Columbia Law School
Sky Blog
My first few weeks at the Securities and Exchange Commission have been a whirlwind—and just to be clear, I am not talking about the markets.[1] In a few short weeks, I have gotten a crash course on SEC policymaking—and
dual class shares
Against Mandatory Sunset for Dual Class Firms
The debate over dual class firms has morphed from an objection to their very legitimacy to a demand to subject them to a mandatory sunset provision. My colleague and friend, Professor John Coffee, believes that dual class firms are undesirable …
Why Investors Pay So Much for Dual Class Firms
Professor Coffee makes the insightful point that if founders receive a lower price for their stock when they retain voting control, it does not seem fair to allow other shareholders to take away that control without compensation. But, Professor Coffee …
A Brief Response
Forever is a long time — indeed, too long. That is the essence of my answer to my two friends and colleagues — professors Zohar Goshen and Joshua Mitts — who each argue against mandatory sunset provisions on super-voting stock …
Dual Class Stock: What Is a Fair Compromise?
In my last post[1], I focused on the Council of Institutional Investors’ (“CII”) recent proposal to the New York Stock Exchange and Nasdaq to impose a listing condition that any super-voting rights on dual class stock must expire …
Dual Class Stock: The Shades of Sunset
The most important issue in corporate governance today is dual class capitalization, and the most important recent development is the petition submitted on October 24, 2018 by the Council of Institutional Investors (“CII”) to both the New York Stock Exchange …
Sullivan & Cromwell Discusses ISS’ 2018 Governance Principles Survey Results
On September 18, 2018, Institutional Shareholder Services (ISS) released the results of the first half of its Annual Policy Survey. The Annual Policy Survey is designed to gather feedback from stakeholders, including institutional investors, companies, corporate directors and other market …
How Dual Class Share Structures Affect Innovation
In a new paper, we seek to fill a gap in research on the possible benefits of dual class share structures and how they might promote innovation. We start with a bit of history.
Shareholder democracy has been fundamental to …
Blue Sky Banter Podcast: SEC’s Robert Jackson on Dual Class Shares and More
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Video: The Biggest Issues Facing Securities Markets in the 21st Century
An esteemed panel of regulators, scholars, and lawyers gathered at Columbia Law School on March 29 to discuss Securities Market Issues for the 21st Century, a new e-book on the most important areas of inquiry for securities regulation and …
Sticking Around Too Long? Dynamics of the Benefits of Dual-Class Structures
Lawyers and academics generally have a dim view of dual-class share structures. When Snap Inc., a technology-based social media company, was preparing for its initial public offering (IPO) in early 2017, for example, CalPERS and many other prominent institutional investors …
Enhancing Governance in Dual-Class Share Firms
In a typical public company, shareholders can elect the board, appoint the auditors, and approve fundamental changes. In other words, they can participate in the governance of the firm. Firms with dual class shares (DCS) alter this balance by inviting …
Perpetual Dual-Class Stock: The Case Against Corporate Royalty
How Dual-Class Share Structures Create Agency Costs
A number of companies have recently gone public with dual-class share structures, allowing founders to retain control. Most of these companies’ articles of incorporation contain a provision that requires any merger consideration to be distributed pro rata among all shareholders. …
How Nonvoting Shares Can Help Promote Efficient Corporate Governance
Companies that go public with multiple classes of shares will be excluded from the major U.S. stock indexes of S&P Dow Jones Indices, the organization announced in July. A few days earlier, FTSE Russell said it would bar dual-class companies …
Dow Jones Erred By Going Nuclear on Dual-Class Shares
In July 2017, Dow Jones, goaded by the reaction to Snapchat having gone public with a class of shares without voting rights, announced that, after extensive consultation, it had decided to henceforth eliminate companies with dual-class shares from its …
How Dual Class Shares in IPOs Can Create Value
The shareholder empowerment movement (the “movement”), driven primarily by public pension funds and union-related funds with over $3 billion in assets, has renewed its effort to eliminate, restrict, or at least discourage companies from creating dual class share structures in …
Principal Costs: A New Theory for Corporate Law and Governance
For the last 40 years, the problem of managerial agency costs—corporate managers shirking duties and diverting resources—has dominated the study of corporate law and governance. Many scholars treat the reduction of agency costs as the essential function of corporate law …
A Comparative Analysis of Dual Class Share Structures
The efficiency of dual class share structures is controversial, and whether to allow them is a difficult choice. Though much has been written about this topic, no comprehensive picture of dual class structures’ governance effects has emerged.
Although dual class …