Non-voting Stock
Encyclopedia
Non-voting stock is stock
that provides the shareholder very little or no vote on corporate matters, such as election of the board of directors
or mergers. This type of share is usually implemented for individuals who want to invest in the company’s profitability and success at the expense of voting rights in the direction of the company. Preferred stock
typically has nonvoting qualities.
Not all corporations offer voting stock and non-voting stock, nor do all stocks usually have equal voting power. Warren Buffett’s Berkshire Hathaway
corporation has two classes of stocks, Class A (Voting stocks -Ticker symbol: BRKA) and Class B (Non-voting stocks - Ticker symbol: BRKB). The Class B stocks carry 1/200th of the voting rights of the Class A, but 1/30th of the dividends.
attempts. If the founders of a company maintain all of the voting stock and sell non-voting stock only to the public, takeover attempts are unlikely. They may occur only if the founders are willing to tender an offer by an unfriendly bidder.
There are consequences to not releasing voting rights to common shareholders; these include fewer supplicants for a friendly takeover, displeased shareholders as a result of the corporation’s limited growth potential, and difficulty finding bidders for additional non-voting shares in the market.
Stock
The capital stock of a business entity represents the original capital paid into or invested in the business by its founders. It serves as a security for the creditors of a business since it cannot be withdrawn to the detriment of the creditors...
that provides the shareholder very little or no vote on corporate matters, such as election of the board of directors
Board of directors
A board of directors is a body of elected or appointed members who jointly oversee the activities of a company or organization. Other names include board of governors, board of managers, board of regents, board of trustees, and board of visitors...
or mergers. This type of share is usually implemented for individuals who want to invest in the company’s profitability and success at the expense of voting rights in the direction of the company. Preferred stock
Preferred stock
Preferred stock, also called preferred shares, preference shares, or simply preferreds, is a special equity security that has properties of both an equity and a debt instrument and is generally considered a hybrid instrument...
typically has nonvoting qualities.
Not all corporations offer voting stock and non-voting stock, nor do all stocks usually have equal voting power. Warren Buffett’s Berkshire Hathaway
Berkshire Hathaway
Berkshire Hathaway Inc. is an American multinational conglomerate holding company headquartered in Omaha, Nebraska, United States, that oversees and manages a number of subsidiary companies. The company averaged an annual growth in book value of 20.3% to its shareholders for the last 44 years,...
corporation has two classes of stocks, Class A (Voting stocks -Ticker symbol: BRKA) and Class B (Non-voting stocks - Ticker symbol: BRKB). The Class B stocks carry 1/200th of the voting rights of the Class A, but 1/30th of the dividends.
Takeover
Non-voting stock may also thwart hostile takeoverTakeover
In business, a takeover is the purchase of one company by another . In the UK, the term refers to the acquisition of a public company whose shares are listed on a stock exchange, in contrast to the acquisition of a private company.- Friendly takeovers :Before a bidder makes an offer for another...
attempts. If the founders of a company maintain all of the voting stock and sell non-voting stock only to the public, takeover attempts are unlikely. They may occur only if the founders are willing to tender an offer by an unfriendly bidder.
There are consequences to not releasing voting rights to common shareholders; these include fewer supplicants for a friendly takeover, displeased shareholders as a result of the corporation’s limited growth potential, and difficulty finding bidders for additional non-voting shares in the market.
See also
- Mergers and acquisitionsMergers and acquisitionsMergers and acquisitions refers to the aspect of corporate strategy, corporate finance and management dealing with the buying, selling, dividing and combining of different companies and similar entities that can help an enterprise grow rapidly in its sector or location of origin, or a new field or...
- MicroeconomicsMicroeconomicsMicroeconomics is a branch of economics that studies the behavior of how the individual modern household and firms make decisions to allocate limited resources. Typically, it applies to markets where goods or services are being bought and sold...
- TakeoverTakeoverIn business, a takeover is the purchase of one company by another . In the UK, the term refers to the acquisition of a public company whose shares are listed on a stock exchange, in contrast to the acquisition of a private company.- Friendly takeovers :Before a bidder makes an offer for another...
- Industrial organizationIndustrial organizationIndustrial organization is the field of economics that builds on the theory of the firm in examining the structure of, and boundaries between, firms and markets....
- Voting interestVoting interestVoting interest in business and accounting means the total number of votes entitled to be cast on the issue at the time the determination of voting power is made, excluding a vote which is contingent upon the happening of a condition or event which has not occurred at the time.This notion is...