Why do some companies have multiple share classes with different voting rights, and how should analysts think about this?

Dual-class and multi-class share structures are a hot governance topic in the CFA curriculum and in real markets.

How It Works:

A company issues two (or more) classes of common stock with different voting rights. Typically:

• Class A: 1 vote per share — held by public investors
• Class B: 10 votes per share — held by founders/insiders

This lets founders maintain control even after selling a majority of the economic interest to public shareholders.

Example: Orion Technologies goes public with 100M Class A shares (1 vote each = 100M votes) and 20M Class B shares held by founder Priya Nakamura (10 votes each = 200M votes). Priya owns only 16.7% of total shares but controls 66.7% of votes.

Analytical Implications:

1. Governance risk — Minority shareholders cannot vote out management or block value-destroying decisions
2. Entrenchment — Founders may pursue pet projects, excessive compensation, or resist beneficial takeovers
3. Valuation discount — Academic research suggests dual-class shares trade at a 5-15% discount to single-class peers
4. Sunset provisions — Some structures automatically convert to single-class after a period (e.g., 10 years), which can be value-positive

For the Exam: Be prepared to calculate voting power vs. economic ownership, identify governance risks, and know that major index providers (like S&P) have debated excluding dual-class companies from indices.

Dive deeper into corporate governance with our CFA Level I Equity section.