/10.2139/ssrn.2371759

Victoria Hu

Harvard University, Law School, Students

1563 Massachusetts Avenue
Cambridge, MA 02138
United States

Harikrishna Mehta

Harvard University, Law School, Students ( email )

1563 Massachusetts Avenue
Cambridge, MA 02138
United States

Sonal Mittal (Contact Author)

Harvard University, Law School, Students ( email )

1563 Massachusetts Avenue
Cambridge, MA 02138
United States

Jeffrey Wheeler

Harvard University, Law School, Students

1563 Massachusetts Avenue
Cambridge, MA 02138
United States

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