The Governance of Dual-Class Firms

Despite being contentious, dual-class share structures have become increasingly common among U.S. firms going public. In an earlier survey (Adams and Ferreira 2008), we argued that the empirical literature on the costs and benefits of dual-class shares was inconclusive. We ask whether subsequent advances in the literature can help explain the current trend. To set the scene, we compile a new database on U.S. IPOs. We document that the share of firms listing with unequal voting rights rose from about 10% in 2000 to about 35% in 2025, and that the recent wave is concentrated in founder-led, VC-backed technology firms. We present a set of stylized facts about the governance of these firms. Founder-CEOs and founder-directors are more common at dual-class firms, board structures differ little otherwise, and we find no evidence that the CEOs of dual-class firms stay in office longer than those of single-class firms. Consistent with the data, recent theoretical papers show that, when information is asymmetric, separating control from cash flow rights can facilitate rather than impede efficient transfers of control. However, the empirical literature remains inconclusive about the value of dual-class shares. One reason may be its continued focus on dual-class shares as a mechanism of entrenching founders. We suggest that ignoring the role of founders' visions may be shortsighted, and outline our own vision for research that incorporates it.