Even though shareholders technically own parts of the corporations in which they own stock, it is important to consider that the management team traditionally owns a larger portion of the stock. This indicates that their vote contributes to a greater portion of company decisions. In other cases, dual-class structures exist that create two types of stock; the holders of one type have the power to make executive decisions for the company and the other, for general members of the public, allows these individuals to benefit from their investments in terms of dividends and the ability to sell shares at a profit (The Economist). This trend is generally seen as permissible in the New York Stock Exchange. However, it is important to understand how shareholders can lose their control over corporations as a result of dual-class structuring.
Practices at Google follow the dual-class structure deal. Under their plan, shareholders with Class A stock are entitled to one vote per share, while individuals with Class B stock are entitled to ten votes per share (Summers). This makes the shares that Class A stockholders own essentially valueless due to the large number of shares that Class B stockholders have in their control. To further reduce the rights of shareholders, Google recently implemented a “Class C” shareholding option that is associated with no voting rights whatsoever. To make matters worse, these shares only trade for $1 less than other share types, indicating that there is no advantage in having this type of share. Under Armour Inc. has reportedly followed Google’s lead and issued Class C stock associated with no voting privileges (Ogg). Critics of Google’s and Under Armour’s plans are worried about the lack of checks and balances in place that will allow shareholders to provide these organizations with feedback about their plans.
While the development of “Class C” stock is a modern example of how shareholders have lost control over corporations, shareholders...