For the newspaper moguls, the reason for dual stock categories was simple. They could entice investors to put their hard earned money into ownership while keeping control in the hands of the families that started the papers in the first place. After all, why not take the money from the plebes and keep an iron fist on how things run because, clearly, you're so smart that no one could do better and investors should be thankful to have a place underneath the table, where they can receive the orts that drop.
There's just one problem with the theory. Things worked more or less well as conditions remained constant. But when the world changed and there was a premium on management, the newspapers simply tried to fend off the inevitable -- with results that were equally inevitable.
This desire for control for the "real" people at the top is exactly what is motivating Facebook movers and shakers. Here it is in their own words:
"We did introduce a dual class stock structure because existing shareholders wanted to maintain control over voting on certain issues, to help ensure the company can continue to focus on the long term to build a great business," said Larry Yu, a Facebook spokesman. "Facebook has no plans to go public at this time."No plans to go public at this time? What a load of investor relations two-stepping. Technically it would be impossible to go public at this time, not in the near-future, because the paperwork isn't filed. But public they will go so the money it can flow -- into their pockets. And all with the same intent as the newspapers to keep control in the hands of those who will always remember "how we used to do it."
It's nothing but bad governance that will circle around and have the same result as it always does: terrible decisions, an ultimate fiasco, investors left holding the bag, and no one learning anything that seems to stick. Eventually all that is left is a castle with not much at home.
[UPDATE: I wanted to add that Facebook is hardly the only tech company to do this. Google is notable example, and perhaps that's why it continues to be incapable of significantly broadening its revenue base beyond online ads -- because management isn't really accountable to ordinary shareholders.]
Image via stock.xchng user johnnyberg, site standard license.