Re-Thinking The Hostility Towards Dual-Class Share Structures: When Dual-Class Shares Work Better
Within the field of corporate governance, few issues inspire as much fervor from critics as the use of dual-class or multi-class share structures at certain companies. In recent years, proxy advisory firms and other self-proclaimed good governance advocates have increasingly embraced the ‘one share, one vote’ approach while castigating companies with dual-class stock. But our […]
Jeffrey Sonnenfeld is the Senior Associate Dean for Leadership Studies and Lester Crown Professor in the Practice of Management, and Steven Tian is the Research Director of the Yale Chief Executive Leadership Institute, both at the Yale School of Management.
Within the field of corporate governance, few issues inspire as much fervor from critics as the use of dual-class or multi-class share structures at certain companies. In recent years, proxy advisory firms and other self-proclaimed good governance advocates have increasingly embraced the ‘one share, one vote’ approach while castigating companies with dual-class stock.
But our new, original analysis suggests that perhaps dual-class shares are far from the malignant tumor its critics would have you believe. One has to question whether self-anointed governistas seeking to impose single-share structures on all companies are overreaching in their zeal for a universal, one-size-fits-all solution when the reality is far more nuanced.
