Well it's a bit like trying to "have your cake and eat it": if you want to run a family company, fine, but you can't ask the markets for capital and yet keep the control! Those dual class of shares have always seem odd to me; I mean, I kind of understand the point for your average young startup - where the voting power somehow represents the risk everyone took, and you don't want to destabilize the company. For a mature company, the justification is less clear.

Dual class structures are easier for investors to swallow in good times. When things go bad, those investors will discover the downsides.

I own shares in two dual-class companies:

Berkshire is one, and there, the dual class nature has the effect of giving more-serious/rich investors more votes. The coming century will test whether that is a good idea.

Starrett is the other; there the dual class structure is designed to protect a once-family business that is still run by the family. To me, at present, it is a feature, not a bug. Without the dual-class, Starrett probably would have been bought out in a hostile takeover/leveraged buyout. Instead, the company endures, with a long-term vision. The coming decades will test my optimistic thesis.

> Without the dual-class, Starrett probably would have been bought out in a hostile takeover/leveraged buyout

Recently, in Switzerland, there was a company (Sika AG), where the founding family held 54% of the vote with 16% of the shares. When they wanted to cash out, they simply sold their shares to an outside investor at a sizable premium, and the remaining shares could potentially have ended up worthless (ultimately, after a multi year lawsuit, a compromise prevailed).

Interesting -- thank you.

Why not? Markets are interested in capital gains and profit sharing, not necessarily steering the wheel directly.

How is it wrong for a founder to take a smaller cut of the profit in exchange for more power?

Founders (individuals) want a voice in their companies, and how much money does one need anyway? Investors (usually institutions) want to make money, and they need lots of it.

Seems like a fair trade.

If a dual-class share structure allows the CEO to divert 100% of dividends into his personal bonus, and prevents investors from having him removed even if he does, why wouldn't he?

Does an investment with those properties sound like a good investment to you?

> If a dual-class share structure allows the CEO to divert 100% of dividends into his personal bonus

> Does an investment with those properties sound like a good investment to you?

It's plainly obvious you don't hold an investment in a public company that does that. Your setup has a self-correcting action: the investors sell if they can't derive the expected benefit from owning the stock because the CEO is sending all the profit into their own bank account.

Why doesn't Zuckerberg do it for example? Because the stock would implode by 90%+ overnight and the best employees would immediately flee as they see their stock become worthless and future stock compensation goes to zero. Then the rest of the corporation would collapse in time without the employees required to keep it operating at a high level. Even monopolies can easily lose their position. Just downgrading your average employee by one grade, eg from a B to a C, will collapse elite tech companies over time. History is littered with examples (from HP to IBM) of what happens to companies when they can no longer attract the best.

The concrete point in the above is that that employees vested with stock would rebel. But of the employees weren't so vested yes Zuvk could go do that. I would rather he did to teach people this multi class stock business is silly.

If I’m not mistaken there are several large public US companies with a significant (or majority) control held by family members of the founders. Isn’t Walmart one? I think Ford was mostly controlled by family for a long time too.

I’m not saying I agree with nepotism in public companies, just saying there’s precedent.

They "work" because the real owners "Dallas Police Retirement Fund" et. al. are too far away from the situation to understand the screwjob.

>There is not really anything wrong with having a family business.

Shouldn't building a business be step one, though? Neuman didn't do that; he gambled a bunch of VC money on real estate.

Same goes for politic, yes? Because "in this day and age where pump-and-dump short term trading often prevails, the security benefits of limiting the power of public shares often seem worth considering."

Monarchy is really underrated.

Once you get past the fact that murder is the primary way to change monarchical leadership, it's quite smart.

I certainly would prefer to live under a heritable monarch than a bunch of anonymous external shareholders. Of course any kind of autocracy is a gross violation of the rights of everyone living under it. But this is capitalism so democracy isn't even an option.

well there is something wrong if you want the company to be run well. if leaders of a company are selected by any other trait than merit, then the company will under-perform. if the company has a monopoly, that means a long and drawn out period of that particular market not achieving what it could or maybe even damaging peoples lives if the market is important.

That's not the point of control. Think of it as the company selecting their CEOs as any other company would, but the family that owns the company setting guidelines, like, even if we could use our tech in military projects as well, we're not going to get involved in military projects. They don't run the day to day business, but give them guidelines.

Right, so hedge your bets on unborn spawn. That’s the best we can do to steer a ship in the right direction for future generations.

What this has to do with a business being family-owned or not?

Your (grand-)children can’t guarantee you to preserve your values. Only policy maker can.

Wow, that escalated quickly.