As the founder and CEO of your company, you’ve worked harder and sacrificed more than anyone to make it successful. You’ve done the research, consulted trusted advisors, and decided that the best way to take your company’s growth to the next level is through an initial public offering (IPO). But you don’t want common shareholders, corporate board members, or investment companies, who haven’t put their blood, sweat, and tears into the company, to determine how it’s run. Here are some methods for keeping greater control of your business after the💮 IPO, including issuing different share types.

Create Different Share Classes

Publicly held corporations can choose to issue different classes of 澳洲幸运5开奖号码历史查询:common stock after completing their 澳洲幸运5开奖号码历史查询:initial public offering. Each class comes with a different set of rights for stockholders. The most common practice🤡 is to issue different share claღsses:

• 澳洲幸运5开奖号码历史查询:Class A shares might give stockholders 10 votes or 100 votes for each share they own
• 澳洲幸运5开奖号码历史查询:Class B shares might give stockholders one vote for each share they own

Companies can also switch it up, where Class A shares have to be 🐼superior to Class B shares. The shares with extra voting rights are sometimes called super-voting shares.

When a company goes 🌠public, it can give its founders, executives, and any other key stakeholders enough super-voting shares to help them retain control over the company. Concentrating voting rights among a particular class of shareholders also makes a takeover attempt more difficult.

The company can choose to only sell to the public its regular shares with lesser voting rights. Groupon, LinkꦑedIn (before it was bought by Microsoft), and Meta are among the companies that have used this strategy.

Downsides

The downsi⭕de of this strategy is that the Class B shareholders may not be happy. They may feel that insiders have too much control over the company and won’t act in the best interests of ordinary shareholders, causing the company and its stock to underperform. Class B shareholders can try to force a vote of all shareholders to get rid of t🉐he two different stock classes and their unequal voting rights.

Many public companies use different share classes to delegate control. For example, Ford (F) has a small percentage of shares with super-voting rights but gives Henry Ford’s heirs control of 40% of the votes. The company's shareholders voted down a proposal to eliminate the 澳洲幸运5开奖号码历史查询:dual-class stock structure.

Operate as a Controlled Company

Under stock exchange rules, a controlled company is one in which an individual, group, or other company holds more than 50% of the shares. These firms aren’t required to have an 澳洲幸运5开奖号码历史查询:independent board of directors, an independent compensation committee, or an independent nominating function for board members. Members of the audit, compensation, and 澳洲幸运5开奖号码历史查询:governance committees don't have to be indepen💦dent in a controlled c𒉰ompany. The dual-class stock structure facilitates the existence of controlled companies. 

You could also be a family-controlled firm. These may or may not meet the stock exchange definition of a controlled company, but founders or their families own a significant percentage of the company and can appoint the 澳洲幸运5开奖号码历史查询:chief executive officer. These types of companies make up nearly 35% of the Fortune Global 500. Examples include:

• Walmart (WMT), which is largely owned and run by founder Sam Walton’s children
• Meta (META), which is controlled by founder Mark Zuckerberg with provisions for control to transfer at his death to anyone he appoints
  

Disclosing Control

Control should not be a secret from shareholders. It must be disclosed by companies in their publicly filed reports. Shareholders have a right to know what th🀅ey’re getting into, and some see added risk to investing in con🐼trolled companies because controlled firms have been shown to underperform compared with non-controlled firms, and they’re viewed as less accountable to the public.

Controlled companies are still subject to independent audits and most other requirements of being publicly traded. As of 2012, there were 114 controlled companies in the S&P 1500 Composite, including Groupon and Meta.

Copy Alibaba’s Partnership Structure

When Alibaba (BABA) went public in September 2014, its unusual corporate structure was big news. Instead of using two share classes to let its owners retain control, it had 27 partners who nominated the board members while two other companies that were the company’s biggest shareholders (Yahoo and SoftBank) would be required to approve the nominations. The partners would effectively control the board and limit outside shareholders’ input. Like controlled companies, foreign private issuers and 澳洲幸运5开奖号码历史查询:limited partnerships are exempt from independen🐻t board requirements. 

The Alibaba Partnership now has 26 members, and that number will continue to change when new partners are elected and existing partners retire or leave the company. Partners are restricted in their ability to sell their shares, and outside shareholders remain limited in their ability to nominate or elect directors or to influence corporate decision-making. Executive chair Jack Ma and executive vice-chair Joe Tsai (both co-founders) retain signif𓃲icant control over the company through this structure.

The company’s 澳洲幸运5开奖号码历史查询:articles of association also limit the ability of third parties to gain control of the company through provisions such as staggered terms for board members so they cannot all be replaced at the same time. Despite the well-known potential foℱr conflicts of interest between the Alibaba Partnership and general shareholders, the company had the biggest IPO in history, but its stock price has declined significantly since then.

Ensure Outsiders’ Shares Are Widely Distributed

You don’t have to use different classes of stock with different voting rights or be a controlled company to stay in charge of your firm. Management and board members can own less than 50% of shares and still retain control as long as outside entities don’t own a large percentage of shares.

The upside of this strategy is that it may be more palatable to outside shareholders, who appreciate having shares with equal voting rights to what insiders have. The downside is that you can’t control whom outsiders sell their shares to, so a takeover is always🦹 a possibility. This strategy isn’t as strong as the others for retaining control of your company.

The Bottom Line

Taking your company public m♓eans losing much of the freedom you had as a private company. Not only do you have to comply with numerous regulations, but you also have to keep shareholders happy. When you accept the public’s money, you have to be accountable to them. But that doesn’t mean you have to let them call all the shots. You’ve been instrumental in getting the company to where it is today, and you deserve to stay in control as long as you continue to deliver results.