Control freaks: Google's stock split

It's good for the founders, but is it in the company's interests?

Google have announced that they will be splitting their stock. This is normally a move which – although free-market purists disagree – is intended to slightly boost the overall value of a company. The idea is that small investors may be put off by the fact that it costs well over $600 to own a single share in Google, but would buy in to a company that costs $300. It is a reasonable theory. After all, one share in pre-split Google would be a significant proportion of a hobbyist investor's portfolio; if they jump on board in significant numbers, it could provide a mild capital boost.

Except that's not really why Google split their stock. They did it because their Troika – Larry Page, Sergei Brin and Eric Schmidt – never really wanted to give up control in the first place. The split will create an entirely new class of non-voting stocks, which will mean those three will continue to own 58 per cent of the votes for the foreseeable future. Indeed, twice in the founders' letter announcing the change, Page and Brin write of the "very long term"; they have no intention to give up control any time soon.

On the other hand, they have to specify the very long term, because the scale of their control of the company is such that it is only in a long timeframe that it is coceivable that they could lose it. Even if Google doubled the number of shares owned by people other than those three, they would still hold control in the company (although Larry and Sergei would no longer hold an absolute majority on their own, but would need Eric's input).

Felix Salmon thinks he knows why they made this change:

This move, then, is basically a way for Google to try to retreat back into its pre-IPO shell as much as possible. It never really wanted to go public in the first place — it was forced into that by the 500-shareholder rule...

(The SEC has a rule which forces companies with more than 500 shareholders to register with them, revealing most of their internal accounts. Faced with this, many companies decide to go public, which has much the same restrictions but also promises a massive payout)

...but at this point, Google is far too entrenched in the corporate landscape to be able to turn back the clock. It’s too big, and too important, and has been public for too long. That’s the thing about going public: it might suck, but once you’ve done it, you’ve done it. And at that point, if you try to pull a stunt like this, you risk looking all too much like Rupert Murdoch.

Salmon also points out that moves like this were illegal in the US for much of the last century. From the 1920s until 1986, companies had to have equal voting rights. Indeed, it was seen as a pretty fundamental rule of the market. Not that we should hold Google to the standards of 1985. That would be tricky for a number of reasons.

Google are splitting their stocks to concentrate control. Don't be evil? Credit: Getty

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Photo: Getty
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If the left leaves it to David Cameron, we'll have Brexit for sure

Only an upbeat, leftwing case can keep Britain in the European Union.

After months flapping and hesitation, and with much of the reporting and detail so dull that it has barely penetrated the consciousness of even those who speak the language of ‘directives’ and treaty provisions, the EU referendum is upon us. With David Cameron signalling concrete outcomes for negotiations, we seem to be set for June, whatever the protests from opposition parties about the date being too close to local and national elections.  

Cameron’s deal, whose most substantive element consists of denying in-work benefits to European citizens, exemplifies the kind of debate that Conservative strategists want to create: a tedious, labyrinthine parochialism, blending the EU’s procedural dullness with an unquestioned mythology of the little Englander. Try actually reading the various letters, let alone the draft decisions, that Cameron extracted from Donald Tusk, and the agreement turns to putty in your head. But in summary, what Cameron is negotiating is designed to keep the EU debate as an in-house affair within the right, to continue and formalise the framing of the debate as between two strains of anti-migrant sentiment, both of them backed by big business.

The deal may be reactionary, but it is also mediocre in its scope and impact. The worries that many of us had in the leftwing pro-In camp, that Cameron’s deal would push back freedom of movement and working and environmental protections so far that we would be unable to mobilise for continued membership of the EU, can now be put to bed. Quite the opposite of allowing Cameron's narrative to demoralise us, the left must now seize an opportunity to put imagination and ideas back at the heart of the referendum debate.

The British political landscape in which that debate will play out is a deceptively volatile environment. Party allegiance is at a nearly all time low. Inequality is growing, and so is the gap between attitudes. The backbone of the UKIP vote – and much of the Out vote – will come from a demographic that, sometimes impoverished by the legacy of Thatcherite economic policy, sees itself as left behind by migration and change. On top of the class war, there is a kind of culture war underway in today’s Britain: on one side those who see LGBT rights, open borders and internationalism as the future; on the other side, those who are scared of the future. About the only thing these groups have in common with one another is their anti-establishment instincts, their total disdain and mistrust of politics as usual.

The only political movement to have broken through the fog of cynicism and disillusionment in British politics has come from the left. Jeremy Corbyn’s rise to the leadership of the Labour has unleashed something new - and while large parts of the press, and some Labour backbenchers, have portrayed this rise as a crusade of the “croissant eating” metropolitan elite, the reality is very different. The rise of the new Labour left has given voice to a renewed socialist and working class politics; its explicitly radical, outsider approach has given it traction across the social divides – among the young looking for a future, and among Labour’s old base. 

A politics of hope – however vague that term might sound – is the only real answer to the populist Euroscepticism that the Out campaign will seek to embody. Radical politics, that proposes an alternative narrative to the scapegoating of migrants, has to find voice in the course of this referendum campaign: put simply, we need to persuade a minimum wage worker that they have more in common with a fellow Polish migrant worker than they do with their employer; we need to persuade someone on a social housing waiting list should blame the privatisation of the housing market, not other homeless families. Fundamentally, the real debate to be had is about who the public blames for social injustice: that is a question which only the left can satisfactorily answer.

The outsider-led volatility of British politics gives the EU referendum a special kind of unpredictability. For voters who have lost faith in the political establishment – and who often have little materially to lose from Brexit – the opportunity to deliver a blow to David Cameron this summer will be tempting. The almost consciously boring, business-dominated Britain Stronger In Europe campaign makes a perfect target for disenfranchised public sentiment, its campaigning style less informed by a metropolitan elite than by the landed gentry. Its main weapons – fear, danger and uncertainty – will work on some parts of the electorate, but will backfire on others, much as the Better Together campaign did in the Scottish referendum.

Last night, Another Europe is Possible held a launch meeting of about a hundred people in central London - with the backing of dozens of MPs, campaigners and academics across the country. It will aim to provide a radical, left wing voice to keep Britain in the EU.

If Britain votes to leave the EU in June, it will give the Right a mandate for a renewed set of attacks on workers’ rights, environmental protections, migrants and freedom of movement. But without an injection of idealism and radicalism,  an In vote will be a mandate for the status quo - at home and in Brussels. In order to seize the real potential of the referendum, the left has to approach the campaign with big ideas and demands. And we have to mobilise.