Dual Class Stock
Definition of 'Dual Class Stock'
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.
Investopedia explains '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.