NorthStar Asset Management Founder Explains Why Facebook Should Do Away With Its Supervoting Structure

NorthStar Asset Management Group Inc NSAM revealed in a SEC filing on Monday that it’s asking Facebook Inc FB to end its ‘supervoting’ arrangement of Class B shares through which Facebook’s CEO Mark Zuckerberg effectively gets around 60 percent voting rights in the company.

Julie Goodridge, founder of NorthStar Asset Management, was on CNBC Tuesday to discuss the filing and why her firm wants Facebook’s supervoting shares to be eliminated.

“What we are asking for is for Facebook to recapitalize its shares, so that each share gets 1 vote,” Goodridge said.

The Supermajority

She mentioned that NorthStar Asset Management bought Facebook’s shares during the IPO and revealed that “prior to the Facebook going public, Mark Zuckerberg and some of the venture firms backing Facebook created a supermajority group of shareholders.”

“There are two classes of stock at Facebook, there’s a Class A and Class B, the public was entitled to purchase Class A shares. The Class B shares have 10 times the voting power of one class A share.”

Knew It Beforehand

Goodridge also revealed that NorthStar Asset Management knew before buying the shares that it was getting the class B stock.

On being asked why the firm bought the stock in the first place if it had problems with the supervoting arrangement, Goodridge said, “If you look back in history basically companies that have unequal share structure tend to underperform. Even if you look at what happened when, there were lots of questions on the internet when Facebook first came out.”

“The first thing that happened is the shares dropped by 50 percent. Well, one of the insiders, a guy who is still sitting on the board, sold 80 percent of his shares in Facebook. That’s a problem,” Goodridge concluded.