Multiple Share Classes and Super-Voting Shares

A share represents ownership in a company. Companies can issue different types of shares, each with unique characteristics regarding voting rights, dividends, and other factors. Shareholders typically have the right to vote on significant corporate decisions, such as electing the board of directors. Common stock usually grants voting rights, whereas preferred stock often does not. The specific terms and differences of share classes can vary significantly from company to company. Read the charter for the specific class you are buying; voting and dividend rights are not standardized.

Common Stock

Voting Rights

Common stock, also known as ordinary shares, generally provides voting rights.

Dividends

May offer dividends, though not guaranteed.

Share Classes

Can be subdivided into different classes with distinct voting rights and economic interests. For instance, Google’s 2004 IPO (the company is now Alphabet) included Class B shares with 10 votes per share, compared to one vote per share for Class A common stock.

Preferred Stock

Dividends

Often pays a fixed dividend.

Priority

Ranks ahead of common stock but behind corporate debt in liquidation or bankruptcy.

Voting Rights

Usually lacks voting rights.

Super-Voting Shares

Control

Used by founders to maintain control without a proportional economic interest.

Voting Power

Disproportionate voting power relative to economic interest.

Class A, B, and C Shares

The letters mean nothing on their own. There is no standard, no regulation assigning characteristics to a letter, and no way to infer rights from a class name — you must read the charter. The loose convention is that Class A carries superior voting power and dividend priority, Class B is ordinary common, and Class C covers employee or non-voting classes; plenty of issuers do the opposite.

Alphabet is the counterexample that should cure you of the habit: its Class A (GOOGL) has one vote, its Class B — held by the founders and unlisted — has ten, and its Class C (GOOG) has none. Buy “the A shares” expecting control and you have bought the weakest voting stock the company issues. Before buying any multi-class issuer, read the share-class description in the most recent 10-K and confirm which class you are actually getting a quote on.

While differentiated voting rights or dividends based on the duration of ownership might seem like a way to encourage long-term investment, they function as control mechanisms. Bebchuk and Kastiel show that whatever case exists for a dual-class structure is strongest at the IPO and decays from there: the founder’s edge fades, the costs of insulated control compound, and the controller retains a private incentive to keep the structure long after it has stopped being efficient for everyone else.⁵¹ That is the argument for time-based sunset provisions — and their absence is what you are buying into when you take the low-vote class.