In the wake of the now infamous Google "founders," expect to hear more griping that Silicon Valley live by its own set of rules.
By creating a third class of stock, which will have no voting powers — a surefire lightning rod for corporate governance experts — Google founders Larry Page and Sergey Brin were effectively saying: If you don't like our way of managing, the exit is over there.
In a letter that cannot be faulted for a lack of transparency (they don't mince words about why they did what they did), the founders said they created the shares to make Google virtually impossible to be taken over. Many expect Facebook to create a similar structure. The company already had a dual-class stock system, with the "B" shares having considerably more voting power than the more common "A" shares.
The new "C" shares, which will be distributed as a dividend, will have no voting power. As part of the transaction creating the shares, Brin and Page will get the non-voting shares, as well. If they sell, they'll also see their voting shares reduced as well through a process called "stapling," which ties their voting power to their entire economic interest in the company, including the "C" shares. But even with that there's a catch: According to the company, the stapling "will terminate as to the founders when their collective ownership falls below a certain threshold." They just don't tell you what that threshold is.
As I tweeted earlier, it's like a public company that has all the perks of being private.
Which gets us to the rules Silicon Valley lives by:
For all of the good Silicon Valley does in creating new technology, jobs, excitement and wealth, it also does so using an "our way or the highway" approach to Wall Street.
Take, for example, the way it generally treats stock-based compensation as an expense that it suggests investors ignore (even if it is a form of pay!)
Now with Google creating a new way to keep hostile activists at bay, we've got another Silicon Valley invention, except this one may actually backfire.
Like so much else at Google, maybe they should have kept this one in "beta" a while longer.
Questions? Comments? Write to HerbOnTheStreet@cnbc.com