Multiple-voting shares: good or evil?

Marc Andreessen has an excellent rundown on his blog of the issues and possible outcomes in the Microsoft-Yahoo takeover battle — something that virtually any newspaper I can think of would be pleased to run as an analysis piece. With the help of a couple of corporate M&A lawyers, he outlines the various strategies that Microsoft could use, and the defenses that Yahoo has available, including a series of “poison pills.” But one thing jumped out at me in Marc’s analysis — a reference to how Yahoo would have been better off if it had multiple-voting shares:

Would a dual-class share structure have been a good idea for Yahoo? Yes. If Yahoo did have a dual-class share structure, Yahoo’s cofounders would have been much better situated to block Microsoft from attempting a takeover. You can bet that this is being noticed by the founders of every technology company that might go public from here on out.

Marc points out that Google has a dual-class share structure, which gives the founders multiple votes (Larry Page, Sergey Brin and Eric Schmidt have shares with 10 votes each), the implication being that this is the way other technology companies should go as well. As much as I respect Marc’s point of view, however, I’m going to disagree. I think having multiple-voting shares — or any class of special voting shares that gives a small group of insiders control over the fate of the company — is a bad idea. And not just for investors, but for the company itself.

I think Marc is looking at this issue as a founder and CEO, which is fair enough — and from a founder’s perspective, multiple or special-voting shares seem like the Holy Grail: they allow you to raise money, but don’t require you to give up control. Unfortunately, they also cement control within a small group and make that group virtually impervious to hostile takeovers or any other form of shareholder activism. It’s a little like a dictatorship: a benevolent dictatorship is one of the best forms of government — but also very rare.

For every founder who uses his voting powers wisely, there is another who plunders the company and distorts the business in virtually every way imaginable. Canada has had a love affair of sorts with multiple-voting stock — in part because of a desire to protect broadcasting and media companies, but also because much of the foundation of corporate Canada consists of family-owned entities that pass control on from generation to generation (don’t get me started on Frank Stronach and Magna Corp.). For every example of a company that has been successful with such a share structure, there are a dozen of contrary examples.

For me, dual-class shares are an attempt to get around Darwin’s Law as it applies to the marketplace. Multiple-voting shares protect incompetent, complacent or simply unsuccessful companies that should be taken over and either remade or dismantled. If your company is agile enough and creative enough, it shouldn’t need them.

NYT becomes an aggregator

An interesting move by the New York Times: it has effectively added a blog-aggregation news feature to its technology pages, as described by Richard MacManus at Read/Write Web. In the middle of the site there’s a column of the top tech headlines from around the blogosphere — in other words, a very Techmeme-like feature — and you can click below each one to see other posts about the same story.

When you click, you go to BlogRunner.com, which is a blog aggregator/headline engine that the New York Times acquired last year. I wasn’t initially that impressed with it when I first saw it (before the Times bought it), but I’ve been back several times since and I think it does a pretty good job. As Erick Schonfeld notes at TechCrunch, the Times is also building content aggregated by BlogRunner into other parts of its site, including at the bottom of news stories (the same way I use Sphere on my posts).

One small design point that I like about BlogRunner, and wish that Gabe would duplicate at Techmeme: there’s an expand/collapse button for the discussion links on each topic heading (Techmeme lets you expand or collapse them all, but then your preference is set until the next time). The Times has also done some syndication deals with PaidContent and IDG, among others.

I think this is a very smart move by the Times, and by tech editor Saul Hansell (who also writes for the Bits blog). Newspapers by definition have always been aggregators and curators of information — both their own and that culled from news wires and other sources. Aggregating Web content from many different sources seems to me like a natural extension of that.

Further reading:

For more on this development, there’s the NYT press release, Saul Hansell’s comments, a take from Scott Karp of Publishing 2.0 and some impressions from Frederic at The Last Podcast.

A shorter version of The Bionic Man

Peng Shulin was cut in half after getting run over by a truck in 1995, and lost the lower half of his body. Doctors did skin grafts to seal up his torso, but he has been bed-ridden for years — until now. Scientists at the Chinese Rehabilitation Research Center created a kind of plastic housing for his torso that is fitted with two bionic legs (and some cool Adidas shoes as well, apparently), and he has been using the device with a modified walker. I wonder if Johnny Eck would have liked something similar — probably not.

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Technology and evil

Dave Winer makes a good — and yet frightening — point about the Virginia Tech shooter’s use of video, etc.
clipped from www.scripting.com

I said we hadn’t forseen this use of the technology because, as utopians, we tend to look for the good stuff. I liked to think I had a balanced view, and could see where bloggers weren’t doing good, but I hadn’t seriously considered our tools used to further such a bad cause.

What’s next? Isn’t it obvious — the latest and greatest stuff, Ustream, Twitter and mass murder. When you see a suicide bomber with a camera strapped to his or her head, you’ll know that the bad has caught up with the good.

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It’s a floor wax and a dessert topping

Gilda Radner: New Shimmer is a floor wax!

Dan Aykroyd: No, new Shimmer is a dessert topping!

Radner: It’s a floor wax!

Aykroyd: It’s a dessert topping!

It may not be quite as confusing (or funny) an issue, but for some reason the debate over whether Google is a media company or a technology company made me think of the old Saturday Night Live skit. In case you never saw it (or like me, your memory is going), Buck Henry eventually came in from offstage and said “Hey, calm down you two — new Shimmer is both a floor wax and a dessert topping.”

My friend Scott Karp at Publishing 2.0 is quite right to be aghast that anyone would think Google isn’t a media company — after all, about 96 per cent of its revenue comes from advertising, which is something we all associate with media companies. And John Battelle makes a similar point, for which he gets props from none other than Henry Blodget himself, the former Merrill Lynch tech-analyst kingpin, who notes that “you are what you sell,” and Google sells advertising.

Let me play the role of Buck Henry here for a moment. Google is both a media company and a technology company. Let’s face it, the fact that the company sells advertising (a whole lot of advertising, mind you) is really only part of the picture. The reason Google managed to become dominant in that field in the first place is its search algorithms, which are based on proprietary technology.

Does Google’s ad business involve anything proprietary, anything that other companies don’t offer? No. But its technology does. If anything, it is more of a distributor of media than it is a media company, as Rex notes here. If anything, all this debate underlines is how much those two businesses are changing, to the point where it’s difficult to tell what fits in which category and what doesn’t.

(P.S. My thanks to Paul Kedrosky for his inspired use of movie dialogue as an opening gambit for a blog post, which is where I got the idea).