Journal article
The Social Costs (and Benefits) of Dual-Class Stock
Alabama law review, Vol.75(1), pp.221-274
2023
Abstract
Dual-class stock creates a two-tiered ownership structure that allows new investors to buy a piece of a
fast-growing company, with just one catch: they become second-class shareholders who have little or no
voting power in the corporation. A rich literature debates whether this arrangement, which cements
founder control, is truly optimal for investors. This Article is the first to identify an entirely different type
of problem: the structure’s social costs.
This Article makes three contributions. First, it adds an essential yet missing dimension to the
understanding of dual-class stock: the structure’s social costs (or negative externalities). Second, it connects
the concept of social cost to two developments this century that have supercharged corporate influence on
American life: the rise of dual-class technology companies like Google and Facebook and the widened
scope of corporate constitutional rights under U.S. Supreme Court caselaw. The interaction of these
changes gives two men (at Google) or even just one (at Facebook) a constitutional beachhead from which
they can deploy vast corporate resources for personal as well as business ends. The Article then develops
a policy playbook that is responsive to these problems yet grounded in a fair assessment of the structure’s
benefits. These solutions can inform approaches to other externalities of the corporation as well.
These contributions are both theoretical and practical in nature. They aim to curb the social costs of dualclass stock (and, optimistically, to nurture its social benefits) while preserving its private appeal to founders
and investors.
Details
- Title: Subtitle
- The Social Costs (and Benefits) of Dual-Class Stock
- Creators
- Gregory H Shill - University of Iowa, Law Faculty
- Resource Type
- Journal article
- Publication Details
- Alabama law review, Vol.75(1), pp.221-274
- Publisher
- University of Alabama
- ISSN
- 0002-4279
- eISSN
- 2162-6812
- Language
- English
- Date published
- 2023
- Academic Unit
- Center for Social Science Innovation; Economics; Law Faculty
- Record Identifier
- 9984804319902771
Metrics
1 Record Views