I originally wrote in my above comment that “Alphabet is legally obligated to try to maximize” its stock price, and I’m retracting that claim (not just the “legally” part, which I crossed out 90 minutes after publishing that comment). The claim is probably somewhere between inaccurate and wrong, I’m not an expert in the relevant domain, and I should have at the very least used hedging language when writing it; so that was a bad failure on my part. (All this does not change the main points made in my original comment)
I don’t know in what situations shareholders of NASDAQ companies can successfully sue the company/directors/executives for making decisions that are not aligned with their myopic financial incentives. It’s an open question (for me) to what extent Alphabet can be modeled as an agent that tries to maximize the stock price; and the answer can seemingly depend on the identity of some major shareholders and the directors.
What follows is some evidence I’ve found regarding that question.
At December 31, 2019, there were 299,828,232 shares of Class A Common Stock issued and outstanding, 46,441,036 shares of Class B Common Stock issued and outstanding
our Class B Common Stock has 10 votes per share, while our Class A Common Stock has one vote per share
According to this piece from investopedia.com, as of October 2021 Larry Page and Sergey Brin (the founders) collectively own 5.9% of the outstanding shares. If my calculation is correct, this means that the two founders collectively have at most ~27% of the voting power over Alphabet (which is the figure I got when assuming that “5.9% of the outstanding shares” = 20,429,887 Class B shares). On the other hand, all the Class B shares collectively correspond to ~61% of the voting power. My best guess from what I’ve read is that the only entities that can own Class B shares are mainly the founders and some pre-IPO investors. (If someone who owns Class B shares gives them to someone else who is not permitted to own Class B shares, the shares automatically turn into Class A shares, i.e. they no longer have 10x voting power, if my understanding is correct.)
Again, I’m not an expert and this is a very amateur analysis that may be completely wrong.
Some interesting nuggets from this page by “Alphabet Investor Relations”:
These Corporate Governance Guidelines are established by the Board of Directors (the “Board”) of Alphabet Inc. to provide a structure within which our directors and management can effectively pursue Alphabet’s objectives for the benefit of its stockholders. The Board intends that these guidelines serve as a flexible framework within which the Board may conduct its business, not as a set of binding legal obligations. These guidelines should be interpreted in the context of all applicable laws, Alphabet’s charter documents and other governing legal documents and Alphabet’s policies.
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The fundamental responsibility of the directors is to exercise their business judgment to act in what they reasonably believe to be the best interests of Alphabet and its stockholders. It is the duty of the Board to oversee management’s performance to ensure that Alphabet operates in an effective, efficient and ethical manner in order to produce value for Alphabet’s stockholders.
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Minimum Stock Ownership Requirement. In an effort to more closely align the interests of our directors and senior management with those of our stockholders, each director and senior officer will be required to meet the following minimum stock ownership requirements: (i) each director shall own shares of Alphabet stock equal in value to at least $1,000,000 (One Million Dollars); (ii) the Founders of Google LLC, the Chief Executive Officer of Alphabet, and the Chief Executive Officer of Google LLC shall own shares of Alphabet stock equal in value to at least $30,000,000 (Thirty Million Dollars); and (iii) Senior Vice Presidents of Alphabet or Google LLC shall own shares of Alphabet stock equal in value to at least $6,000,000 (Six Million Dollars).
I originally wrote in my above comment that “Alphabet is legally obligated to try to maximize” its stock price, and I’m retracting that claim (not just the “legally” part, which I crossed out 90 minutes after publishing that comment). The claim is probably somewhere between inaccurate and wrong, I’m not an expert in the relevant domain, and I should have at the very least used hedging language when writing it; so that was a bad failure on my part. (All this does not change the main points made in my original comment)
I don’t know in what situations shareholders of NASDAQ companies can successfully sue the company/directors/executives for making decisions that are not aligned with their myopic financial incentives. It’s an open question (for me) to what extent Alphabet can be modeled as an agent that tries to maximize the stock price; and the answer can seemingly depend on the identity of some major shareholders and the directors.
What follows is some evidence I’ve found regarding that question.
According to this page on sec.gov:
According to this piece from investopedia.com, as of October 2021 Larry Page and Sergey Brin (the founders) collectively own 5.9% of the outstanding shares. If my calculation is correct, this means that the two founders collectively have at most ~27% of the voting power over Alphabet (which is the figure I got when assuming that “5.9% of the outstanding shares” = 20,429,887 Class B shares). On the other hand, all the Class B shares collectively correspond to ~61% of the voting power. My best guess from what I’ve read is that the only entities that can own Class B shares are mainly the founders and some pre-IPO investors. (If someone who owns Class B shares gives them to someone else who is not permitted to own Class B shares, the shares automatically turn into Class A shares, i.e. they no longer have 10x voting power, if my understanding is correct.)
Again, I’m not an expert and this is a very amateur analysis that may be completely wrong.
Some interesting nuggets from this page by “Alphabet Investor Relations”:
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