Voting Shares
Candlefocus EditorWhen a major corporate action is proposed, such as a merger, voting shares also give investors the right to approve or reject the move. These decisions are typically made at shareholders meeting. At these meetings, investors representing their voting shares vote by electing a board of directors, or taking company-wide decisions.
Voting shares are usually differentiated from the non-voting shares. Non-voting shares still allow the investor to own a piece of the company and gain dividend payments, but the holder of the non-voting shares does not have the privilege to vote on matters.
Companies such as Google, Berkshire Hathaway and, more recently, Pivotal Software all offer two different classes of equity, one with voting rights and one without. Google offered A and B shares that were equal in all respects, other than the B shares had no voting rights. This decision was made to allow the company’s founders, Larry Page and Sergey Brin, to control who was elected to the Board of Directors, while maintaining an attractive offering of non-voting shares to the broader market.
It is important for investors to understand the differences between voting and non-voting shares. Voting shares may provide the owner with certain rights, such as the ability to vote on corporate decisions, but should also be understood for their lack of liquidity. Investing in a company through the issuance of voting shares, means owning a part of the company and may not be readily saleable in the open market.
Overall, voting shares provide investors with a unique opportunity to take part in the decisions of the company’s corporate policies, with the potential to affect the performance and value of the investor’s stock over the long-term. However, it is important for investors to know the details of the shares they are buying, and to weigh the value of the voting rights against the saleability of the shares.