Building a world changing company that dominates an entire market is no easy task. But imagine doing such a good job of it that your shareholders are concerned with the consequences. This is the challange faced by Alphabet, the holding company of Google, as it faces an antitrust related claim brought by its shareholders in the form of a derivative class action lawsuit.
The complaint alleges that Alphabet is likely to accrue significant antitrust liabilities, and is at risk of being broken up by regulators. The founding directors of the company, Sergey Brin, Larry Page and Eric Schmitt, are accused of exerting undue influence on corporate governance, resulting in breaches of fiduciary duty, unjust enrichment, and corporate waste.
The lawsuit has arisen in the wake of Alphabet coming under increasing regulatory scrutiny, culminating in numerous claims initiated by government and private interests. Each lawsuit shares a common theme, ensuring that the company’s management have in place adequate checks and balances to maintain transparent and responsible business practices.
Alphabet was established in 2015 as a holding company of Google and a number of related enterprises, such as the Android mobile operating system and Google Play store. The purpose behind its creation was to clean up the group’s existing governance structures, and ensure that its various units remain sufficiently accountable to stakeholders as a whole.
As our society becomes further digitised, the centralisation of information is a concern shared by many. The recent lawsuits faced by Alphabet indicate that it is not just regulators that have an active interest in ensuring that appropriate controls are in place, but also shareholders who will experience equally the risks and rewards of innovation.