- July 30, 2022
- Posted by: Ramkumar
- Category: Posts
Differential Voting Rights
In my view, one of the bad practices these startups would bring is the #differentialvotingrights that result in captive boards of directors and opaque corporate structures at these companies. Google was the first firm to begin this practice, thus starting the era of Corporate dictatorship. Then, seeing Googe succeed, Meta followed suit, where Mark Zuckerberg owns 20% shares but 50% of voting rights.
Google and Facebook are iconic companies, and shareholders would not regret protecting their voting rights. However, that may not be the situation with other startups.
For instance, recently, we witnessed better.com laying off its significant employee force, resulting in a bad reputation for the firm. However, the board cannot push the CEO out as he has super-voting rights. Another instance is the WeWork fiasco, where the CEO had special voting rights that could enable him to control the entire firm.
In my view, at some stage in each of these companies’ lives, investors and managers will diverge on the best path forward, and that is when investors will come to regret their lack of power.