In discussing corporate structures like Lyfts, where there are two classes of stock, and the founders own
Question:
In discussing corporate structures like Lyft’s, where there are two classes of stock, and the founders own most of the class with the most voting power, SEC Commissioner Robert J. Jackson, Jr., argued that “there is reason to think that, at least for a defined period of time early in a company’s life, dual-class can be beneficial. The structure can allow entrepreneurs to build for the long term—and even transform entire industries—without being subject to short-term pressure.”
a. In what sense does this corporate structure relieve entrepreneurs from short-term pressure? Who might be applying short-term pressure to the entrepreneurs under a more typical corporate structure that has only one class of stock?
b. Jackson was careful to qualify his observation as applying “for a definite period of time early in a company’s life.” Why might this qualification be important?
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