Following Snap Inc.’s IPO, IR Magazine took a closer look at companies that offer different classes of shares and how they maintain good governance.

While Snap’s move to offer no voting rights in its IPO is unprecedented, the number of companies offering restricted voting rights is on the rise. Many microcap public companies also use multiple classes to maintain management control and protect from toxic and activist investors. 

According to data from Dealogic, 27 of the 174 IPOs in the US in 2015 used dual-class structures – roughly half of these were technology companies. In 2005, just 1 percent of all IPOs used that structure.

Proponents of restricted shareholder rights argue that it protects a company from the short-term interests of some investors.

Bob Lamm, senior adviser to Deloitte’s Center for Boardroom Effectiveness, says that companies can still maintain positive relationships with investors while operating with a restricted share structure.

“Most public companies can develop good governance practices and explain why they do what they do,” Lamm says, speaking to IR Magazine. “But if they don’t convey good corporate governance practices, they run the risk of investor discontent.“

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