Tech Titans Without Checks and Balances

“The gods of Silicon Valley have repeatedly sought to take the companies they founded public while retaining control as if they were still private,” Steven M. Davidoff writes in the Deal Professor column. “Recent events at Google and other technology companies show that perhaps this control may be bad not only for the companies but also for the founders, who are increasingly living in a world bereft of checks and balances.”

Google was a leader in this movement, using a dual-class structure when it went public in 2004. Facebook took this further, going public by adopting a dual-class structure that allowed its co-founder Mark Zuckerberg to keep control even if he owned less than 10 percent of the company. And last year, Google proposed that the company issue a new class of shares with no voting rights. “The idea is that absent the pressures of the public market, executives can look after the long-term best interests of the company,” Mr. Davidoff writes. But recent events raise an issue: “technology companies have not done well in sustaining themselves when their founders leave.”

“In Silicon Valley, founders’ control has not always translated into the long-term success. In fact, control may have nothing to do with it,” Mr. Davidoff writes. Just look at Amazon, where the chief executive, Jeffery P. Bezos, owns only 19.1 percent of the company. “In plain English, the great tech minds of Silicon Valley are told so often how great they are that they sometimes lose perspective.”

MICROSOFT BETS ON APPLE-LIKE REVIVAL  |  In buying Nokia’s phone business, Microsoft is taking inspiration from Apple’s product strategy, bringing hardware and software under a single roof. But the $7.2 billion deal is unlikely to catapult Microsoft up the ranks in the smartphone market, Nick Wingfield reports in The New York Times. “That is because Microsoft, with its Windows Phone operating system, is stuck in third place in that market, where all the oxygen has been drained by more established players.”

Completing the transaction, Microsoft’s second-biggest after the acquisition of Skype, was a lengthy process that was anything but straightforward, Michael J. de la Merced and Mark Scott report in DealBook. Much of the discussions were held directly between Microsoft’s departing C.E.O., Steven A. Ballmer, and Riisto Siilasmaa, the Finnish company’s chairman. “The negotiations featured a disparity of styles: Mr. Ballmer was his famously demonstrative and energetic self, while Mr. Siilasmaa was more reserved and polite.”

At the very least, the acquisition may “give Microsoft an edge in recruiting customers who still buy the more basic feature phones from companies like Nokia,” Nick Bilton writes on the Bits blog. “That group of customers still makes up hundreds of millions of people.” One rival, BlackBerry, may now face a greater challenge in finding its own savior, Ian Austen writes on the Bits blog.

PANDIT INVESTS IN LENDING START-UP COMMONBOND  |  Vikram S. Pandit has been on the sidelines of the banking industry since resigning as chief executive of Citigroup last October. But with a new investment, Mr. Pandit is betting an upstart lender will be able to compete with the giants of Wall Street. Mr. Pandit is among the investors in a round of financing raised by CommonBond, a Brooklyn-based start-up that lends to M.B.A. students and refinances existing debt. The financing, including equity and debt, totals more than $100 million, the company said.

ON THE AGENDA  | A report on the international trade gap for July is released at 8:30 a.m. The Federal Reserve’s “beige book” on the economy is out at 2 p.m. Dollar General reports earnings before the market opens. Leslie Moonves, chief executive of CBS, is on CNBC at 8:40 a.m. and on Bloomberg TV at 3 p.m.

JUDGE DISMISSES SUIT AGAINST 2 BEAR STEARNS EXECUTIVES  |  Ralph R. Cioffi and Matthew M. Tannin, two former Bear Stearns managers who were among the few executives to face a trial on criminal charges in the aftermath of the financial crisis, achieved another legal victory on Tuesday, when a federal judge dismissed a lawsuit brought against them by Bank of America, DealBook’s Peter Lattman reports.

The bank had accused the two men of lying about the health of their hedge funds, which were filled with subprime mortgage-backed securities that fell in value in the housing crash. Judge Alison J. Nathan of Federal District Court in Manhattan rejected Bank of America’s claims of fraud and breach of fiduciary duty, ruling that the bank had failed to prove damages tied to the former executives’ conduct.

Mergers & Acquisitions »

News Corp. Sells Small Local Publications  |  After a corporate spinoff in June, News Corporation said on Tuesday that it had sold 33 local publications, known as the Dow Jones Local Media Group, to an affiliate of the Fortress Investment Group. NEW YORK TIMES

Bezos Visits Washington Post as Owner  |  Jeffrey P. Bezos, who purchased The Washington Post for $250 million on Aug. 5, kicked off a two-day visit to the paper on Tuesday, his first since buying it. NEW YORK TIMES

Eventbrite Strikes First Two Deals, Buying Start-Ups Abroad  |  Eventbrite announced its first-ever acquisitions on Tuesday, months after the firm, an online ticketing start-up, raised $60 million in venture capital financing from the likes of Tiger Global and T. Rowe Price. DealBook »

AT&T Should Resist Buying Spree  |  Vodafone’s sale of its 45 percent stake in Verizon Wireless could tempt AT&T to make a big move overseas now. But the fat margins at home and the perils of cross-border M.&A. make a stronger case for discipline, Robert Cyran of Reuters Breakingviews writes. REUTERS BREAKINGVIEWS

INVESTMENT BANKING »

Real Estate Mogul Gives $200 Million to University of Michigan  |  The Wall Street Journal reports: “Stephen M. Ross, a self-described academically average transfer student who graduated from the University of Michigan, will become the school’s biggest benefactor Wednesday with a gift of $200 million.” WALL STREET JOURNAL

London Business School Receives Its Largest-Ever Gift  |  The South African billionaire Nathan Kirsh is giving 10 million pounds, or about $15.6 million, to the London Business School, The Financial Times reports. FINANCIAL TIMES

Friction at Zurich Insurance in Months Before Suicide  |  Before the chief financial officer of Zurich Insurance took his own life, he tussled this summer with the chairman “over how to explain the company’s disappointing progress toward meeting certain business targets, according to company officials familiar with the situation,” The Wall Street Journal reports. WALL STREET JOURNAL

Morgan Stanley Must Pay $8 Million to Former Trader  |  Arbitrators ruled in favor of Amit Gupta, who said two units of Morgan Stanley improperly terminated him, Reuters reports. REUTERS

PRIVATE EQUITY »

A Banker’s View of Private Equity  |  Alison J. Mass, co-head of the financial sponsors group in the investment banking division at Goldman Sachs, discusses private equity in a video on Goldman’s Web site. “A lot of the leadership of these important firms are of the age where it’s time for them to transition to the next generation,” she says. GOLDMAN SACHS

HEDGE FUNDS »

Two More Hedge Funds Scoop Up Stakes in J.C. Penney  |  Since William A. Ackman sold his 18 percent stake in Penney, Glenview Capital Management and Hayman Capital Management have become some of its largest stockholders. DealBook »

Starboard Says It Is Working on Smithfield Bid  |  Starboard Value, the activist hedge fund that is urging the breakup of Smithfield Foods, said in a letter to investors that it had received interest from third parties for parts of the company and that it was working with them to come up with a competing bid to Shuanghui International Holdings’ $34-a-share offer. DealBook »

I.P.O./OFFERINGS »

LinkedIn Plans to Sell $1 Billion in Stock  |  LinkedIn, which has enjoyed a buoyant stock price since going public in 2011, filed on Tuesday to sell Class A shares valued at $1 billion. Its stock price fell more than 2 percent in after-hours trading after the filing. WALL STREET JOURNAL

AMC Aims to Raise $400 Million in I.P.O.  |  An initial public offering would be the latest corporate maneuver for AMC Entertainment, the second-largest movie theater owner in North America. DealBook »

VENTURE CAPITAL »

Data Backup Service Raises $25 Million  |  The financing of Datto, which provides both local and cloud-based data backup, is the latest bet that cloud computing will help transform data backup and recovery. DealBook »

‘Headphones Are the New Cubicle’  |  RocketSpace, an office rental company in San Francisco, offers young companies space to work on long tables that they sometimes share with other companies, The New York Times reports. NEW YORK TIMES

LEGAL/REGULATORY »

Corporate Money Losing Clout in a G.O.P. Moving Right  |  “The seemingly inexorable rise of political partisans â€" mainly on the right, but on the left, too â€" suggests that corporate money may be playing a much smaller role in the political process than expected,” Eduardo Porter writes in the Economic Scene column in The New York Times. NEW YORK TIMES

Kodak Emerges From Bankruptcy  |  Kodak exited Chapter 11 on Tuesday in a smaller and redirected form, now a commercial imaging company serving business markets like packaging and graphics, The Associated Press reports. ASSOCIATED PRESS

JPMorgan Chase Tests U.S. Law on Buying Influence Abroad  |  The investigation of reports that the bank hired scores of children of powerful government officials in Asia will test how broadly the Foreign Corrupt Practices Act applies to almost commonplace conduct by firms, Peter J. Henning writes in the White Collar Watch column. DealBook »

Bribery Charges in China for Official Whose Child Worked for JPMorgan  |  The official, whose daughter’s employment at JPMorgan Chase is a focus of an antibribery investigation in the United States, was accused of accepting nearly $8 million. DealBook »

Europe Misses Out on Germany’s Resurgence  |  “Whenever Germany thrived, so did the rest of Europe. But that long-held belief is being questioned by its neighbors, which see evidence that the country is taking off without them,” Jack Ewing writes in The New York Times. NEW YORK TIMES