Class A share - Grokipedia

Fact-checked by Grok 2 weeks ago

A Class A share is a designation for a class of common stock issued by a corporation, representing partial ownership and entitling holders to specific rights such as voting on corporate matters, receiving dividends, and claiming a portion of assets upon liquidation.^[1] These shares are distinguished from other classes (like Class B or C) by their allocated privileges, which are outlined in the company's charter or bylaws and can include enhanced voting power (e.g., multiple votes per share) or priority in dividend distributions, though such features are not uniform across issuers.^[1] Class A shares often serve as the primary publicly traded equity in multi-class structures, balancing investor access with internal control mechanisms.^[2] In dual-class or multi-class stock arrangements—common among technology and growth-oriented companies—Class A shares typically provide standard voting rights (one vote per share) to public investors, while higher-voting classes (often Class B) are retained by founders or executives to preserve decision-making authority without diluting economic ownership.^[3] For instance, at Alphabet Inc. (Google's parent), Class A shares grant one vote per share and are publicly available, contrasting with Class B shares that offer ten votes each and are primarily held by company insiders.^[4] This structure has been employed in initial public offerings (IPOs) by firms like Meta Platforms, enabling rapid capital raising while safeguarding long-term vision, though it has sparked debates on governance equity.^[3] Notably, the "Class A" label does not universally imply superiority; in some cases, such as Berkshire Hathaway, Class A shares carry superior voting rights (one vote per share versus a fraction for Class B) and command significantly higher prices (over $760,000 per share as of November 2025), reflecting their premium status and limited supply.^[5]^[6] Investors must review a company's prospectus or SEC filings to understand precise rights, as variations can affect liquidity, control influence, and return potential.^[7] Beyond corporate stocks, the term "Class A shares" also applies to mutual funds, where they involve front-end sales loads (e.g., 3-5.75%) but lower ongoing fees, appealing to long-term holders.^[8]

Definition and Characteristics

Definition

A Class A share is a classification of common stock issued by a company, which may provide shareholders with voting rights that are enhanced, standard, or reduced relative to other share classes, such as Class B shares.^[1] This structure allows certain investors, often founders or insiders, to maintain greater influence over corporate decisions despite holding a smaller economic stake.^[9] Class A shares are a form of equity ownership, entitling holders to potential dividends and residual claims on assets upon liquidation, similar to standard common stock.^[1] The use of Class A shares within multi-class stock systems originated in the late 19th century, with the first known instance in the United States being the International Silver Company in 1898, which issued shares with differential voting rights to preserve management control during public offerings.^[10] Although early adoption was limited, these structures gained renewed prominence in the mid-20th century, particularly among media and family-owned firms, as a means to balance founder control with broader public ownership.^[11] By the 1980s, dual-class arrangements featuring Class A shares became more widespread to protect against hostile takeovers while enabling capital raising from public markets.^[12] Unlike preferred shares, which prioritize fixed dividend payments and offer limited or no voting rights, Class A shares emphasize voting privileges as part of common equity ownership, without guaranteed returns.^[13] This distinction underscores Class A shares' role in governance rather than income stability, assuming familiarity with basic stock types where common shares generally carry voting power and variable dividends.^[14]

Key Features

Class A shares are characterized by their voting power, which varies across companies but often grants one vote per share to holders in publicly traded classes; in certain dual-class structures, they may confer super-voting rights, such as 10 votes per share, to enhance control for specific shareholders.^[15] This voting allocation allows Class A shares to play a pivotal role in corporate governance decisions, distinguishing them from other share classes with varying or no voting privileges.^[16] In terms of economic rights, Class A shares generally provide holders with equal participation in dividends and liquidation proceeds compared to other common share classes, unless the company's charter specifies otherwise.^[11] These rights ensure that economic benefits, such as pro-rata distributions from earnings or asset sales, are aligned across classes, focusing the differentiation primarily on governance rather than financial returns.^[17] Convertibility features for Class A shares are often limited or absent, meaning they are typically non-convertible to other share classes to preserve the intended structure; however, in some arrangements, conversion may occur under specific conditions, such as time-based sunset clauses that expire super-voting rights after a predetermined period.^[18] Transfer restrictions on Class A shares may include provisions that limit the assignment of voting rights to maintain insider control, such as automatic conversion to a lower-voting class upon sale or transfer outside approved parties.^[19] These mechanisms help prevent dilution of concentrated voting power while allowing liquidity for economic ownership. Class A shares are commonly listed and traded on major stock exchanges, with ticker symbols often denoting the class to inform investors of their specific attributes, such as GOOGL for Alphabet's Class A shares.^[4] This public trading facilitates broader access for investors while highlighting the share class's governance features.

Role in Dual-Class Structures

Structure Overview

Dual-class share structures involve the issuance of two distinct classes of common stock, typically Class A and Class B, where one class holds superior rights compared to the other, while multi-class structures extend this to three or more classes with varying rights allocations.^[20] The designation of enhanced rights to specific classes, such as Class A or Class B, varies by company; while some assign superior voting to Class A shares retained by founders or insiders, in many prominent examples—especially technology and media firms—Class A shares provide standard rights to public investors, with enhanced rights allocated to Class B shares held by insiders.^[3] Multi-class setups, though less prevalent, allow for more nuanced distributions of rights across additional classes, such as non-voting shares in a third tier.^[21] Companies typically create dual-class structures through amendments to their articles of incorporation during the pre-IPO phase or corporate reorganizations, enabling the separation of ownership classes prior to public offering.^[22] This process often involves filing with state authorities and the SEC, where a high-vote class (e.g., Class B) is designated for insiders retaining existing shares, while a standard-vote Class A is prepared for issuance to public investors.^[23] Such issuance facilitates access to capital markets without diluting foundational control.^[24] The primary purpose of these structures is to enable companies to raise public equity funding while maintaining concentrated decision-making authority among a select group of stakeholders, thereby supporting sustained strategic direction in governance.^[25] This architecture balances capital influx with internal stability, particularly in industries requiring long-term vision. Dual-class structures originated prominently in the 1980s among media companies seeking to protect editorial independence amid public listings, exemplified by early adopters like The New York Times Company and The Washington Post Company, where Class B shares provided enhanced voting rights to maintain family control.^[20] Their adoption expanded in the 2000s to technology firms, driven by the need to safeguard innovative trajectories during rapid growth, as seen in initial public offerings by companies like Google in 2004, which used Class B shares for super-voting rights held by founders.^[21] In common configurations, the class with enhanced features such as priority in certain governance matters (often Class B) is paired with a standard-vote class (often Class A) that supports public flotation and broader ownership distribution, allowing the enhanced class to be held privately.^[26]

Voting Rights and Control

In dual-class structures, enhanced voting rights are typically assigned to shares held by founders or insiders (often Class B), allowing them to exert disproportionate influence over corporate decisions, while Class A shares commonly provide one vote per share to public investors. Class B shares may carry multiple votes per share (e.g., 10 votes per share) or, in some cases, the public class has no voting rights at all, creating a voting differential that concentrates power. For instance, in structures where Class A shares have 1 vote per share and Class B shares have 10 votes per share, this disparity enables control without proportional economic ownership.^[3] This voting differential facilitates control concentration, where a minority equity stake can secure a majority of votes. Founders holding a small fraction of total equity through super-voting shares (e.g., Class B) might control over 51% of the voting power, ensuring influence on board elections, mergers, and strategic directions without needing broad shareholder consensus. Such mechanisms are prevalent in technology firms to preserve visionary leadership post-IPO. Proxy and quorum rules further amplify this control in shareholder meetings. With enhanced votes, holders of the superior class can more easily meet quorum requirements—often a majority of outstanding shares—and sway proxy solicitations, tipping outcomes in board elections or bylaw amendments toward management preferences. This dynamic reduces the influence of public shareholders, who may hold the majority of economic interest but lack voting parity. Many dual-class structures incorporate sunset provisions to limit perpetual control, where voting differentials expire after a set period, such as 5-10 years following an IPO, restoring one-share-one-vote parity. These provisions aim to balance long-term governance with initial founder protection, though adoption varies and some structures lack them entirely. To illustrate control thresholds mathematically, consider a firm with total shares N split between low-vote Class A (v_A = 1, fraction $1 - \alpha) held publicly and high-vote Class B (v_B = 10, fraction \alpha) held by controlling insiders. Total votes V = (1 - \alpha) N \cdot 1 + \alpha N \cdot 10 = N [1 - \alpha + 10\alpha] = N (1 + 9\alpha). For majority control (> 0.5 V), insider votes \alpha N \cdot 10 > 0.5 N (1 + 9\alpha), simplifying to $10\alpha > 0.5 (1 + 9\alpha), $10\alpha > 0.5 + 4.5\alpha, $5.5\alpha > 0.5, \alpha > 0.5 / 5.5 = 1/11 \approx 0.0909 (about 9.09% of total equity). Thus, with a 10:1 differential, insiders can achieve majority voting control with roughly 10% economic ownership.

Advantages

For Founders and Management

In dual-class structures, superior voting shares—often designated as Class B but sometimes as Class A (e.g., in Berkshire Hathaway)—empower founders and management to safeguard their long-term strategic vision by shielding the company from short-term shareholder pressures and opportunistic takeovers. This control mechanism allows insiders to prioritize sustained growth initiatives over immediate quarterly demands, fostering decisions aligned with the company's original mission.^[27]^[28] In technology and innovation-driven sectors, such superior voting shares are particularly prevalent, enabling management to allocate resources toward high-risk research and development without interference from activist investors seeking rapid returns. For instance, this structure helps avoid disruptive campaigns that could divert focus from long-term R&D investments, as seen in many venture-backed tech firms where founders retain influence post-IPO.^[28]^[29] Superior voting shares also support effective succession planning by ensuring continuity within founding teams or family leadership, allowing for seamless transitions that preserve the company's strategic direction across generations. This is especially beneficial in family-controlled enterprises, where the enhanced voting power facilitates the transfer of control without external disruptions.^[30]^[31] During initial public offerings, superior voting shares permit founders to raise substantial capital from public markets while minimizing dilution of their control, a key advantage for venture-backed companies transitioning to public status. This approach encourages more startups to pursue IPOs, as insiders can retain decision-making authority proportional to their vision rather than economic ownership alone.^[32]^[28] Empirical research underscores these benefits, with studies indicating that dual-class firms exhibit higher innovation output, including patent filings approximately 20-30% above those of single-class peers, alongside improved patent quality and R&D efficiency. These gains are most pronounced in the early years post-IPO and in competitive industries, highlighting the role of insider control in driving technological advancement.^[33]^[34]

For Investors

Class A shares in dual-class structures provide external investors with several key benefits, primarily stemming from their status as the publicly traded class with standard voting rights. These shares typically carry one vote per share, allowing holders to participate in shareholder votes on critical matters such as board elections and mergers, albeit with influence diluted by the superior voting power of insider-held classes. This structure enables investors to gain exposure to innovative, high-growth companies that might otherwise remain private due to founders' reluctance to relinquish control, thereby enhancing portfolio diversification opportunities. For instance, dual-class arrangements have facilitated public access to firms like Alphabet Inc., where Class A shares (traded as GOOGL) represent a significant portion of the market capitalization while supporting long-term strategic focus.^[27]^[35] A primary advantage is enhanced liquidity, as Class A shares are listed on major exchanges and benefit from broad institutional and retail participation, often exhibiting higher trading volumes compared to non-public or restricted classes like Class B. This public trading facilitates easier entry and exit for investors, reducing transaction costs and enabling more efficient portfolio management. In contrast to privately held super-voting shares, Class A shares' widespread availability supports robust market depth, as evidenced in studies of dual-class firms where the introduction of public classes correlates with increased overall stock liquidity post-IPO.^[36]^[9] Economically, Class A shares offer identical claims to dividends and other financial distributions as other classes, ensuring holders receive the same upside potential from company performance without preferential treatment for insiders. This parity in economic rights means investors capture full proportional benefits from earnings and growth, as seen in structures like Alphabet's, where Class A, B, and C shares share equivalent dividend entitlements. Additionally, these shares have historically traded at a slight premium or discount relative to non-voting counterparts, reflecting varying market perceptions of voting rights' value. For example, Alphabet's Class A shares traded at a modest premium relative to Class C non-voting shares in earlier years. The voting rights associated with Class A shares also provide a form of risk mitigation by allowing investors to voice concerns on major decisions, such as executive compensation or acquisitions, thereby offering some safeguard against unchecked management actions despite the overall limited control in dual-class setups. This participatory element can help align interests to a degree, potentially reducing the risk of value-destroying policies, though its effectiveness is constrained by the structure's design. Overall, these features make Class A shares an attractive option for investors seeking balanced access to growth-oriented firms with minimal economic concessions.^[15]

Criticisms and Disadvantages

Agency Problems

Superior-voting shares in dual-class structures, by concentrating voting power in the hands of founders or insiders, exacerbate principal-agent conflicts, where managers may prioritize personal interests—such as extracting private benefits—over the welfare of minority shareholders holding inferior-voting shares. This divergence between voting rights and cash-flow ownership enables insiders to pursue self-serving actions, including excessive compensation for executives, as evidenced by studies showing CEO pay increases with the voting-cash flow wedge.^[37]^[37] Such entrenchment reduces managerial accountability, fostering suboptimal decisions like value-destroying acquisitions or inefficient capital allocation, often termed "empire-building." Insiders' superior control insulates them from market discipline, including hostile takeovers, leading to governance failures where boards, lacking sufficient independence, delay responses to operational scandals or ethical lapses.^[38]^[37]^[38] Empirical research links these agency issues to lower firm valuations, with dual-class firms exhibiting discounts of approximately 8-12% in measures like Tobin's Q compared to single-class peers, reflecting market anticipation of entrenchment costs. This valuation penalty persists even after controlling for endogeneity, underscoring the long-term impact on shareholder value.^[39]^[39] To mitigate these problems, regulatory and market mechanisms include requirements for independent directors on boards and committees, which correlate with higher firm value in dual-class settings by enhancing oversight. Additionally, shareholder proposals advocating for one-share-one-vote structures or sunset provisions on superior voting rights serve as tools to realign interests, though their adoption remains limited.^[38]^[38]

Market Impact

Superior-voting shares in dual-class structures contribute to market dynamics where non-voting or inferior-voting shares often trade at valuation discounts of 5% to 20% compared to their voting counterparts, reflecting investor perceptions of heightened governance risks and reduced influence. Empirical analyses of U.S. firms indicate that these discounts arise from the wedge between voting control and economic ownership, leading to lower overall firm valuations for dual-class companies relative to single-class peers. For instance, studies examining Tobin's Q ratios find dual-class firms valued approximately 8-10% lower on average, as the market prices in potential agency costs associated with entrenched management.^[40]^[11] In initial public offerings (IPOs), dual-class structures tend to experience lower underpricing than single-class IPOs, with first-day returns approximately 13% lower on average (e.g., 11.9% vs. 13.7% for single-class IPOs from 1990-1998), attributed to heightened regulatory and investor scrutiny that prompts issuers to set more conservative offering prices. This phenomenon is linked to the control motivations of insiders retaining superior-voting shares, which attract a more sophisticated investor base less prone to speculative bidding. However, this scrutiny can result in adjusted pricing to mitigate perceived risks, potentially limiting the capital raised at IPO compared to equivalent single-class firms.^[41]^[42] Liquidity patterns in dual-class setups show publicly traded voting shares exhibiting higher trading volumes and narrower bid-ask spreads than non-voting shares due to greater institutional interest and float availability, though the overall structure historically deterred index inclusion. From 2017 to 2023, S&P Dow Jones Indices excluded new multi-class companies from the S&P 500 (while grandfathering existing ones), reducing visibility and liquidity for affected stocks by limiting passive fund inflows estimated at billions in assets under management; this policy was reversed in April 2023 to allow inclusion again. This exclusion amplified liquidity disparities, as non-voting shares faced additional selling pressure from index-tracking exclusions.^[43]^[44]^[45]^[46] Investor sentiment toward dual-class structures reveals widespread institutional opposition due to governance concerns. Major asset managers like Vanguard and BlackRock have policies supporting measures like sunset provisions on superior voting rights, contributing to lower demand and persistent valuation pressures. This sentiment stems from fears of diminished accountability, as evidenced by proxy advisory firms recommending against dual-class recapitalizations in over 70% of cases.^[47]^[40]^[48] Long-term performance of dual-class firms post-IPO is mixed, with early premiums for young companies eroding over time into underperformance relative to single-class peers, driven by governance issues that amplify market discounts after five years. Comprehensive studies tracking U.S. IPOs from 1980 to 2017 find that while dual-class firms outperform initially by 5-10% in valuation multiples, they subsequently lag by 10-15% in stock returns and Tobin's Q, correlating with reduced innovation efficiency and higher capital costs. These patterns underscore how superior-voting share dominance can lead to sustained market penalties once the benefits of founder control wane.^[21]

Examples

Prominent Companies

Alphabet Inc. (GOOGL) employs a multi-class share structure where Class A shares carry one vote per share and are publicly traded, while founders Larry Page and Sergey Brin hold Class B shares with 10 votes each, enabling them to maintain significant control despite owning a minority of economic interest.^[49] This structure has been in place since the company's 2004 initial public offering, with Class C shares (GOOG) offering no voting rights to further dilute public influence without affecting founder control.^[50] Meta Platforms, Inc. (META) features Class A shares with one vote per share, publicly traded, contrasted by Class B shares held primarily by CEO Mark Zuckerberg that carry 10 votes per share. As of April 1, 2025, Zuckerberg's ownership equated to approximately 13.7% of the total economic interest but 61% of the total voting power, stemming from his control of nearly all outstanding Class B shares. Berkshire Hathaway Inc. (BRK.A) maintains a two-class structure where high-priced Class A shares provide full voting rights of one vote per share, serving as the primary vehicle for significant investor influence, including Warren Buffett's approximately 37.5% ownership of Class A shares (as of November 2025) that grants him about 30% of overall voting power.^[51]^[52] Class B shares (BRK.B), introduced in 1996 to make ownership more accessible, carry 1/10,000th of the voting power of Class A shares, distinguishing the company without traditional super-voting provisions but emblematic of class-based distinctions in access and control. Snap Inc. (SNAP) operates a tri-class structure where publicly traded Class A shares, issued post-2017 IPO, carry no voting rights except as required by law, allowing founders Evan Spiegel and Robert Murphy to retain over 99% of total voting power through their holdings of Class B (one vote per share) and Class C (10 votes per share) stock. This setup, designed to preserve founder control, has drawn scrutiny for disenfranchising public shareholders, with 1,442,210,767 Class A shares outstanding as of January 31, 2025.^[53] As of 2025, dual-class structures like those in tech firms face ongoing debates over sunset provisions that would time-limit super-voting shares, with examples including Lyft Inc. eliminating its dual-class setup in August 2025 and The Trade Desk Inc. extending its dual-class structure via a 10-year extension approved in September 2025, reflecting pressure from investors for greater equity in governance.^[54]^[55] In 2025, investor advocacy groups continued to push for sunset provisions at other companies like Snowflake, highlighting persistent tensions between innovation protection and shareholder equality.

Historical Developments

The use of dual-class share structures, including Class A shares with enhanced voting rights, originated in the late 19th century in the United States. The first publicly traded American firm to issue multi-class shares was the International Silver Company in 1898, which introduced non-voting common shares to raise capital while retaining control.^[10] By the 1920s, adoption surged amid a booming stock market, with over 183 firms listing dual-class structures on exchanges like the New York Stock Exchange (NYSE), often to consolidate founder or family control during rapid expansion.^[47] However, the 1925 proposed NYSE listing of Dodge Brothers, where insiders sought 1.7% equity for majority voting control, triggered public backlash and led to NYSE restrictions on such arrangements by 1926.^[47] In the media sector, dual-class shares gained prominence in the mid-20th century to safeguard editorial independence. A seminal example was The New York Times Company, which went public in 1967 with a dual-class structure, issuing Class B shares with superior voting rights to the Ochs-Sulzberger family, ensuring family oversight amid public ownership.^[11] This approach became a model for other media firms seeking to balance capital access with journalistic autonomy. Following World War II, regulatory shifts in the 1970s facilitated broader post-war growth; the American Stock Exchange (AMEX, now part of NYSE) adopted a case-by-case policy for dual-class listings in 1972, formalized in 1976, allowing more initial public offerings (IPOs) with multi-class structures despite NYSE's ongoing one-share-one-vote preference.^[47] The 1980s marked a renaissance for dual-class shares in the U.S., driven by takeover defenses amid hostile acquisition waves. The NYSE reversed its de facto ban in the early 1980s due to competitive pressures from AMEX and Nasdaq, permitting 37 of 44 adopting firms to implement structures primarily as anti-takeover measures.^[47] The Securities and Exchange Commission (SEC) attempted regulation via Rule 19c-4 in 1988, prohibiting exchanges from listing firms with unequal voting rights, but a federal court overturned it in 1991, solidifying permissiveness.^[47] By 1994, NYSE, Nasdaq, and AMEX aligned on policies allowing initial multi-class issuances, with ongoing listings subject to disclosure.^[10] The tech boom of the 1990s and 2000s propelled widespread adoption, particularly among internet and innovation-driven firms prioritizing founder vision. Dual-class IPOs rose from 46 between 2006 and 2010 to 104 from 2011 to 2015, reflecting a shift from traditional industries to high-growth tech. Google's 2004 IPO exemplified and popularized super-voting Class A and B shares, granting founders Larry Page and Sergey Brin 10 votes per Class B share to maintain control post-listing.^[47] In the 2010s, intensified debates over governance prompted reforms among exchanges and index providers. NYSE and Nasdaq maintained flexible dual-class policies but faced scrutiny; in 2017, S&P Dow Jones Indices announced exclusion of new multi-class firms from the S&P Composite 1500 (including S&P 500) unless they committed to eventual proportionate voting rights, aiming to curb perpetual control disparities.^[44] This policy, part of broader investor advocacy, highlighted tensions between innovation protection and shareholder equality, though it was reversed in 2023.^[56] Globally, dual-class structures spread from the U.S., with Canada adopting them prominently from the 1970s onward, especially in media to preserve family or editorial control, building on practices dating back six decades by the 1980s.^[57] In Europe, adoption was slower due to stricter one-share-one-vote norms but accelerated from the 1980s in permissive jurisdictions like France and Italy; peaks occurred between 2012 and 2022 amid tech listings, as countries like Sweden and Finland liberalized rules to attract innovative IPOs.^[58]^[59] By the 2020s, over 40% of European tech IPOs featured dual-class elements, mirroring U.S. trends.^[60]

Legal and Regulatory Framework

In the United States

In the United States, the Securities and Exchange Commission (SEC) oversees the issuance and disclosure of Class A shares, particularly in dual-class structures where voting rights differ across share classes. Under the Securities Act of 1933, companies must provide full disclosure of material differences between share classes in their registration statements and prospectuses. Specifically, Item 202 of Regulation S-K requires a detailed description of the securities, including voting rights, dividend preferences, and conversion provisions for each class, ensuring investors understand disparities such as superior voting power in Class A shares compared to Class B or common stock. Additionally, the SEC's Division of Corporation Finance emphasizes enhanced risk factor disclosures in prospectuses for dual-class structures, covering potential governance risks, exclusion from stock indices, and delisting threats due to voting imbalances. Stock exchanges like the New York Stock Exchange (NYSE) and Nasdaq permit dual-class share structures, including Class A shares with enhanced voting rights, but impose governance disclosure requirements to promote transparency. The NYSE Listed Company Manual (Section 313) allows such listings without prohibiting additional supervoting shares, provided companies adhere to general corporate governance standards under Section 303A, which mandate annual affirmations of compliance and disclosures on board independence and committee structures. Post-2013 updates to NYSE rules, including amendments to shareholder approval policies for equity issuances, reinforced disclosures for controlled companies relying on dual-class voting to meet listing criteria. Similarly, Nasdaq Listing Rule 5640 prohibits issuances that unequally restrict voting rights but explicitly permits dual-class structures, requiring controlled companies (where more than 50% voting power is held by insiders via dual classes) to disclose exemptions from independence rules in annual reports per Item 407(a) of Regulation S-K.^[61] Shareholder protections against entrenched dual-class structures, including Class A shares, are facilitated through SEC proxy rules. Rule 14a-8 under the Securities Exchange Act of 1934 allows eligible shareholders to submit proposals for inclusion in company proxy statements, including those seeking to eliminate or sunset multi-class voting disparities, provided they meet ownership and procedural thresholds.^[62] Companies may exclude proposals under specific bases, such as substantial duplication or relation to ordinary business, but proposals addressing dual-class governance—such as one-share-one-vote recaps—have been upheld when they seek significant policy changes without micromanaging operations.^[63] Dual-class shares, including Class A, face no differential federal income taxation compared to single-class common stock; dividends and capital gains are taxed uniformly based on the underlying economic interest. However, estate planning complications arise for holders of high-vote Class A shares, as their disproportionate control can lead to higher valuations for estate tax purposes under IRC Section 2704, potentially triggering larger taxable estates without discounts typically available for minority interests. In the 2020s, proxy advisory firms have intensified scrutiny of entrenched dual-class structures. Institutional Shareholder Services (ISS) updated its U.S. guidelines in 2021 to recommend against directors at companies with multi-class shares lacking time-based sunsets after seven years post-IPO, emphasizing governance risks from perpetual voting disparities. Glass Lewis, in its 2022 policy updates, began recommending votes against the governance committee chair at firms where lower-voting shares have traded for over five years without a reasonable sunset provision for superior-voting Class A shares, aiming to mitigate agency problems through enhanced accountability. These guidelines influence institutional investors, who control a majority of U.S. equity voting power, and reflect broader regulatory pressure on dual-class entrenchment.

International Perspectives

In international jurisdictions outside the United States, regulations on Class A shares—typically featuring superior voting rights in dual-class structures—emphasize investor protections through transparency mandates, voting caps, and time-limited provisions, differing from more flexible approaches elsewhere. These frameworks aim to balance founder control with equitable governance, often requiring disclosures on voting disparities to mitigate agency risks. In Canada, the Toronto Stock Exchange (TSX) permits dual-class share structures, including Class A shares with enhanced voting rights, without a universal mandatory sunset clause but with ongoing calls for time-based expirations since a 2014 regulatory review; such arrangements are prevalent in resource sector firms to maintain management stability amid volatile markets.^[64] Europe's regulatory landscape, shaped by the EU Shareholder Rights Directive II (SRD II) enacted in 2017, mandates enhanced transparency for institutional investors and asset managers regarding their engagement policies, including how they address multi-class share structures, while permitting dual-class setups subject to national variations. In the United Kingdom, the Financial Conduct Authority's (FCA) 2024 reforms (effective July 2024) permit dual-class structures under a single commercial listing category, allowing enhanced voting rights without prior restrictions on holder types (e.g., natural persons only) or mandatory sunsets, though weighted voting rights shares must be established pre-initial public offering (IPO) and no new such shares can be issued post-IPO; a July 2025 consultation by the UK Takeover Panel (PCP 2025/1) proposes frameworks for applying takeover rules to dual-class structures, including mandatory offer thresholds and IPO disclosures.^[65]^[66] Australia, by contrast, maintains a strict prohibition on dual-class shares with unequal voting rights under ASX listing rules (as of November 2025), positioning it as one of the few major markets upholding a pure one-share-one-vote principle to safeguard minority interests, though consultations to potentially allow them are ongoing. In Asia, the Hong Kong Stock Exchange (HKEX) reformed its rules in 2018 to permit weighted voting rights (WVR) structures akin to Class A shares for innovative companies, but bans permanent dual-class arrangements through mandatory sunset clauses—such as event-based triggers upon founder departure or share transfer—and a 10:1 voting cap to prevent entrenchment. India, via the Securities and Exchange Board of India (SEBI) framework introduced in 2019, allows differential voting rights shares with superior rights up to a 10:1 ratio relative to ordinary shares, limited to technology firms and subject to a five-year sunset extendable once, ensuring promoter control does not exceed 74% of total voting power post-IPO. Among emerging markets, Brazil's 2021 amendments to the Corporations Law (Law 14.195) authorize plural voting shares for newly listed companies on B3, permitting up to 10 votes per share in a dedicated class, but require supermajority approval and restrict issuance to closed or specific public entities to align with governance standards. In South Africa, while dual-class structures are permitted under the Companies Act, the King V Code on Corporate Governance (2025) advocates for the one-share-one-vote principle through recommended practices promoting equitable treatment of shareholders and board independence—streamlining prior principles and emphasizing ethical leadership and AI governance—pressuring firms toward structures that avoid disproportionate control.^[67] Globally, as of 2025, investment indices like MSCI have intensified scrutiny on dual-class shares, penalizing non-time-limited structures in ESG ratings and favoring those with sunset provisions to encourage long-term alignment with shareholder interests, reflecting broader trends toward governance reforms amid rising cross-border listings.^[68]

References

[1]
Comparison With Class B and C Shares - Investopedia
Class A shares are a type of common stock, often with more voting rights and dividend priority, but this can vary by company.
[2]
Share Class - Definition, How Rights Work, Features
The most common classes are as follows: Class A Shares. Public companies can issue Class A shares to new investors when they float their stock through an IPO.
[3]
Dual Class Stock: Definition, Structure, and Controversy - Investopedia
A dual class stock structure can consist of Class A and Class B shares, for example. These shares can differ in terms of voting rights and dividend payments.
[4]
Alphabet's GOOG vs. GOOGL: What's the Difference? - Investopedia
The main difference between the GOOG and GOOGL symbols is that GOOG shares (Class C) have no voting rights, while GOOGL shares (Class A) do.Overview · Alphabet's Class Structures · Which Is a Better Investment?
[5]
Berkshire Hathaway Class A vs. Class B Shares - Investopedia
Berkshire Hathaway offers two classes of common stock: Class A and Class B. Class A has a higher price per share and more voting rights than Class B.
[6]
Description of Class A Common Stock - SEC.gov
Holders of Class A common stock are entitled to one vote per share on matters to be voted on by stockholders. . Dividends. . Holders of Class A common stock ...
[7]
https://www.sec.gov/Archives/edgar/data/1759546/000155837021003449/ride-20201231xex4d1.htm
[8]
Dual-Class Stocks - Overview, Example, History
Dual-class stocks refer to a stock offering structure within a company. A dual-class structure means that a company offers two types (or classes) of stocks.
[9]
Dual Class Stock: Background and Policy Debate - Congress.gov
Dec 8, 2021 · The first American publicly traded firm to issue multi-class shares was reportedly the International Silver Company in 1898. Use of differential ...
[10]
[PDF] Dual Class Stock - ECGI
Dual class stock is a capital structure where a corporation issues two or more classes of common stock with identical economic rights but differential voting ...
[11]
Dual-Class: The Consequences of Depriving Institutional Investors ...
May 17, 2017 · In the 1920s, many companies went public with dual-class share structures that limited “common” shareholders' voting rights. But after the Great ...
[12]
Preferred vs. Common Stock: What's the Difference? - Investopedia
May 28, 2025 · An important difference between preferred and common stock is that preferred stock shareholders are paid dividends before common shareholders.Overview · Preferred Stock · Common Stock · Differences
[13]
Common vs Preferred Shares - Difference, Investment
Because preferred shares are a combination of both bonds and common shares, preferred shareholders are paid out after the bond shareholders but before the ...What are Common vs... · What are Preferred Shares? · Differences: Common vs...
[14]
Class A vs. Class B Shares: Differences in Voting Rights and ...
Class A shares are one class of common stock in a public company. Common shares are an ownership interest in a company and entitle purchasers to a portion of ...
[15]
Class A vs Class B vs Class C Shares, Explained - SoFi
While the specific attributes of Class A shares depend on the company, they generally come with more voting power and a higher priority for dividends and profit ...
[16]
Overview of Equity Securities - CFA Institute
The candidate should be able to: describe characteristics of types of equity securities;; describe differences in voting rights and other ownership ...Introduction · Learning Outcomes · Summary
[17]
[PDF] THE PROBLEM OF SUNSETS - Boston University
The sunset provisions would automatically convert the dual class structure to a single share structure after the passage of a pre-determined period of time.
[18]
Transfer Traps: Considerations for Dual-Class Companies ...
Sep 16, 2022 · Transfer traps in dual-class companies arise when high-vote shares automatically convert to low-vote shares upon transfer, potentially ...
[19]
[PDF] The Dual-Class Spectrum - Yale Journal on Regulation
As a result, the dual- class structure of our common stock may prevent the inclusion of our Class A common stock in such indices, may cause stockholder advisory ...<|control11|><|separator|>
[20]
Shareholder Democracy and the Challenge of Dual Class Share ...
Feb 11, 2025 · Its Class A shares carry 10 votes for every one vote carried by each Class B share, but they are widely held, having been distributed as ...
[21]
[PDF] The Rise of Dual-Class Stock IPOs
Another key factor behind the rise of founder-controlled dual-class IPOs is the growing number of listings by foreign-based firms in the United States, ...Missing: origin | Show results with:origin
[22]
[PDF] US IPO Guide - Latham & Watkins LLP
Dec 22, 2022 · This is our initial public offering guide. It will help you decide whether an IPO is the right move for your company and, if so, help you make ...
[23]
[PDF] The Up-C Structure in IPOs - Mayer Brown
The Original Partners are expected to recapitalize the Flow-through Entity by using a single class of units that can be subsequently exchanged for Class A ...Missing: process | Show results with:process
[24]
[PDF] On Dual Class and Other Entrenching Governance Structures in ...
This figure reflects and this set of recommendations are focused on companies with dual or multi- class structures under which the founder or managers retain ...
[25]
The Social Costs (and Benefits) of Dual-Class Stock
Oct 16, 2023 · Dual-class stock structures allow founders to sell equity in their company without giving up control. These devices accomplish this by creating one class of ...
[26]
[PDF] A Snapshot of Dual-Class Share Structures in the Twenty-First Century
Jan 14, 2019 · Dual-class share structures have long been the subject of a hotly contested debate both within the United States and around the world.
[27]
In Defense Of Dual-Class Shares | Yale Insights
Jan 10, 2025 · More efficient capital allocation · Insulation from short term opportunistic hostile takeovers · Facilitation of innovative risk-taking ...
[28]
Dual-Class Shares: Risks and Advantages - Ivey Business Journal
Facilitates execution of strategy · Encourages founders to publicly list stock · Insulates firm and management from short-termism · Protects founders from activist ...
[29]
The innovation effect of dual-class shares: New evidence from US ...
We document novel evidence suggesting that firms that choose dual-class control structures can be more innovative in terms of patent quality. Specifically, we ...
[30]
Dual-Class Stock Structures in Family-Controlled Firms - Attorney ...
Additionally, dual-class shares provide flexible mechanisms for succession planning, ensuring continuity of family influence across generations. Control ...
[31]
How dual-class shares will help London attract tech IPOs
Dual-class shares are also common in Hong Kong and Singapore, territories where family succession planning is crucial. Attempts to retro-fit dual-class ...
[32]
https://deloitte.wsj.com/riskandcompliance/dual-class-share-structure-weighing-the-risks-and-rewards-1397016118
[33]
Dual‐class share structure and innovation - Wiley Online Library
Oct 13, 2022 · We find a positive association between disproportionate insider control and patent output, quality, creativity, research and development efficiency.
[34]
How Dual Class Share Structures Affect Innovation
Jul 16, 2018 · We find that a dual class structure enhances innovation as measured by patent output, quality, and creativity.
[35]
https://deloitte.wsj.com/riskandcompliance/dual-class-share-structure-weighing-the-risks-and-rewards-1415854903
[36]
(PDF) Dual-class splits and stock liquidity - ResearchGate
This paper examines the effects on stock liquidity of a dual-class split that changes the firm's ownership structure from one share one vote to two classes ...
[37]
How to Buy and Sell Google Stocks - FOREX.com CA
Class A shares (GOOGL) carry one vote per share, granting shareholders voting rights, while Class C shares (GOOG) have no voting rights but offer the same ...
[38]
Agency Problems at Dual‐Class Companies - MASULIS - 2009
Jul 16, 2009 · Using a sample of US dual-class companies, we examine how divergence between insider voting and cash flow rights affects managerial extraction of private ...
[39]
Corporate governance and firm value at dual class firms
The divergence between voting and cash flow rights at dual class firms exacerbates the agency conflicts between managers and the outside investors.
[40]
https://scholarship.law.upenn.edu/cgi/viewcontent.cgi?article=1650&context=jbl
[41]
[PDF] Reassessing the Empirical Evidence on U.S. Dual-Class Stock
It will be shown in this article that firm valuation studies generally show dual-class corporations to be correlated with lower valuations than. OSOV ...
[42]
[PDF] a comparison of dual and single-class IPOs - University of Pittsburgh
We find that dual-class firms experience less underpricing than single-class firms and explore several hypotheses which explain this phenomenon.
[43]
Control as a motivation for underpricing: a comparison of dual and ...
We find that dual-class firms experience less underpricing than single-class firms and explore several hypotheses which explain this phenomenon.
[44]
Index Providers and Dual-Class Stock
Some believe that the exclusion of dual-class shares is misguided because indexes capture the "investable universe." This is a myth.
[45]
[PDF] Dual-Class Stock Structures - Houlihan Lokey
May 18, 2023 · A dual-class stock structure (DCSS) has high-vote stock (HV Shares) and low-vote or no-vote stock (LV Shares), allowing founders to control ...
[46]
[PDF] DUAL-CLASS SHARES: THE GOOD, THE BAD, AND THE UGLY
Jun 5, 2018 · In these situations, granting the founders super voting rights allows them to maintain control while giving investors an opportunity to ...<|control11|><|separator|>
[47]
https://www.cfainstitute.org/sites/default/files/-/media/documents/survey/apac-dual-class-shares-survey-report.pdf
[48]
Alphabet Investor Relations - 2025 Annual Meeting of Stockholders
Holders of the shares of Class A common stock were entitled to one vote per share held as of the close of business on April 8, 2025, our Record Date, and ...
[49]
https://www.sec.gov/Archives/edgar/data/1652044/000165204425000014/goog-20241231.htm
[50]
[PDF] BRK-A 2025 Proxy Statement - BERKSHIRE HATHAWAY INC.
May 3, 2025 · The Class A Stock and Class B Stock vote together as a single class on the matters described in this proxy statement. Only shareholders of ...
[51]
snap-20241231 - SEC.gov
Class A common stockholders have no voting rights, unless required by Delaware law. This concentrated control may result in our co-founders voting their shares ...
[52]
Dual Class: Lyft Eliminates its High Vote Shares
Sep 2, 2025 · Green and Zimmer will also convert all shares of Lyft Class B common stock to Lyft Class A common stock on August 15, 2025. Following the ...
[53]
US Tech Firm's Bundled Proposal Targets DCSS Extension
Aug 6, 2025 · US technology company The Trade Desk is seeking to extend the sunset trigger of its dual-class share structure (DCSS) by a decade as part of ...
[54]
S&P Dow Jones Indices Announces Decision on Multi-Class Shares ...
Jul 31, 2017 · The S&P Global BMI Indices and S&P Total Market Index will continue to include companies with multiple share classes or with limited or no ...
[55]
Investors push back on S&P Global decision allowing dual-class ...
May 1, 2023 · On April 17, S&P Global reversed a 2017 policy of barring new companies with dual-class shares from indexes.
[56]
[PDF] Dual Class Shares in Canada: An Historical Analysis
Dec 21, 1984 · Dual class shares have been used by Canadian corporations to access public capital markets for the past sixty years.Missing: timeline | Show results with:timeline
[57]
[PDF] The Rise of Dual Class Shares: Regulation and Implications
... multi-class share structures have been excluded from the S&P 1500 since 2017. See text accompanying note 64. 11 See Dual Class Shares: Governance Risks and ...
[58]
[PDF] Once Bitten, Twice shy -- Multiple Voting Shares in Continental Europe
Mar 1, 2023 · Over the last decade, several jurisdictions in continental Europe have lifted regulatory restrictions on multiple voting shares (hereinafter ...
[59]
Multiple class shares and double voting rights: Literature review a...
In 2021, 46 % of “tech” IPOs were for dual class share firms. This trend accelerated over the previous 40-year period (1980-2022) during which dual class ...
[60]
Listing Rule 5600 Series - Rules | The Nasdaq Stock Market
These requirements include rules relating to a Company's board of directors, including audit committees and Independent Director oversight of executive ...
[61]
17 CFR § 240.14a-8 - Shareholder proposals. - Law.Cornell.Edu
§ 240.14a-8 Shareholder proposals. This section addresses when a company must include a shareholder's proposal in its proxy statement and identify the proposal ...<|control11|><|separator|>
[62]
Procedural Requirements and Resubmission Thresholds Under ...
Nov 4, 2020 · Rule 14a-8 permits a company to exclude a shareholder proposal from its proxy statement if the proposal fails to meet any of several specified ...
[63]
Investors call for limits on dual-class shares in light of Rogers battle
Nov 4, 2021 · SHARE advocates prohibiting new dual-class shares except on the TSX Venture Exchange, requiring a three-year sunset provision for companies ...
[64]
[PDF] MSCI Global Investable Market Indexes Methodology
Developments in international equity markets and investment management processes have led many investors to desire very broad coverage and size-segmentation ...Missing: dual | Show results with:dual