Should Dual-Class Share Structures Be Eliminated?

Dual-class shares make companies unaccountable to shareholders, markets and courts.

Over the last decade, company founders have been opting to shore up control by creating multi-class voting structures that undercut shareholder voting power. This stock ownership structure reduces shareholder influence, undermines corporate governance and shifts the burden of investment grievances to the courts.

Multi-class capitalizations — in which founders and other insiders retain a class of high-vote shares while selling low-vote shares to the public — are nothing new for controlled companies. This mechanism has long allowed founding individuals and families to leverage minority economic ownership — say 10% or 20% — into total voting control of large companies, such as Facebook and Google.

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About the Author(s)

Charles Elson

Charles Elson is executive editor-at-large of Directors & Boards.


Craig Ferrere


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