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.
A day in the Twitter life of hedge fund manager Doug Kass
FORTUNE -- Apple's (AAPL) shares moved sharply from the red to the green Tuesday afternoon. There are a couple theories why, but the leading contender is the rumor on Twitter posted just before the stock popped by Douglas Kass, president of the Seabreeze Partners hedge fund, frequent contributor to The Street and regular guest on CNBC.
Kass, whose tweets are MOREPhilip Elmer-DeWitt - Feb 27, 2013 8:44 AM ET
When Tim Cook's failure to announce a dividend was supposed to send it tumbling?
If you spent part of Thursday afternoon, as I did, monitoring the $AAPL tweets, you know that Apple's (AAPL) share price was supposed to go into free fall the moment traders found out that the company was not going to announce a dividend, buyback or stock split at its annual stockholders meeting.
Shares did begin to tumble at MOREPhilip Elmer-DeWitt - Feb 24, 2012 6:18 PM ET
CEO Tim Cook reiterated his previous position: We're looking at it carefully
As expected, the issue of what Apple (AAPL) plans to do with its roughly $100 billion in cash came up at the company's annual shareholder meeting Thursday.
It was the first question from the floor, and CEO Tim Cook had an opportunity to make an announcement, if he were so inclined.
He was not.
According to reports from inside the meeting, he MOREPhilip Elmer-DeWitt - Feb 23, 2012 1:58 PM ET
After six years and an eight-fold increase in share price, maybe it's about time
On Feb. 28, 2005, with Apple (AAPL) trading at $88.99 a share, the company issued a 2:1 split. The stock closed that day at $44.86. Within a year it was once again selling for more than $80 a share.
At The Mac Observer's Apple Finance Board, where the question of whether Apple is about to split has come MOREPhilip Elmer-DeWitt - Feb 9, 2011 6:07 AM ET
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