[vineyardmike]

> On the date of this prospectus, Robert Reffkin, our founder, Chairman and Chief Executive Officer, will hold all of the shares of our Class C common stock

> Each share of Class A common stock is entitled to one vote per share. Each share of Class C common stock is entitled to 20 votes per share

I'm surprised no one has proposed laws trying too crack down on founders have super-control of their company through stock voting power shenanigans. For example, I hear a lot of critique of facebook due to absolute control from Zuck' and his voting control - the remaining shareholders are unable to vote him out or otherwise exert control

Edit: not explicitly saying its bad for business or anything like that, just surprised it hasn't been regulated away.

[superfrank]

If you want to see some messed up voting rights, look at Palantir.

It's super complicated and I'm glazing over a lot of the details, but my understanding is that the founders have "founder's shares" and no matter how many of these they have, whether it be one or one million, these shares control 49.9999% of the votes. They are allowed to designate which of their shares are and are not "founder's shares" and alter this pretty much on a whim.

Because it's so complicated, and because the amount of common shares changes depending on how many shares are designated as "founder's shares", they also don't ever have to tell people how much voting power common shares have, even as a vote is happening.

It's actually funny reading all the legalese that just boils down to, "we're can do whatever we want".

https://techcrunch.com/2020/09/21/palantir-is-not-a-democrac...

[Invictus0]

And yet Zucc has increased the value of the company sevenfold since IPO. I don't love Zucc either but there is definitely something to be said for allowing the CEO to execute on their vision without being beholden to the tale of the hour and the spectacle of quarterly earnings.

[dcolkitt]

And I agree that Zucc's been an incredible CEO. But for every Facebook, there's about 50 companies that were run into the ground and pilfered by management on the way down because of inadequate corporate governance.

[InvertedRhodium]

Not only that - but there is nothing to say that it wouldn't have performed just as well, if not better, with a different CEO.

[detaro]

There's probably been proposals, but I guess the fundamental argument remains that as long as it is clearly documented, investors know what they are getting into, and it hasn't gone wrong loudly enough yet (I think most high-profile examples are doing quite well, financially) to sway opinions otherwise.

(EDIT: And the main group being "forced" to invest and can't just skip such companies are index funds, who generally don't take an active position anyways?)

[ericd]

Yeah, honestly I prefer to invest in companies whose founders are firmly in control so that they can take a longer, strategic view.

[bradleyjg]

Some of the biggest indexes, including S&P500, now exclude new entrants with multiple equity classes.

[bostonsre]

It seems like behavior that the SEC should be pushing back on. They're charged with protecting investors and it seems like investors having no say in company management would be in conflict with that charge.

[vineyardmike]

Well said! This is the reasoning that I had when posturing the question.

[boh]

There's no case to be made that "super control" inherently leads to unethical behavior. It may, however, negatively impact the stock price, since less investors will likely want to invest in a company with limited controls on governance. Most companies aren't Facebook and don't have Facebook growth, so ignoring them is an option.

[bostonsre]

Why is there no case to be made? It would be interesting for someone to investigate if it hasn't been already. I'm curious if that "absolute power corrupts absolutely" saying is just a saying or if it has a basis in reality. I can't recall many benevolent dictators for life from my history classes.

[boh]

This comment is in reference to the voting rights attached to common shares. This would have likely not been covered in your history classes.

[bostonsre]

> There's no case to be made that "super control" inherently leads to unethical behavior.

You are saying it like it's been proven. What are companies where is gone well? I can't think of many examples whether inside or outside of the market where absolute control has gone well.

[boh]

Voting rights don't give you "absolute control".

[bostonsre]

Seems like you are splitting hairs and arguing about semantics. If you don't want to call it absolute control then it's whatever is currently in place at Facebook where Zuckerberg has majority voting rights and has stacked the board with yes men. He controls policy, he controls the direction of the company. If that's not controlling something absolutely, then what is it?

[djrogers]

> I'm surprised no one has proposed laws trying too crack down on founders have super-control of their company

I think your proposal explains the problem here - it’s their company. If we remove this option for control, we’d likely see companies like this stay private or private-ish in order to retain that control.

[InvertedRhodium]

I actually came here to ask why this is setup in this manner and I already find a partial answer! To extend a bit further - what possible motivation could there be to prompt someone to exchange more valuable Class C shares for Class A shares at a 1:1 basis?

[bradleyjg]

Only A shares are tradable. So if he wants to turn some of that paper wealth into money he needs to convert the shares first.