In an unusual move for a Silicon Valley company, Zynga chairman Mark Pincus has given up voting control of the social gaming company he founded more than a decade ago.
The establishment of voting rights parity — basically, one share, one vote — rids the company of its longtime multi-class share structure that concentrated all power in the hands of one person. What that means is that Pincus’s 70 percent voting power over Zynga will convert into a 10 percent economic stake. Under the Zynga plan, his high-octane voting shares will convert into Class A common stock in the San Francisco-based company.
Pincus is also shifting his title to non-executive chairman but will remain on its board.
That much-celebrated “power of the founder” has been common in tech, with companies like Facebook and Google continuing to concentrate voting control in the hands of a startup’s creators with the aim of resisting undue shareholder pressure and staying true to their vision.
Pincus said that was no longer needed at Zynga, since the company has stabilized after several years of turmoil. Thus, he said, he felt “it’s time” to move to a new corporate structure and also remove himself from active management in the company. He had done that once before, stepping back in 2013, only to return in a more prominent role in 2015.
“Given our positive momentum, now is the right time to simplify our stock structure and transition to one share, one vote. I believe it’s in the best interests of our shareholders to establish voting rights parity for all,” Pincus said in a statement.
In a longer interview this morning, he noted that he also wanted space to undertake a number of other things in investing and elsewhere.
“When I came back, I put my other aspirations on hold,” said Pincus, noting he has become interested in areas like blockchain and building a new internet (yes, he gets the reference to the HBO show, “Silicon Valley). “But now it’s time to create more space between me and the company to do that as a separate person and entity ... I have a lot of pent-up ideas and energy that for well over a year I have wanted to pursue.”
More importantly, said Pincus, the founder-as-ruler concept may have outlived its usefulness, at least at Zynga. “We asked ourselves, is there a benefit to this, and I think it is a healthy debate for any company to be having,” he said. “Recently, my control did give air cover for the team, but that is not needed any longer as we have become more stable.”
Zynga CEO Frank Gibeau agreed. “When Mark approached the board with this idea, we thought it was a good time, because we were growing with a lot of momentum and this change makes us more accountable to shareholders,” he said. “When we are not worried about defense but growing the company, a one-share-one-vote structure where everyone’s economic interests aligned is positive to shareholders. The perception of a controlling shareholder causes that to skew and this gives us a clean road ahead.”
Zynga was founded in April of 2007, taking off like a rocket ship via its game integration with Facebook. With Pincus as its energetic and high-profile leader, it went public in late 2011. According to Zynga, it had three classes of stock ownership, with its Class C common shares — all held by Pincus — getting 70 votes per share. Class B shares, which Pincus held a majority of, got seven votes per share and Class A shares had one vote each.
Under the new structure, all Zynga shareholders will have equal voting rights.
Zynga’s shares have certainly recovered over the last several years, after getting hit by changes at Facebook and in the mobile market. Its stock price dipped below $2 a share in early 2016, but it has now risen to $3.61.
While still in turnaround, the company reported stronger first-quarter results today and has announced more stock repurchase programs. Recently, under Gibeau, its flagship games and live services, like “Words With Friends 2” and “Zynga Poker,” have seen solid growth.
While not directly commenting on current Silicon Valley giants like Google and Facebook, which continue to give founders huge latitude, he did note that there will be some pushback on the idea that “founders don’t feel accountable to shareholders.”
Added Pincus: “Is the value we were worried about at founding served by multi-class structures? It’s no longer obvious what benefit it has given. So many companies like this are now in amazing positions that seem very well aligned with visions of founders.”
If you want to read more from Pincus, here is his blog post.
This article originally appeared on Recode.net.