Ride sharing startup Lyft’s move to the public market, has rekindled the issue of shareholder voting rights. Lyft’s plan for dual-class voting shares has caught the attention of pension funds, which suggests that investors should be aware that corporate governance is not a one-man one-vote democracy.
Lyft co-founders will receive 20 votes per share while other common stockholders will get one-for-one. We have previously addressed the issue of dual-class shares that give insiders or family owners corporate control, in blogs dated 15 Mar 2017 and 7 Jul 2017.
While the issue of dual-class shares remains controversial, the obvious solution for investors who are concerned about corporate governance is, don’t invest in companies with a dual-class structure.
For the record, Sigma is opposed to corporate strategies that limit or otherwise reduce public shareholder rights.
All comments and suggestions are welcome.
Walter J. Kirchberger, CFA