Dual-class structure

Two share classes with different votes per share, so founders can keep control with a minority of the economic interest. Whether and how it is allowed depends on jurisdiction and exchange.

Where you will meet it

Dual-class structure appears in 3 learning outcomes on the CFA syllabus. A few of them:

• Explain how voting and economic rights vary between share classes and between jurisdictions
  CFA Level I · Equity Investments

  “In a dual-class structure one class may carry ten votes per share and another one or none, so founders can hold control with a minority of the economic interest.”

• Explain how ownership structures differ around the world and how those differences may shape corporate governance policies and practices
  CFA Level II · Corporate Finance

  “Dual-class shares and pyramid (vertical) structures let controllers hold more votes than economic interest: with 10 votes per Class B share, a family holding a quarter of the equity, all of it in Class B, commands 76.9% of the votes, about three-quarters.”

• Judge how well a company's governance policies and practices work
  CFA Level II · Corporate Finance

  “Useful checks: the share of genuinely independent directors (recent former executives or relatives do not count); whether the chair and chief executive roles are separated; the composition of audit, remuneration and nomination committees; the handling of related-party transactions, ideally reviewed by independent directors; whether pay is linked to long-term returns rather than size or revenue; voting rights, including dual-class structures and staggered boards; and shareholders' legal remedies.”

Practise it

• Today's practice question One question, with every wrong option explained.
• Free Level I diagnostic test Twelve questions that show which topics to start with.
• Free finance calculators Check your arithmetic on the exam's core formulas.

All terms beginning with D · Glossary