The vast majority of U.S. publicly traded companies embrace this corporate governance best practice. But a significant and growing number of start-up companies are opting for dual-class or multi-class share structures with unequal voting rights. Such companies typically have a superior class of shares with more votes per share than the inferior class with only one vote per share—or, in some cases, no vote at all. Company founders, their families or other insiders typically hold the superior class of shares, giving them majority voting rights even when they hold minority ownership and risk. That concentrates voting power in insiders’ hands, giving them effective control of board of director elections and other matters that are put before shareowners for a vote.
Dual-class share structures pose greater risks to investors and make boards and insiders less accountable to the shareholders. Companies with a dual-class stock structure often do not perform as well as companies with a single class of stock and have more stock-price volatility, a recent study found.
|Resources & Advocacy|
|CII corporate governance policy on "one share, one vote"|
|Nov. 1, 2012||Post-Teleconference recording on "one share, one vote" (members only)|
|Dec. 10, 2012||CII follow-up letter to NYSE meeting on dual-class stock|
|Oct. 2, 2012||CII letter to NYSE urging end to new listings of dual-class stock companies|
|Oct. 2, 2012||CII letter to Nasdaq urging end to new listings of dual-class stock companies|