Not all shareholders are created equal— at least when it comes to voting rights. While some companies take a “one share, one vote” approach to shareholder decision-making, others give disproportionate voting rights to founders or choose to offer multiple share classes, each with different voting power.
Companies have been offering shares with different voting rights for decades. Multi-class shares are common around the world, not just a phenomenon of Silicon Valley.
Strong arguments can be made on both sides of this issue: in favor and against the practice of offering shares with differential voting rights. Ensuring that founders and key decision-makers have extra voting heft might insulate them from short-term market demands, thus helping them focus on long-term goals. Yet, concentrating voting power in a few hands could also become a way for insiders to entrench their positions and suppress legitimate concerns from other owners.
FCLTGlobal is particularly interested in testing the oft-used argument that multi-class shares promote long-term behavior and outperformance. Absent definitive evidence, arguments on this topic often focus disproportionately on the most high-profile, recent examples of companies using multiple share classes, which makes it hard to appreciate the full breadth, history, and market impact of differential voting rights.
To enrich the debate, FCLTGlobal partnered with researchers at the University of Virginia’s Darden School of Business, who have a unique dataset covering companies that issue shares with different voting rights. We found that:
Power Play: The Long-term Impact of Multi-class Shares provides a fuller explanation of these findings, beginning with a broader look at the practice of issuing multiple share class—and followed by a detailed account of FCLTGlobal’s statistical approach and findings.
Press Release
31 December 2024 - FCLTGlobal, a non-profit organization whose mission is to focus capital on the long term to support a sustainable and prosperous economy, announced today that Peter Harrison, former Group Chief Executive of Schroders, and Geraldine Matchett, former Co-CEO and CFO of DSM-Firmenich, are retiring from its Board of Directors.
Investor-Corporate Engagement | Report
18 December 2024 - A well-functioning proxy voting system is critical to support effective capital allocation and participation in the public markets. This report examines the factors that have led to the current situation and broaches potential solutions to build a stronger system.
Report
18 December 2024 - This 5th edition of FCLT Compass reflects 15 years of data, examining global wealth and investment horizon shifts since 2009. In addition to answering the question, "Are capital markets becoming more long-term or short-term?" this project will now draw the essential connection between investment horizons, global participation in capital markets, and the health of household savings, demonstrating the power of long-term investing.