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Silicon Valley retains control

Thursday, July 05 09:38:42

Founders of new technology empires don't like to give away control when their babies go to market. Unlike standard new ventures which relinquish at least some control at the point at which they seek investors money, tech firms tend to hold on to considerable power.Silicon Valley is different, they say. One of the most economically creative and dynamic pockets of the United States, it is where entrepreneurs rule. Perhaps it is no surprise then that the men who hold sway in the Valley are now looking to transform not only the global economy but the way that public companies are run, locking out both public shareholders and directors. That the call for shareholder rights is a refrain seldom heard in the Internet sector is not new. Since Google went public in 2004 in a way that maintained control for its founders, the leaders of Silicon Valley have been chary about shareholder voting rights according to the New York Times.

In the latest wave of Internet initial public offerings, shareholder voting rights have become even more diminished. Facebook, Zynga, LinkedIn and Groupon all gave control of the company to the founding shareholders over public shareholders. Mark Zuckerberg of Facebook appears to have even negotiated arrangements that give him - or really, his heirs - control over some shares after his death. Google is planning to issue a class of nonvoting shares that will further disenfranchise shareholders, partly justifying its actions in its annual founders' letter as maintaining a governance structure that "is now somewhat standard among newer technology companies."