Photo Credit Harry Campbell A great divide exists in the voting power of shareholders in the United States.
The majority of American companies have one share, one vote, but more and more companies are going public with a dual-class stock structure. Here, the voting power rests in the hands of the founders or another group of shareholders.
It’s time to consider an alternative: “tenure voting,” a system in which shareholders accumulate more votes the longer they hold stock.
Dual-class stock, which must be adopted in the initial public offering stage, is all the rage and is not just found at Google and Facebook. Pure Storage, First Data and Square have all gone public with dual-class stock. Last year, some 13.5 percent of I.P.O.s included some type of dual-class stock, according to Dealogic As I’ve written before , this creates a culture of “haves” and “have-nots.” The haves with dual-class stock are protected from shareholder activism and insulated from shareholder demands. The have-nots are on the run — in constant fear of demands from activist investors.
The difference comes down to the value of a vote.
In the case of dual-class stock, either your vote is worth nothing or everything. The founders essentially control the company and wield influence more or less with impunity. This insulates the company from shareholder activism and indeed from the other shareholders. The other shareholders, meanwhile, have worthless votes.
The idea can work well in principle. Concentrating voting power with the founders allows them to steer the corporate culture and look to the long term. But there are examples where it has gone horribly awry, as with Sumner Redstone at Viacom and CBS. Mr. Redstone has refused to give up control of the companies despite his apparent ill health at age 92.
In the rest of corporate America, shareholders have one vote […]
