Dual-Class Stock

Resources on Dual-Class Stock
“One share, one vote” is a bedrock principle of good corporate governance. When a company taps the capital markets to raise money from public investors, those investors should have a right to vote in proportion to the size of their holdings. A single class of common stock with equal voting rights also ensures that the board of directors is accountable to all of the shareholders.
While the vast majority of U.S. public companies (approximately nine in 10) have a single class of voting stock, in recent years, a growing proportion of U.S. companies going public have multiple classes of common stock with differential voting rights. Nearly one in four (24%) U.S. companies that went public in the first half of 2021 did so with a dual class structure.
Typically, these companies have two classes of common stock: Class A shares with 10 votes per share for the founders (and sometimes insiders, too) and Class B shares with one vote per share for public shareholders. This enables founders to wield control far beyond their equity stake, with little interference from boards they effectively control. Over time, this founder-knows-best approach can entrench management and blindside executives to a need for change in strategy.
CII has pressed dual-class IPO companies to include reasonable time-based “sunset” provisions in their charters. We think seven or fewer years post-IPO is sensible. Academic research has found that while dual-class companies tend to have a value premium for a while after making their public debut, that benefit fades to a discount after 7 years.

CII’s campaign for time-based sunsets is gaining ground. In the first half of 2021, 51% of newly public U.S. dual-class companies incorporated time-based sunsets.

In the fall of 2021, CII submitted draft federal legislation that would prohibit the U.S. listing of companies with multi-class stock with unequal voting rights absent a sunset provision that takes effect within seven years of IPO, unless shareowners of all classes approved keeping the unequal structure.

CII and Railpen announced June 13 the launch of the Investor Coalition for Equal Votes (ICEV), a new collective investor initiative to push back against unequal voting rights at portfolio companies. The ICEV is a group of global asset owners that may grow over time to include asset managers. Current investor members are Railpen, the Minnesota State Board of Investment, New York City Comptroller’s Office, New York State Common Retirement Fund, Ohio Public Employees Retirement System and the Washington State Investment Board. All are committed to advocating for proportionate shareholder voting, effective stewardship and long-term sustainable company performance. In its first phase, ICEV will engage with pre-IPO companies and their advisors, as well as policymakers, commentators and index providers in priority jurisdictions.

Note: For information on the use of CII's company-specific lists for commercial purposes, please email Emmanuel Tamrat.
Nov. 30, 2023 Investor Coalition For Equal Votes Report: Undermining the Shareholder Voice
Dec. 19, 2022 "Is the Sun Setting Too Slowly?": Analysis by Subodh Mishra
Oct. 1, 2021 U.S. House panel considers bill curbing dual-class stock
Jan. 22, 2021 Letter objecting to SEC exclusion of shareholder proposals seeking reports on dual-class underwriting 
April 15, 2020 FCLT: Power Play: The Long-Term Impact of Multi-Class Shares
April 5, 2022 CII letter to Chair and Ranking Member of House Committee on Financial Services on Multi-Class Bill
April 6, 2022 Letter from CalSTRS to Chair and Ranking Member of House Committee on Financial Services on Multi-Class Bill
Feb. 14, 2022 CII letter to European Commission on Dual-Class Stock and SPACs
Oct. 12, 2021 CII Letter to  Chair and Ranking Member of House Committee on Financial Services supporting draft Multi-Class Bill
Oct. 6, 2021  CII letter to Blue Apron board commending recapitaliation 
Oct. 1, 2021 CII letter to leadership of U.S. House Committee on Financial Services
  Supporting letters: CalPERSCalSTRSConsumer Federation of AmericaFederated Hermes EOSHealthy Markets AssociationLos Angeles County Employees Reitrement Association (LACERA)North American Securities Administrators AssociationOffice of the New York State ComptrollerOhio PERSPublic CitizenRailpen
Sept. 14, 2021 CII letter to U.K. FCA on dual-class share structures
Nov. 9, 2020 CII letter to Brazilian Securities Commission
Sept. 3, 2020 CII letter to Palantir Technologies
April 23, 2020 CII letter to Hong Kong Stock Exchange