White Papers-17


All controlled companies are not created equal. At some companies, founders and their families, or other large investors simply own large blocks of their companies’ sole class of voting stock. At these firms, voting power remains directly proportionate to the investor’s at-risk capital. More often, controlling shareholders use multi-class capital structures to concentrate voting power without commensurate capital commitments or risk of loss. Supporters of these multi-class structures argue that control of a firm’s voting power enables management teams to minimize the impact of short-term market pressure, so as to focus on long-term business prospects. They promise higher returns over time in exchange for public shareholders’ loss of control.

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