FORTUNE -- You can't blame Google CEO Larry Page for not being consistent. As Google prepared to go public nine years ago, Page detailed in a letter to prospective investors the many ways in which Google would be unconventional. It would focus on users and on long-term results; it would have an unusual management structure; it would abide by a wacky "don't be evil" motto -- or at least, by how Page & Co. interpreted it; and it would aspire to make the world better. Oh, and if shareholders didn't like any of this, there wasn't much they could do about it: Google would have dual stock class structure that ensured that Page and co-founder Sergey Brin, as well as then CEO Eric Schmidt, would retain voting control.
A year ago, Page sought to strengthen and extend the founders' majority control, proposing a stock split that would create a new class of stock with no voting rights. The details were arcane but the effect clear: Page and Brin would continue to call the shots, even though they currently own about 15% of Google's (GOOG) equity.
Not surprisingly, advocates of shareholder rights universally panned the move. After all, the owners of Google's new shares would have few rights beyond their ability to sell their shares. A Massachusetts pension fund sued to block the split, alleging the founders and the board had breached their fiduciary duty to shareholders.
On Sunday night, Google's board approved a proposed settlement of the lawsuit. The particulars of the settlement are complicated, but it essentially calls for Google to compensate the owners of the new class of shares if those shares fall in value below those of Google's other shares. If a court approves the plan, the stock split is likely to go forward.
Page's undemocratic style of governance has hardly been a handicap. A $1,000 investment in the company at the IPO would now be worth about $10,500. Google shares closed above $900 on Tuesday, just shy of their all-time high of $920, giving the company a market value of nearly $300 billion. Since Page announced the controversial stock split last year, shares have risen 38%. Google's shareholders may be disenfranchised, but they are not unhappy.
None of this is to say that Google has been setting a good example. When it decided on a dual-stock structure in 2004, the move was virtually unheard-of in tech. Google made it fashionable, and companies like Groupon (GRPN), Zynga (ZNGA), and Facebook (FB) followed suit, giving their founders and early investors control over their destiny. All are trading well below their offering prices. All have unhappy shareholders who now wish they hadn't placed so much faith in the wisdom of those companies' founders. There's not much they can do now to register their discontent other than, of course, sell their shares.
Google's story demonstrates that shareholder rights and returns do not necessarily go hand in hand. But the struggles of lesser tech companies suggest that Silicon Valley's bet on founder control remains fraught with peril.
Google CEO Larry Page envisions a future in which computers plan your vacations, drive your cars, and anticipate your whims. Audacious? Maybe. But Page's dreams have a way of coming true.
Note: On Jan 3, as Fortune published this article, the Federal Trade Commission ended its investigation of Google's search practices saying it found no evidence that the company manipulated search results in violation of antitrust laws. The European Commission and MOREMiguel Helft, senior writer - Jan 3, 2013 5:00 AM ET
Amazon's potential plans for your TV; Twitter sales trump Facebook's.
Eric Schmidt: "There are now 1.3 million Android device activations per day" [TECHCRUNCH]
Android is growing at a rapid pace. Last December there were 700k devices activated each day. Then, earlier this summer, that number was at 900k. One month later in late July it hit 1M. Now, in early September, there are 1.3M devices activated every single day.
Schmidt later added that there are close to MOREJP Mangalindan, Writer - Sep 6, 2012 1:11 PM ET
A record of the Android phones and tablets that downloaded a single app over 6 months
FORTUNE -- Suddenly you can see the advantage -- both for developers and users -- of Apple's (AAPL) approach of limiting the number of iOS devices on sale at any time to a handful of iPads, iPhones and iPod touches.
Google (GOOG) executive chairman Eric Schmidt downplays the challenge of knowing ahead of time which Android MOREPhilip Elmer-DeWitt - May 17, 2012 10:40 AM ET
Fortune's curated selection of tech stories from the weekend. Sign up to get the round-up delivered to you each and every day.
* What happens when tech companies like Google (GOOG) get defensive on privacy issues? Not only do they rub other companies and consumers the wrong way, they serve as reminders of the industry's growing pains. (GigaOm and The New York Times)
* A primer of the Oracle (ORCL) vs. Google trial. (CNET)
* Q&A start-up Quora MOREJP Mangalindan, Writer - Apr 23, 2012 3:30 AM ET
Larry Page has successfully refocused the company on its core products. What he needs to do now is recapture some of the firm's early magic with bold new products.
By Kevin Kelleher, contributor
FORTUNE – When was the last time Google did something dazzling?
For a company that turns 14 this summer, Google (GOOG) has a history thick with moments when it surprised the web -- many outlined on the company's site, starting in MOREMar 13, 2012 11:06 AM ET
The new deadline in a key Apple vs. HTC patent infringement case is Monday, Dec. 19
There are six more days of nail-biting ahead for Apple (AAPL) and HTC.
A final decision on a closely watched case before the International Trade Commission that was due on Dec. 6 and then postponed to Dec. 14 has been postponed once again to Monday, Dec. 19.
This is a big one.
In the worst case scenario for MOREPhilip Elmer-DeWitt - Dec 14, 2011 6:25 AM ET
Fortune's curated selection of newsworthy tech stories from the weekend. Sign up to get the round-up delivered to you every day.
* Google (GOOG) chairman Eric Schmidt told the U.S. Senate antitrust committee that the iPhone 4S's voice assistant, Siri, poses a "competitive threat" to his company's business. Confessed Schmidt: "Apple's Siri is a significant development -- a voice-activated means of accessing answers through iPhones that demonstrates the innovations in search." (Apple MOREJP Mangalindan, Writer - Nov 7, 2011 3:30 AM ET
Fortune's curated selection of newsworthy tech stories from the last 24 hours. Sign up to get the newsletter delivered to you every day.
* Thanks to an 8K HP (HPQ) filed, we now know ousted CEO Leo Apotheker walked away with almost $10 million in payouts and bonuses. Meanwhile, new company head Meg Whitman will earn $1 -- yes, $1 -- a year, joining former Apple CEO Steve Jobs and Google execs Larry Page, MOREJP Mangalindan, Writer - Sep 30, 2011 3:30 AM ET
What Yelp CEO Jeremy Stoppelman told the Senate antitrust panel about Google
As feared, the Senate hearings Wednesday on "The Power of Google: Serving Customers or Threatening Competition?" barely scratched the surface.
What Google (GOOG) did to Apple (AAPL) -- copying Apple's touchscreen operating system and offering it to Apple's competitors for free -- never came up. Amy Klobuchar (D-Minn.) and Chuck Schumer (D-NY) used much of their time to suck up to Google MOREPhilip Elmer-DeWitt - Sep 22, 2011 7:00 AM ET
|Chrysler relents, agrees to recall 2.7 million Jeeps|
|Stocks: Investors hold their breath for Bernanke|
|China's fastest-growing cities for millionaires|
|U.S. oil boom helps thwart OPEC|
|Fed not expected to taper QE3 until December|