Dual-Class Share Structure

A share is a stake in a company. Whoever holds a share is normally entitled to vote at shareholder meetings and thus influence important decisions. In a dual-class share structure, there are two different types of shares — and they carry different numbers of voting rights. One type, often called Class A, is traded on the stock exchange and is open to everyone. The other type, often Class B, remains in the hands of the founders or early investors. This second class can carry ten times, sometimes even twenty times, as many votes per share. The result: founders hold a small portion of the shares but the majority of the votes — and thus have the final say on all major decisions.

Control despite going public

When a company goes public, it sells shares to external investors. This brings capital into the company — but the founders also give up influence. Without special protective measures, shareholders could jointly vote against the founders and even remove them.

The dual-class structure solves this problem. Founders can raise billions and still decide alone where the company is headed. This is particularly attractive for technology companies whose founders pursue long-term, sometimes unconventional visions. The idea behind it: whoever built the company understands it better than a hedge fund that has only held shares for three months.

Critics see it differently. A share with fewer voting rights protects the interests of ordinary investors less effectively. If a founder makes poor decisions, shareholders have little recourse. This imbalance is the reason why some stock exchanges and regulators have long rejected such structures or only permit them under strict conditions.

What the distribution of votes looks like in practice

A simple example makes the mechanics clear. Suppose a company issues 900 million Class A shares, each with one vote, to the public. At the same time, the founders hold 100 million Class B shares, each with ten votes. Then the founders have 1 billion votes, as does the public — but the founders make up only ten percent of all shares. In a close vote, they still decide alone.

Some structures include so-called sunset clauses. These are automatic expiration dates: after a certain number of years or upon the founder’s death, all shares are equalized. The multiple voting rights thus eventually expire. Without such a clause, the structure can theoretically persist indefinitely — even if someone else has long since taken over running the company.

It is important not to confuse the dual-class structure with preferred shares. Preferred shares often have no or fewer voting rights, but in return offer a guaranteed claim to dividends. The dual-class structure is exclusively about voting rights — not about the distribution of profits.

Dual-class structures in well-known tech companies

The most well-known examples come from Silicon Valley. Google — today under the parent company Alphabet — went public in 2004 with a dual-class structure. Founders Larry Page and Sergey Brin wanted to ensure that short-term quarterly expectations from investors would not influence their long-term decisions. Mark Zuckerberg took a similar approach at Meta, then still known as Facebook. His share of voting rights significantly exceeds his ownership stake.

In Europe, the model was long controversial. Deutsche Börse and other European trading venues rarely allowed such structures because they viewed the principle of 'one share, one vote' as a protection for investors. This has changed: in the competition for IPOs, especially with the US and Asia, several European exchanges have relaxed their rules in recent years.

In financial reporting, the term frequently appears when a tech startup announces its IPO. Journalists and analysts then look closely at how much control the founders retain — because this affects how much weight the vote of ordinary shareholders actually carries.