A couple of years ago I posted a video proposing multiple-class stock as a way to empower owners and hold management to account. Now seems like a good time to discuss the downside of dual-class or multiple-class stock because there have been some recent high profile offerings that bring those characteristics to light.
Facebook, of course, is the most high profile, but there are others including the Manchester United Football Club. In this last case, one class of shares would get one vote and the other class would get additional votes. In some the cases of some other offerings, some ownership get no votes at all. We tend to think that all shareholders have a say (through voting) about how the company is run. All problems with shareholder access and proxy voting aside, these multiple-class offerings sometimes wipe out event the illusion that shareholders have a say.
As I have attempted to explain in this new video, there are situations in which having two classes of stock actually works to the benefit of the outside class, but admittedly they are rare. It probably would be better simply to say if you’re going to have a public company you must have one class of stock.
What do you think? Are you involved in a company with dual or multiple classes of ownership?