Sky Blog
In a new paper, I examine the potential of sunset clauses – legal provisions that automatically phase out enhanced voting rights over time or upon certain events – to mitigate the imbalances and entrenchment risks associated with tenure-based voting structures, …
Financial globalization has allowed issuers more freedom to shop among jurisdictions and thus intensified stock market competition. Against this backdrop, the Hong Kong, Singapore, China, and UK stock markets have accepted the dual-class share structure (DCSS). While empirical legal studies …
The structure of dual-class stock, where one class of shares confers more votes per share than the other, creates a gap (“wedge”) between voting rights and cash flow rights that allows insiders to raise capital without relinquishing effective control of …
Over the past three decades, there has been increasing concern about how corporate governance structures such as classified boards and dual class stock entrench managers, reduce director effectiveness, and reduce firm value. Likely as a result, mature firms have increasingly …
Debates about corporate governance ultimately rest on empirical studies that evaluate whether a particular type of governance enhances shareholder value. In recent years, lawyers have increasingly engaged with these studies, by either criticizing or praising them, and given them greater …
Vast corporate growth over more than a century has weakened shareholder voting rights, as highlighted by, among other things, the rise of dual-voting stock IPOs. The extent of that growth, and the lack of people’s power to negotiate with …
Do companies adopt optimal governance arrangements when they go public? This question has been a hotly debated topic in corporate law and governance and one that I examine in a recent paper.
At the time of an initial public offering …
Just over 10 years ago, benefit corporations emerged as legal entities intended to permit for-profit social enterprises to pursue public-interest missions. While increasingly popular among states and businesses, these new entities have received unending criticism from commentators on all sides. …
Public securities markets have undergone dramatic changes in recent years. Not only has the number of publicly traded firms been declining, but the nature of the firms that choose to go public has also changed. While publicly traded firms in …
Discretion is an integral part of how indices, including stock market indices, are constituted, according to professors Rauterberg and Verstein and Robertson (here and here), and the S&P 500 index is no exception.
The S&P 500 is a …
Companies with dual class shares have, as the term suggests, two (or more) classes of common stock. One class gives its holders voting power proportionate to their equity shareholdings. The other offers a group of shareholders, normally corporate insiders, weighted …
Why are large private companies often characterized by poor corporate governance? WeWork provides a recent high-profile example. For reasons that now seem implausible, WeWork attracted billions of investment dollars. Perhaps it was the company’s “vision” or the sheer personality of …
Direct listings, the most promising disruptor of IPOs, received a significant boost this week, thanks to the U.S. Securities and Exchange Commission (SEC) ruling on a petition from the Council of Institutional Investors.
Most common in the tech industry, direct …
Since Google (now Alphabet) issued dual-class stock at its IPO in 2004, the subject has been vigorously debated throughout the world. Unlike firms whose shares all have equal voting rights (“one-share, one-vote firms”), companies with dual-class stock allow a founder …
Dual class capital structures have spread exponentially in recent years across much of the corporate world, as has previously been reported on this blog. Dual class listed companies today account for around $4 trillion of US total stock market value …
The dramatic implosion of the IPO of The We Company, parent of office-sharing firm WeWork, (the “WeWork IPO) has attracted intense scrutiny across the business community. For scholars and practitioners who work at the intersection of law, business, and technology, …
On March 28, 2019 the Nasdaq Listing Council invited me to respond to the recent proposal by the Council of Institutional Investors (“CII”) to Nasdaq, requesting it to adopt a rule requiring any company going public with dual class shares …
Editor’s Note: This and the following two pieces are responses to our January 2, 2019, symposium on dual class shares.
I welcome the opportunity to share a few observations on Professor Coffee’s two CLS Blue Sky Blog posts (here…
I would like to make two points in response to Professor Coffee’s piece on dual class common stock.
First, American dual class companies should be obliged to include a “coattail” provision, as is the case in Canada. This provision, imposed …
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 …