Offloading the Burden of Being Public: An Analysis of Multi-Voting Share Structures

21 Pages Posted: 8 Feb 2016

See all articles by Anita Anand

Anita Anand

University of Toronto - Faculty of Law

Date Written: February 5, 2016

Abstract

Public companies with dual class and multiple voting share (MVS) structures have grown in popularity in the United States as evidenced by Google, Alibaba and Fitbit. While MVS allow founders to retain control of their firms, they undermine corporate governance standards. In particular, MVS structures undermine minority shareholders' rights and render these rights meaningless in the face of the proportionately greater economic risk that minority shareholders bear. Some argue that "caveat emptor" applies: shareholders, armed with full disclosure of a firm's capital structure, invest in companies with multiple voting shares at their own risk. But this line of reasoning fails to account for two important aspects of relevant law. First, MVS structures undermine existing accountability mechanisms in corporate law. Second, a securities regime premised on investor protection that equips regulators with the discretionary power to intervene in the public interest calls for further regulation, and perhaps prohibition, of MVS.

Suggested Citation

Anand, Anita, Offloading the Burden of Being Public: An Analysis of Multi-Voting Share Structures (February 5, 2016). Virginia Law & Business Review, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2728481

Anita Anand (Contact Author)

University of Toronto - Faculty of Law ( email )

78 Queen's Park
Toronto, Ontario M5S 2C5
Canada
4169464002 (Phone)

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