The resignation of NVIDIA (NASDAQ: NVDA) former chief executive has reignited debate in the United States over dual-class share structures, with the focus centered on corporate governance at large technology companies.
Dual-class structures grant founders voting power far exceeding that of ordinary shareholders, and views diverge sharply on whether the system protects management control or weakens the checks and balances of shareholders and the board.
A dual-class structure is an equity mechanism in which shares held by specific shareholders such as founders carry voting rights higher than those of ordinary shares, also known as "super-voting shares."
The prominent U.S. shareholder rights organization As You Sow said in a statement on the 14th local time that NVIDIA (NASDAQ: NVDA) did not adopt a dual-class structure, which is why its board was able to exercise effective oversight over management. The organization argues that other companies should also uphold the "one share, one vote" principle.
As You Sow CEO Andrew Behar said: "The NVIDIA (NASDAQ: NVDA) board investigation that ultimately led to the resignation demonstrated what truly effective oversight looks like." He added: "When a chief executive behaves improperly, there must be forces on the board capable of holding them accountable."
The organization cites Meta (NASDAQ: META) as a typical case of dual-class shares harming shareholder interests. Meta (NASDAQ: META) CEO Mark Zuckerberg holds only about 13% of the company's equity, yet controls roughly 60% of total voting power through the dual-class structure.
At Meta's (NASDAQ: META) 2020 shareholder meeting, several proposals came to a vote, including real-name account verification, removal of harmful images, and halting the distribution of false political ads. Among independent shareholders, 63.1% supported these proposals, but after factoring in Zuckerberg's super-voting rights, the final support rate was only 19%.
As You Sow believes that if these proposals had passed, Meta (NASDAQ: META) might have avoided a settlement liability of up to $17.1 billion (about 23 trillion Korean won) from lawsuits related to teenage social media addiction. The core point is that dual-class shares prevent shareholder demands from being realized, ultimately causing losses for both the company and investors.
Professor Purnima Luthra of Imperial College Business School in the United Kingdom also argued in a commentary that if NVIDIA (NASDAQ: NVDA) had adopted a dual-class structure, the enormous power in the former CEO's hands could have worsened the crisis further. She said: "In NVIDIA's (NASDAQ: NVDA) case, if the CEO had been unwilling to resign, the company's existing equity structure would still have made it possible to remove him." She explained: "Because NVIDIA (NASDAQ: NVDA) uses a single-class structure, all shareholders including the CEO have one share one vote, so the board's action would not have offered him much protection."
Comparing Meta (NASDAQ: META) and SpaceX, where voting power is concentrated in founders' hands, she added: "Such equity structures make it very difficult for shareholders to hold powerful corporate leaders accountable."
However, some argue that NVIDIA's (NASDAQ: NVDA) governance arrangement without dual-class shares made the founder's operational control too fragile. This view holds that founders committed to long-term strategy can easily be pushed out under external pressure or board resolutions.
Jeffrey Sonnenfeld, a professor at the Yale School of Management and a long-time supporter of dual-class shares, said in an interview on November 8 local time that the former CEO lacked super-voting rights to consolidate his control. He described the former CEO as one of the few managers who led NVIDIA (NASDAQ: NVDA) to enormous success without the backing of dual-class shares, and said that if the CEO had held super-voting rights, it would have been far more difficult for the board to remove him.
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