Trusting Zuckerberg

There are considerable implications for corporate governance in the structure of the initial public offering (IPO) of Facebook. The equity of the eight-year-old social media platform is divided into Class A and Class B shares. Class A shares control one vote each, while Class B shares control 10 votes each. A Class B share sold to the general public is transformed into a Class A share. This enables the founders, who own Class B shares, to keep control — while raising large sums without debt service obligations. Mark Zuckerberg will control over 57 per cent of voting rights while owning about 28 per cent of Class B equity.

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