Dual Class Stock

What is a 'Dual Class Stock'

A dual class stock is the issuing of various types of shares by a single company. A dual class stock structure can consist of stocks such as Class A and Class B shares, and where the different classes have distinct voting rights and dividend payments. Two share classes are typically issued: one share class is offered to the general public, and the other is offered to company founders, executives and family. The class offered to the general public has limited voting rights, while the class available to founders and executives has more voting power and often provides a majority control of the company.

BREAKING DOWN 'Dual Class Stock'

Dual class stock is intended to give specific shareholders voting control. Well-known companies such as Ford and Warren Buffett's Berkshire Hathaway have dual class stock structures that provide founders, executives and family the ability to control the majority shareholder voting power with a relatively small amount of total equity in the company. The dual class structure at Ford, for example, gives the Ford family control of 40% of the voting power while owning only about 4% of the company's total equity.

Dual class stock structures are controversial. Supporters feel that the structure allows strong leadership to put long-term interests first while seeing beyond the near-term financial situation. Opponents of dual class structures feel it allows a small group of privileged shareholders to maintain control while other shareholders (with less voting power) provide the majority of the capital.

RELATED TERMS
  1. Dual-Class Ownership

    A type of share division in which companies issue shares that ...
  2. Multiple Capital Structure

    The classification of a company's stock and bond offerings into ...
  3. Share Class

    A designation applied to a specified type of security such as ...
  4. Class Of Shares

    1. Types of listed company stock that are differentiated by the ...
  5. Class A Shares

    A classification of common stock that may be accompanied by more ...
  6. Class B Shares

    A classification of common stock that may be accompanied by more ...
Related Articles
  1. Investing Basics

    What are Class B Shares?

    Class B shares are one classification of common stock issued by corporations.
  2. Mutual Funds & ETFs

    Which Fund Share Class is Best for Retirement?

    Mutual funds are a popular investment for retirement. Here's how to choose the best share class when investing in them.
  3. Entrepreneurship

    Keeping Control of Your Business After the IPO

    Taking a company public doesn't mean founders must completely give up calling the shots. Before the IPO, consider these tactics to keep control after it.
  4. Investing Basics

    Stocks Basics: Different Types Of Stocks

    There are two main types of stocks: common stock and preferred stock. Common Stock Common stock is, well, common. When people talk about stocks they are usually referring to this type. In fact, ...
  5. Professionals

    Share Class

    FINRA Series 6: Section 10 Share Class. In this section Class A, B, C and other classes of shares are discussed and deciding which is more suitable for a particular investor.
  6. Professionals

    Classes of Fund Shares

    FINRA/NASAA Series 66 Section 1 - Classes of Fund Shares. In this section class A, B, C shares and other class shares.
  7. Products and Investments

    What's Behind So Many Mutual Fund Share Classes?

    Despite the confusion they create, the number of share classes offered by mutual fund families will most likely continue to grow. Here's why.
  8. Investing Basics

    What is an Asset Class?

    A group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same laws and regulations.
  9. Mutual Funds & ETFs

    The ABCs of Mutual Fund Classes

    There are three main mutual fund classes, and each charges fees in a different way.
  10. Stock Analysis

    If You Had Invested Right After Berkshire Hathaway's IPO (BRK.A)

    Learn how much you would now have if you had invested right after Berkshire Hathaway's IPO, and find out the classes of shares that you could invest in.
RELATED FAQS
  1. Why would a company have multiple share classes, and what are super voting shares?

    Firstly, do not confuse different classes of common stock with preferred stock. Preferred shares are an entirely different ... Read Answer >>
  2. What is the difference between Class A shares and other common shares of company's ...

    Discover how a company can break down its common stock into multiple classes and how these classes differ from one another ... Read Answer >>
  3. What is the difference between Berkshire Hathaway's Class A and Class B shares?

    Learn why Warren Buffet created Berkshire Hathaway Class B shares and discover the main differences between Class A and Class ... Read Answer >>
  4. Is the upfront cost of Class A mutual fund shares worth it?

    Learn about the differences between mutual fund share classes, and discover under what circumstances the Class A shares make ... Read Answer >>
  5. How are a mutual fund's C shares different from A and B shares?

    Learn how a class C share differs from a class A or B share in relation to a mutual fund. Read Answer >>
  6. Do convertible bonds have voting rights?

    Convertible bonds usually have no voting rights until they are converted. Even after conversion, they may not be granted ... Read Answer >>
Hot Definitions
  1. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center