Facebook (NASDAQ: FB) has proposed a new class of publicly listed, non-voting Class C capital stock, to allow CEO Mark Zuckerberg remain in charge of the company, even if he gives his shares away, for philanthropic causes. The decision has been supported by the board of directors, according to a press release issued Wednesday.
The tech giant seeks to maintain its long-term strategy for connecting the world, according to a statement from Colin Stretch, General Counsel at Facebook. The board has recognized that “a large part” of the Facebook’s success has been achieved due to Zuckerberg’s management.
Creating a new type of shares would reduce succession risk, and would encourage the 31-year-old entrepreneur, to be engaged with the social network in a leadership role, said Stretch. When Facebook went public four years ago, Zuckerberg said that an optimal way to accomplish its mission was to “build a valuable and strong company”.
On December last year, Zuckerberg said he will give away 99 percent of his Facebook shares over the course of his life. As a result, he created the Chan-Zuckerberg initiative alongside his wife Priscilla Chang. The couple is focused on “promoting equality, curing disease and connecting people”.
The new proposal announced by the board of executives will “maintain and improve” the current Facebook’s structure, said Stretch. At the same time, it will support Mark Zuckerberg’s goals to participate in philanthropy via the Chang Zuckerberg initiative, which plans to invest $1 billion within the next three years.
Which is the impact of Class C shares?
For every Class A and Class B share owned by stockholders, Facebook will now issue two new Class C shares. All of them have the same economic rights, remarked Stretch. Nonetheless, Class C shares are non-voting. The proposal is expected to be discussed during the annual meeting of stockholders on June 20.
“This is not a traditional governance model, but Facebook was not built to be a traditional company. The board believes that a founder-led approach has been and continues to be in the best interests of Facebook, its stockholders, and the community,” said Stretch in a statement sent to investors.
Zuckerberg has a voting power of 60 percent, due to its owned shares. However, if he gives away 99 percent of his stock, his voting power would decrease to less than 50 percent, according to the New York Times. By creating the new type of shares, the CEO would maintain his voting power.
Class A and Class B shares will continue to be traded under the “FB” ticker symbol. Class C shares will be traded under a new ticker symbol, that has not been announced yet.
Source: Facebook Press Release