- CII Corporate Governance Policies
- CII Correspondence and Testimony
- Comment Opportunity Tracker
- Non-Financial Disclosure
- Investor-Company Engagement
- Majority-Supported Shareowner Proposals
- Director Elections
- Independent Board Leadership
- Executive Compensation
- Dual-Class Stock
- Divestment Debate
- Legal Issues
Dual-Class Stock
| CII Resources on Dual-Class Stock: Download CII's List of Dual-Class Companies Download CII's List of Companies with Time-Based Sunset Approaches to Dual-Class Stock Download CII's 2017-2020 IPO Statistics Download CII's Snapshot of Dual-Class IPOs from the First Half of 2021 Note: For information on the use of CII's company-specific lists for commercial purposes, please e-mail Lucy Nussbaum. |
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 in six to nine 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, including ThreadUp (seven years) and Poshmark (10 years). A few years ago, time-based sunsets were rare and frequently extended beyond the first decade of the company’s public life.
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.