Danish pension fund walks the walk on long-term risk strategy

When considering going public, private companies often express concern about the perceived short-term fixation of public markets. In response, some choose to stay out of the public markets – to the detriment of our overall economic health.

But other companies address this concern by issuing multiple classes of shares, each with different voting rights. Common practice is to assign more voting rights to one class of stock than the other, with the superior voting rights going to founders or other insiders. Issuing companies say that they take this course of action in order to preserve their original priorities, often including long-term goals for the business. Public investors tend to believe the opposite to be true, that this system benefits management at the expense of the company’s shareholders.

Much of the debate about shares with different voting rights is grounded in beliefs and business interests, rather than data. FCLTGlobal’s latest research project will offer facts about the performance of these shares globally, over time, and relative to the risk that they involve.

At present, there is scattered information about the relationship between different voting rights and share performance, but broad trends have emerged.

The rate at which companies issue shares with varied voting rights differs across regions. Notably, neither the United Kingdom nor the United States ranked among the top markets in this regard. Over the past 15 years, Brazilian companies used shares with different voting rights most often, with 42.5 percent of companies utilizing a tiered voting structure. Northern European companies (namely Swedish, Danish, and Finnish firms) also tend to issue shares with varied voting rights quite frequently.

When looking at the U.S., however, unequal vote shares have outperformed1 shares with equal votes in the first three to five years following issuance. Multiple recent studies have observed that this performance lessens over time, but differ as to the exact nature of the dropoff.2 3 4 5

Recently, notable tech companies have embraced the use of multiple share classes (see Snap and Lyft). However, the use of multiple share classes predates the recent wave of technology listings – 63% of trading in unequal vote shares6 during 2018 involved shares issued before 2000. Media and consumer discretionary companies filled this role prior to the tech boom of the late 90s and 2000s, issuing multiple share classes at a higher rate than their contemporaries in other industries.

Cumulative volume traded in 2018, by year of issuance (in $B):7

In order to better understand this strategy and its relation to long-term value creation, FCLTGlobal is partnering with the University of Virginia’s Darden School of Business to launch a full data analysis of these shares’ performance relative to those with equal voting. We are working with the team at Darden to answer three fundamental questions: Have companies that use multiple share classes outperformed those that do not cumulative over the ten years since issuance? How have variance and other risks qualified this outcome? And have certain patterns taken hold within different countries, industries, or time periods?

To learn more about this project or to contribute to our work on the subject, please contact our Research team at [email protected].


  1.  In terms of Tobin’s q, the ratio of the market value of a company’s assets (as measured by the market value of its outstanding stock and debt) divided by the replacement cost of the company’s assets (book value).
  5. Kim, Jinhee, Ting Xu, and Pedro Matos. “Multi-class Shares Around the World: The Role of Institutional Investors.” University of Virginia (Unpublished draft as of November 2018).
  6. Of shares issued by MSCI-ACWI constituent companies.
  7. Factset.