Dual-class shareholder arrangements

by Walter Olson on June 16, 2013

Why Elizabeth Warren is wrong about them [Prof. Bainbridge]

{ 1 comment }

1 Bob Lipton 06.17.13 at 9:31 am

Probably the two best-known companies with at least two classes of shares are Ford and Google. When Ford first came public, it came public with that class. If I recall correctly, so long as the head of the Ford family controls 40 million shares, those shares have outsized voting rights. These were the shares that Bill Ford used to take control of the company and reform its capital structure without government subsidy. Those shares and the name of the company are a matter of pride and responsibility to Bill Ford. As Henry Ford II once remarked “That’s my name on the company.”

The Google situation is different. The shares came public with no special classes. The founder controlled the vast majority of shares, but have sold off many of them for reasons that are doubtless personally valid. However, foreseeing a time in which their majority interest would become a minority interest, they arbitrarily announced the change in structure, backed by their current majority. That is abusive and nakedly so.

Bob

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