Amid a class action lawsuit, Facebook has withdrawn its proposal to issue non-voting shares, backing off a plan that would’ve allowed CEO Mark Zuckerberg to control the company, even if he sells off a significant amount of stock or decided to run for office.
“Facebook’s board determined that withdrawing the reclassification was in the best interests of Facebook and its shareholders,” a Facebook spokesperson told TheWrap.
The lawsuit aimed to block Facebook’s creation of “Class C” shares, which excluded voting rights for shareholders. (Class A shares of Facebook trade under the company’s “FB” ticker, while its Class B shares carry 10 votes per share and are for company insiders.)
Under the proposed class structure, Zuckerberg would’ve keep voting control of the company — even if he decides to decrease his ownership stake. This would become increasingly important as Zuckerberg sells shares to fund the Chan Zuckerberg Initiative — the charity he founded in 2015 with his wife, Priscilla Chan. The lawsuit said the Facebook co-founder would be able to control Facebook with as little as 2 percent of its shares.
Zuckerberg first shared the proposal in April 2016 with Facebook’s board of directors. In a statement on Friday, Zuckerberg said he thought the new class structure was a solution to let him run Facebook while also funding his charity.
“At the time, I felt that this reclassification was the best way to do both of these things. In fact, I thought it was the only way. But I also knew it was going to be complicated and it wasn’t a perfect solution,” said Zuckerberg.
“Today I think we have a better one. Over the past year and a half, Facebook’s business has performed well and the value of our stock has grown to the point that I can fully fund our philanthropy and retain voting control of Facebook for 20 years or more. As a result, I’ve asked our board to withdraw the proposal to reclassify our stock — and the board has agreed.”
In the post, Zuckerberg said he anticipates selling “35-75 million Facebook shares in the next 18 months” — which is up to nearly $13 billion at Facebook’s current share price of about $170 — to fund his philanthropic goals.
Zuckerberg was set to take the stand on Tuesday, Sept. 26, with other Facebook execs scheduled to testify in the weeks ahead.
In court documents from late 2016, Facebook board member Erskine Bowles said the special committee that approved the Class C plan was concerned by Zuckerberg’s desire to maintain voting control of the company, even if he decided to go into politics for two years.