SpaceX voting control revives dual-class share debate

SpaceX’s use of supervoting stock has put a long-running corporate governance fight back in focus. In a Fortune commentary, Yale School of Management’s Jeffrey Sonnenfeld and Steven Tian said the company’s recent IPO and Elon Musk’s voting power have renewed debate over whether dual-class shares protect builders or weaken shareholders.

The commentary said SpaceX uses a dual-class share system and cited the Wall Street Journal for the figure that Musk holds nearly 85% control. Sonnenfeld, a Yale leadership professor, and Tian, director of research at Yale’s Chief Executive Leadership Institute, argued that the structure should be judged by company performance and leadership quality rather than rejected under a broad rule.

Dual-class stock gives some shares greater voting power than others, allowing founders or controlling holders to retain command even when they own a smaller economic stake. The structure has been used at companies associated with Michael Dell, Warren Buffett, and Alphabet founders Sergey Brin and Larry Page, according to the Fortune commentary.

Criticism of one-size-fits-all rules

Sonnenfeld and Tian said many governance academics and proxy advisers favor the principle of “one share, one vote.” They named Glass Lewis and ISS as firms whose governance checklists, in their view, can treat dual-class shares too mechanically.

The authors challenged a common criticism that supervoting stock creates a gap between voting control and financial exposure as founders sell down part of their holdings. They argued that controlling shareholders can remain highly aligned with other investors even below majority economic ownership because their reputation, wealth and legacy often remain tied to the company.

They also said forced expiration dates for dual-class structures, often discussed in seven-, 10- or 15-year terms, can remove effective leaders too early. As an example, they pointed to Berkshire Hathaway and argued that a rigid 10-year sunset would have cut short Warren Buffett’s long tenure.

The commentary said dual-class structures are not suitable for every company. Sonnenfeld and Tian described performance among such companies as uneven, with strong wealth creators on one side and severe failures on the other.

What the authors see as warning signs

The authors said successful cases often involve engaged controllers with strong records, careful capital allocation, long investment horizons, credible succession planning and industries that require heavy spending over many years. They cited Alphabet’s support for projects such as DeepMind and Waymo as an example of founders using voting control to resist pressure for near-term margin gains.

They also identified risks. The commentary cited Sumner Redstone’s later years at Paramount and Viacom as a warning about aging controllers who resist giving up power. It pointed to Conrad Black at Hollinger International as an example of alleged misuse of corporate assets, and to the Gucci family’s conflicts as an example of family control breaking down.

Sonnenfeld and Tian argued that corporate failures cannot be blamed mainly on dual-class shares, noting that collapses such as Enron, WorldCom, Lehman Brothers, Silicon Valley Bank, First Republic, FTX and Theranos occurred under single-class or private structures, according to their commentary.

The authors concluded that boards and investors should evaluate leadership, industry needs and track records case by case. Their argument places SpaceX’s governance in a wider debate over whether founder control is a shareholder risk or, in some companies, a tool for long-term investment.

This story draws on original reporting from Fortune.