Arguments against Facebook’s plan to split its stock and create a new non-voting class of shares are picking up steam. The social network admitted that the plan will allow CEO Mark Zuckerberg to retain control of the company he founded while also selling shares to fund his philanthropic initative, but FB investors have quick to push back against it. As a result, it may be years before the new share class is created and the stock is split.

Complaints About Facebook Inc (FB) Stock Split Piling Up

Lawsuits filed against FB

FB stock soared after the company’s last earnings report as investors lauded Zuckerberg’s achievements. Along with that report, the social network revealed its plan to split its stock three ways and create a new Class C non-voting class, giving shareholders two Class C shares for ever A or B share they own. The plan is aimed at enabling Zuckerberg to keep control of Facebook even though his ownership stake declines as he sells off shares to give money to charity.

So far at least two lawsuits have been filed against the social network, one of which is seeking class-action status. The cases claim that the plan will keep Zuckerberg’s voting power in place forever even as he sells off shares and rakes in billions of dollars in profits off those share sales. According to MarketWach, one of the complaints equates the new stock plan with “a grant to Zuckerberg of billions of dollars in equity, for which he will pay nothing.”

Lessons for FB from Google

In her opinion piece posted on MarketWatch, Therese Poletti recalls the battle Google parent Alphabet went through when it originally announced a similar plan in 2012 for the purpose of keeping co-founders Sergey Brin and Larry Page in control of the company. Shareholders sued the tech giant and were able to put off the beginning of the plan until after the lawsuit was dealt with.

The night before the case was to go to trial, Google settled with shareholders, although it took quite a lot to reach that settlement. The company’s board must carefully scrutinize Class C share sales, and the company had to pay if the price of the two classes of shares got too far away in price, which did happen. Google ended up having to pay an adjustment of $522 billion in Class C shares and $47 million in cash for fractional shares, Poletti explained.

A “self-dealing transaction”

An associate professor at Santa Clara University’s School of Law told her that FB’s stock plan creates a huge conflict of interest and is “self-dealing” because it directly benefits Zuckerberg, who also controls the board. Professor Stephen Diamond described the system as “very undemocratic. It is like a feudal system… the investors are like the peasants,” meaning that they don’t have any influence over how the social network is run.

Further, there were already concerns about the dual-class structure the social network already has in place now. One of the shareholder proposals listed on the preliminary proxy for the company’s June 20 annual meeting seeks a recapitalization plan to assign one vote for every FB share. Of course the social network opposes that proposal and points out that investors rejected proposals like it at the last two meetings.

Poletti notes that while shareholders may currently be happy with Zuckerberg’s leadership, this may not always be so. Further, when someone has such total control over a company, problems become more much difficult to deal with.

FB shares climbed 1.09% to $119.15 during regular trading hours today.