The Rogers debacle shows how little power investors can have over businesses

Dual-class share structures have their uses, but often they make “ownership” an illusion

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As the funk of the Rogers family’s dirty laundry continues wafting over the country, Canadians who have been watching the drama unfold may feel like they’re learning something about greed, power or the politics of the boardroom.

But underneath the scandal’s more salacious layers is an important lesson in how little influence shareholders in certain types of companies — those that issue dual-class shares, like Rogers — have when it comes time for them to vote on matters facing the businesses they’re supposed to be owners of.

Whether you have a few hundred or a few thousand shares in a company with a dual-class structure, your opinion on how that company should function is likely worthless. If you’re an engaged investor who believes it’s every shareholder’s right to take part in company-wide decision-making, dual-class entities may not be for you.


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But that doesn’t mean there aren’t some fairly strong arguments in their favour.

What is dual-class stock?

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If you’ve ever come across the terms “Class A shares” or “Class B shares,” you’ve already encountered a company with dual-class stock.

One set of those shares is set aside for executives, the company’s founders and their family members. The other is made available to the general public. Class A shares are typically doled out to a company’s bigwigs, but some outfits, like Meta (formerly Facebook), made their Class B shares the more exclusive type, so it pays for investors to double-check a company’s share structure.

The reason dual-class companies exist is to ensure an ownership group won’t have to relinquish control of operations. They do that by extending different voting rights to each share class. Individuals closest to the company are granted regular, or supersized, voting rights, while the public receives limited or no voting rights at all.


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Prominent examples of dual-class companies

MAY 24, 2018 : Facebook CEO Mark Zuckerberg in Press conference at VIVA Technology (Vivatech) the world's rendezvous for startup and leaders.

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The Rogers struggle, which saw Edward Rogers awarded control of the Canadian telecom giant in November after a long, public battle over his attempt to turf the company’s CEO, provides an excellent case study in the powerlessness of dual-class shareholders.

“You can buy Rogers Class B shares and have an economic interest in Rogers,” explains Mark Yamada, president of Toronto-based PUR Investing. “But 97.5% of the voting control belongs to the Rogers family, and in the Rogers voting trust that Edward Rogers happens to control. So if you wanted to get rid of management, or hold management to account for some stupid acquisitions they made, or for mismanaging inventory or anything like that, you, as a minority shareholder, just can’t do it.”


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In 2019, 68% of Facebook stockholders voted to split CEO Mark Zuckerberg’s chairman and CEO roles and establish an independent leader of the company’s board. The move went nowhere, as did later efforts to clean up the social media platform’s role in spreading disinformation and hate speech because the company’s dual-class structure has effectively given Zuckerberg veto power.

According to analysis by Morningstar, Zuckerberg has control of approximately 392 million out of 440 million Class B shares, each worth 10 votes, while the company’s 2.4 billion Class A shares are allotted one vote apiece. The math is overwhelmingly in Zuckerberg’s favour, regardless of what he decides to do with the company.

Less controversial billionaires, like Berkshire Hathaway CEO Warren Buffett, run dual-class companies, too. Berkshire’s Class B shares, which cost a fraction of what Class As will run you, also come with severely limited voting rights. A Class B share in Berkshire gets you 1/10,000th of the voting rights of a Class A share.


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Despite owning almost 250,000 Class A shares and another 10,000 Class B shares in Berkshire, Buffett is not a fan of companies with a dual-class structure.

“Warren advocates for single share companies,” Yamada says. “When he buys companies for his portfolio, he doesn’t want them to have these split share items.”

If you’re interested in getting in on Class A shares but find the cost prohibitive, you can always buy fractional shares using an investing app like Wealthsimple . Notable examples of Class A shares available fractionally include Comcast, Mastercard, Pinterest and Visa. Be aware though, that with fractional ownership you won’t see voting rights, Class A shares or not.

Why it matters

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Could investor input have prevented the Rogers scandal? Would a new chairperson at Meta fix the company’s myriad problems without tanking the company’s value as a data business? Would anyone cast a vote contrary to Warren Buffett or his investing record?

It’s fair to wonder just how valuable an individual investor’s voting rights are. The voting packages they receive can be so mind-numbingly detailed, and a voter’s say is so minuscule, that some investors skip voting altogether. If stock values and dividends keep rising, many of them may not want to rock the boat.

It’s a slightly different situation for ETFs and institutional investors, who may own millions of shares in a single company and still have their votes overruled by a handful of executives and family members.


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If an investment management company like Blackrock, for example, can own more than 155 million shares of Meta, should it not be able to protect its investment — and the investments of the thousands of clients who purchase stakes in the company’s ETF offerings — by using its voting rights to prevent Meta from going in what might be an unsavoury or unprofitable direction?

But some argue that dual-class shares are necessary to protect the leadership of new companies from having control wrested from them by institutional investors interested in short-term gains. A family-run, hotshot company like Shopify, for example, may not be where it is today if not for the security and freedom to innovate a dual-class structure provides the company’s decision-makers.


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“It’s also a way to protect companies from hostile takeovers,” Francois Dauphin, president and CEO of the Institute for Governance of Private and Public Organizations, said in an interview with Bloomberg. “We are really subject to that in Canada, so we need to protect our companies and family businesses.”

Stocks aren’t your only option

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If you’re looking to put your money behind something less volatile and more tangible than stock, consider investing in contemporary art.

Don’t worry. You won’t have to rent a tux and outbid a roomful of millionaires. A popular new investing platform allows you to purchase shares in rapidly appreciating modern masterpieces by artists like Andy Warhol, Claude Monet and even Banksy.

They won’t wind up on your wall, but they’ll look just as sweet in your portfolio.

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