A Single Person Can Control a Corporation
• In a standard single-class structure, voting power tracks the amount of company equity a shareholder owns. • Dual-class structures do away with this requirement, allowing a single person to wield full control of a company. • This setup gives a controlling shareholder, like Mark Zuckerberg, near-absolute control of corporate policy and resources. As a professor of corporate law, I’d urge policymakers and the public to consider the societal risks of a system that allows a single person to control a major corporation through dual-class stock. The dual-class effect: Meta as a case study
• Meta, like many tech giants, uses a dual-class structure to vest power in a single person – in this case, Mark Zuckerberg. • Zuckerberg owns 13.5% of Meta’s equity, but 99.7% of the supervoting shares, giving him control of 61% of the company’s votes. • This setup allows Zuckerberg to make decisions without taking on commensurate financial risk. Meta has generated social costs, such as promoting misinformation and suppressing stories about Hunter Biden. • Amnesty International has alleged that Facebook algorithms contributed to atrocities in Myanmar in 2017. • Zuckerberg’s association with progressive causes in the past has also been criticized. When corporate control meets the Supreme Court
• Recent Supreme Court decisions expanding corporate constitutional rights stand to give company founders unprecedented power. • A 2023 law journal article noted the potential for these decisions to grant constitutional protection to “founder kings” with private agendas. • Two recent legal developments raise the stakes, including the expansion of corporate constitutional rights and changes in Delaware law. The dual-class effect: A case for caution
• Dual-class structures give founders the power to carve out exceptions to generally applicable laws. • For example, a controlling shareholder could defy a federal mandate on health insurance plans on the grounds of religious beliefs. • The Supreme Court in Hobby Lobby v. Burwell recognized such an exception for a privately held business. Beyond TikTok: The conversation the US should be having
• The debate over dual-class stock is not limited to TikTok. • Everyone has a stake in its outcome, as it raises questions about the exercise of private corporate control. • The public should question the wisdom of allowing company founders to leverage corporate resources for special agendas. The distinctive risks posed by TikTok are mostly unrelated to its share structure. • The debate over the ban-or-sell law offers a reminder that the powers created by dual-class stock aren’t unique to Chinese control. • America’s homegrown founder kings wield them, too. The author argues that dual-class stock poses significant societal risks, including the concentration of power in a single person and the potential for corporate control to be used for private agendas.
“The dual-class effect: A case for caution”
• As a professor of corporate law, I urge policymakers and the public to consider the societal risks of a system that allows a single person to control a major corporation through dual-class stock. • The concentration of power in a single person can lead to abuse of power and undermine the democratic process. • The potential for corporate control to be used for private agendas raises concerns about the influence of money in politics.
• Dual-class stock gives a single person near-absolute control of corporate policy and resources. • This setup allows controlling shareholders to make decisions without taking on commensurate financial risk. • The debate over dual-class stock raises concerns about the exercise of private corporate control and the potential for abuse of power.
- Meta uses a dual-class structure to vest power in Mark Zuckerberg.
- TikTok’s parent company, ByteDance, is privately held but controlled by a co-founder, Zhang Yiming, via a dual-class structure.
- The dual-class effect can be seen in other companies, such as Alphabet, which owns YouTube and Google, and is controlled by Larry Page and Sergey Brin.
| Company | Voting Power | Voting Shares | Voting Power Percentage |
| Meta | 61% | 99.7% | 61% |
| TikTok | Unknown | Unknown | Unknown |
| Alphabet | Unknown | Unknown | Unknown |
A strong case can be made for caution when it comes to dual-class stock.
Key issues
• The concentration of power in a single person. • The potential for corporate control to be used for private agendas. • The lack of transparency and oversight in dual-class companies.
news is a contributor at Enacture.com. We are committed to providing well-researched, accurate, and valuable content to our readers.
