Dish Network in January submitted an unsolicited counterbid for Clearwire offering an 11 percent premium over Sprint’s $2.97-a-share offer, but Clearwire made no reference to Dish’s proposal. Clearwire said it investigated several other possibilities, including proceeding as an independent mobile broadband carrier, which is what the Dish deal would entail. But Clearwire management claimed that those alternatives were either infeasible are or wouldn’t dig Clearwire out of its current financial hole.

Clearwire tried to sell part of its treasure trove of airwaves back in 2010 and again in 2012, but it couldn’t close a deal despite consulting with 37 prospective buyers, the letter said. The letter said Clearwire also looked into additional debt and equity financing option and even investigated a financial restructuring through Chapter 11 bankruptcy, but neither assured the company’s survival, nor offered much value to shareholders.

In order to survive independently Clearwire needs another major wholesale broadband access customer besides Sprint, the letter said, but the obvious candidates – the major mobile operators – aren’t interested. They prefer to own their spectrum and build their own network rather than lease Clearwire’s capacity. Given that situation, the Clearwire board concluded Sprint would remain Clearwire’s primary customer for the foreseeable future, so becoming fully owned and controlled by Sprint made the most sense.

Last week, a group of Clearwire shareholders went into revolt, telling the SEC they wanted either Sprint to make a better offer or force Clearwire to consider Dish’s offer. Meanwhile Dish is playing both sides of the transaction. Not only has it submitted its bid for Dish, it is challenging Sprint’s own buyout offer from SoftBank with a $25.5 billion counterbid.

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There has been a lot of attention — to say the least — paid to Facebook’s long-awaited public stock offering, which could put a valuation on the company as high as $100 billion. For the first time, average investors will get a chance to own a piece of the massive social network and its multibillion-dollar revenue stream. But in a very important way, Facebook still remains a private company. Why? Because it is controlled by CEO Mark Zuckerberg through a special class of stock that gives him super-voting rights, and he also controls the board. In other words, you may own stock in the company, but you have virtually no say in what happens to it.

As described in the Facebook prospectus, when new shareholders buy stock in the company, once it is publicly traded they will get class A shares, which carry a single vote each. Mark Zuckerberg and the rest of the early investors in the company own class B shares, which have 10 votes each. The co-founder and CEO has about 28 percent of this class of stock; but he also has voting agreements with a number of other Facebook insiders and co-founders that give him about 57 percent of the votes in the company.

Zuckerberg retains control forever, even after his death

And what happens when other holders of the class B super-voting stock decide to sell their shares, as some early investors will no doubt do when the company starts trading publicly? At that point, they are automatically converted to class A shares, which means Zuckerberg’s control over the voting structure effectively remains the same. And the Facebook founder even has the right to transfer control of the company to a handpicked successor after his death.

Facebook is far from the only tech superstar to choose this kind of tiered structure: Larry Page and Sergey Brin retained control of Google after it went public by owning super-voting shares that gave them 10 votes per share, although the two have said they will be selling some large chunks of their stock over the next couple of years, which will reduce their control. Zynga also has super-voting shares that give founder and CEO Mark Pincus 10 votes per share, just as LinkedIn’s and Groupon’s founders have votes that come with 150 votes each.

So are multiple-voting shares good or bad? That depends on whether you believe that giving a 27-year-old entrepreneur almost complete control over the fate of a $100-billion company is a good thing or not. In terms of what is called “corporate governance,” multiple-voting shares are seen as a large risk factor, in part because of what some corporate raiders like Conrad Black have done to their companies by controlling them so completely.

Is giving the CEO ultimate control good or bad?

In Silicon Valley in particular, where entrepreneurs are seen as a special breed, retaining control over your company is viewed as a positive thing. Zuckerberg has been congratulated by many insiders for managing to keep an iron grip on the company through multiple rounds of financing. And this perspective is understandable for entrepreneurs, many of whom are afraid that their successful company will be taken over by VCs or others who don’t have its best interests at heart, as Apple was early in its history.

But when you are a public company, retaining that much control not just only the votes but also over the board of directors — Zuckerberg has the right to nominate a majority of the board as a result of voting agreements with other shareholders and founders — can be a dangerous thing. Although Steve Jobs didn’t control his board in the same way Zuckerberg does, Apple’s board of directors was criticized for keeping the details of Jobs’ illness hidden from investors and also for approving the repricing of options in a way that arguably went against the interests of common shareholders.

Did the kind of control that Steve Jobs wielded over Apple ultimately result in some incredible, world-changing products? Sure it did. And shareholders who have seen their investment multiply a hundredfold are likely unconcerned about any of the board or option irregularities. But does the end always justify the means?

Selling shares to the public is supposed to come with a certain amount of responsibility to those shareholders, and they should have the ability to hold a CEO and a board accountable if decisions are made that go against their interests. But controlling almost 60 percent of the votes and a majority of the board means Zuckerberg gets to fundamentally do whatever he wants with Facebook — and public shareholders are just along for the ride. Investors should be aware of that before they decide to buy a ticket.

Post and thumbnail photos courtesy of Flickr user Faramarz Hashemi

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Credit: Disney

Apple announced Tuesday that Arthur D. Levinson, member of Apple’s board since 2005, will be the successor to Steve Jobs as Apple’s non-executive chairman. In addition, Apple has appointed Robert Iger, CEO and President of The Walt Disney Company, to the board of directors.

Levinson is chairman and former CEO of Genentech. Apple CEO Tim Cook said this of Levinson in a press release Tuesday:

“Art has made enormous contributions to Apple since he joined the board in 2000. He has been our longest serving co-lead director, and his insight and leadership are incredibly valuable to Apple, our employees and our shareholders.”

Iger has been Disney’s chief since 2005. His addition to the board brings the number of directors back to eight, following Steve Jobs’ death in October. Apple and Disney’s relationship was cemented through Jobs, when Disney eventually bought his computer animation company Pixar in 2006, making Jobs Disney’s largest single shareholder. Of Iger, Cook said:

 “His strategic vision for Disney is based on three fundamentals: generating the best creative content possible, fostering innovation and utilizing the latest technology, and expanding into new markets around the world which makes him a great fit for Apple.”

Obviously, Iger brings deep knowledge of the content and creative businesses to Apple, and he was also a good friend of Jobs. But among his other attributes, Apple specifically points out in its news release on his appointment that Iger presides over the world’s largest media company, and that he sits on the US-China Business Council. It seems like a good fit for Apple; not only does it see China as its second-most important regional market after the U.S., but it’s also ended up being one of the largest distributors of media through its iTunes and App stores.

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The Journal is also reporting — really, stating the obvious — that Apple COO Tim Cook tops the short list of candidates. Cook, who ran Apple’s day-to-day operations during Steve Job’s absence earlier this year, would be the second board member actually working the for the company. Looking at the current board, he seems like an excellent choice.

• Bill Campbell, Chairman and former CEO of Intuit Corp., is probably a head scratcher for anyone forced to use Quicken for the Mac. He used to work for Apple and came with Jobs when the latter returned in 1997.
• Millard Drexler, Chairman and CEO of J. Crew, has arguably contributed to the success of the company. He played a part in bringing the retail stores into being.
• Al Gore, former Vice President of the United States and current environmental advocate, perhaps keeps Greenpeace from coming down too hard on Apple. His name definitely brings stature to the company.
• Steve Jobs, Apple CEO, has done nothing less than save the company from destruction.
• Andrea Jung, Chairman and CEO of Avon, is the token female if you are cynical, a breath of fresh air if not. Before running Avon, a company selling cosmetics that is about a tenth the size of Apple, she was a VP at Neiman Marcus — still not seeing the fit with Apple. Jung also serves on the board of GE, though, so there is that.
• Arthur D. Levinson, Chairman of Genentech, is another mystery, though he may not be on the board much longer, or at least a board. Levinson also serves on the board of Google.
• Jerry York, Chairman, President and CEO Harwinton Capital, has some business chops. Being a former CFO for both IBM and Chysler, he also served on the board of GM. York was a part of the return of Jobs in 1997, too.

Considering the control Steve Jobs asserts over the company, in a sense it’s hard to see how the board matters. However, if considerations include a possible successor to Steve Jobs as CEO at some point in the future — distant future, hopefully — Cook, 49, again seems a logical choice.

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Former Apple Board of Directors member and current Google CEO Eric Schmidt wasn’t paid for his time at Cupertino. This despite Apple’s habitual practice of offering stock options and a $50,000 retainer to Board members, both of which Schmidt declined during his tenure.

Instead, like other board members, Schmidt settled for some awesome Apple gear in exchange for his contribution to the board. According to the Securities and Exchange Commission (SEC) and BusinessWeek, the Google CEO accepted $8,712 worth of goods, though no specific breakdown of what sort of hardware that number actually represents has been reported.

We do know that board members are entitled to one of each new Apple product released while they’re an active member, and that they receive additional hardware discounts over and above that. Thanks to this sweet deal, Al Gore took home $13,161 and Arthur Levinson $8,923. I’ll bet a hefty portion of those numbers actually accounts for Apple’s ridiculously over-priced customization options.

Apple board members are also allowed up to 30,000 of company stock, with an option to buy up to 10,000 more per year. Schmidt passed up the opportunity, however, choosing instead to buy 10,000 shares on the open market with his own money in 2006.

Schmidt also received a mystery “commemorative gift” valued at $7,580. Many other Apple execs received similar gifts, including COO Tim Cook, but details about what exactly was gifted remain unknown. A MacBook Pro with the Apple logo on the lid replaced with an etched likeness of the giftee’s face, perhaps? Whatever it was, I’m fairly sure I want one.

Turning down the lucrative extras that come along with being a high-ranked tech executive has become Schmidt’s M.O., so it’s not really surprising to find that he was working at Apple for comped hardware. At Google, he famously only receives a $1 per year salary, and in recent years has been turning down stock option perks from the search giant as well.

If nothing else, the FTC’s investigation into the close links between Apple and Google should pull back the curtain and provide more revelatory looks into the inner workings of some of Silicon Valley’s biggest players. Schmidt recently stepped down from the Apple board amid accusations that the two companies were too closely involved with one another, and involved in a relationship that could potentially be construed as a non-competitive arrangement. Google and Apple still share a common board member, however, as Arthur Levinson, former CEO of Genentech, is still a sitting member of both.

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Google CEO Eric Schmidt has resigned from Apple’s Board of Directors. Given the conflicts of interest, this is not unexpected — Schmidt had already recused himself from any iPhone discussion, and now that Google is getting into the OS business, I guess that would leave Schmidt free to talk about hardware.

Apple CEO Steve Jobs issued a statement confirming Schmidt’s departure as well as offering praise for Schmidt’s past work on the board:

“Eric has been an excellent Board member for Apple, investing his valuable time, talent, passion and wisdom to help make Apple successful,” Jobs said. “Unfortunately, as Google enters more of Apple’s core businesses, with Android and now Chrome OS, Eric’s effectiveness as an Apple board member will be significantly diminished, since he will have to recuse himself from even larger portions of our meetings due to potential conflicts of interest. Therefore, we have mutually decided that now is the right time for Eric to resign his position on Apple’s board.”

While we are now free to discuss how “mutual” the decision was — it’s been my experience any “mutual decision” for a separation is a “mutually decided upon bundle of cash as we kick your sorry butt out the door” — I much prefer Fake Steve Jobs’ take on the situation.

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