Google's founders aggressively protect power with share deal

The news that Google’s founders want to issue a new class of stock to shareholders which doesn’t allow them the right to vote, is a classic defensive move by visionary technology leaders determined to stay in control of their own company, writes Emma Barnett.

Last night, in a letter to shareholders, Google’s chief executive, Larry Page and fellow co-founder Sergey Brin, defended their decision to effectively split the search giant’s stock price in half and remove voting powers from future Google employees and new investors.

Without the change, the paid said, senior leaders would eventually lose their voting power. That, they explained, would undermine "our aspirations for Google over the very long term".

Since it went public in 2004, Google's co-founders, who still own the majority of the company, have emphasized a need to insulate management from short-term pressures.

This latest move is not unusual for the latest generation of technology companies – in which the trend has been for founders to remain running the business and eventually taking it public - instead of selling out.

When Mark Zuckerberg, Faebook’s founder and chief, filed the company’s S-1 filing earlier this year, ahead of its impending flotation, a clause was added to protect his leadership and to grant the 28-year-old the unusual power to name his successor if he still controls the company when he dies.

The filing says: “In the event that Mr. Zuckerberg controls our company at the time of his death. Control may be transferred to a person or entity that he designates as his successor."

Interestingly when Twitter’s new chief executive, Dick Costolo, kicked out one of the site’s co-founders and the former CEO, Ev Williams, from the day-to-day running of the site – Jack Dorsey, another co-founder, was brought back in to head up the product development of the microblogging platform.

Founders are now aggressively staying in the companies they have created and usually more to the benefit of consumers and investors alike.

The vision of a founder is like no other – and can very rarely be replicated.

British music site Last.fm’s popularity and reach declined dramatically after it was gobbled up by CBS and the founders left.

The same was true for Bebo, MySpace and for a long time, Apple – until the return of an ousted founder and chief executive, Steve Jobs. There is a vision, dedication and love that a founder brings to a business and in these cases, consumer products and services – which usually propels the business to new levels.

However, once a business becomes a public company – continued control is more difficult to achieve – as is market success. It becomes far tougher to please the consumer and Wall Street at the same time.

Google’s latest results released last night were described by analysts as disappointing.

Conversely it is argued and is a well accepted argument that Mike Lazaridis and Jim Balsillie, the founders of Research in Motion – the parent company of ill-fated Blackberry, stayed at the helm too long.

Google’s latest results may have been below market expectations – but they are still extremely positive.

While Page and Brin have a great track record to fall back on, they need to buy as much time as possible to do continued great things with their company. However, buying time means accruing power in the world of public companies – which is why this latest move comes as no surprise.