The founders of Lyft, John Zimmer and Logan Green, are working on a plan to retain control of the company after it goes public. They will do this by creating a special class of stock that gives the holders “super voting” rights. The votes will allow the CEO and President to have fiat control. Exact details haven’t yet been made public.

Lyft, whose value jumped to $7.5 billion after raising an additional $600 million last June, has raised $4.5 billion since its founding. All that fundraising has left Zimmer and Green with an actual stake of less than 10% in the company.

Class “F” Supervoting Shares

Supervoting is a growing trend in Silicon Valley start-ups. It enables the founders to retain control of their companies even after “going public.”

Formerly, the decisions and actions of the companies were subject to some form of democratic control. Notably, the world’s biggest tech company, Amazon.com, has no such structure. Billionaire Jeff Bezos retains great voting power by owning a large amount of stock. His actual voting power outsizes most other common holders. However, institutional funds hold more than half the company’s shares.

The “Class F” (“founders”) stock structure is a more recent phenomenon in public companies. Amazon went public during the dot-com boom, when traditional models were still imposed on the gods of tech.

As the Wall Street Journal’s Maureen Farrell and Cara Lombardo write:

“The founders’ move to consolidate their control is the latest illustration of the nearly unchecked power held by the founders of many of the fastest-growing technology startups. Some of the biggest public tech companies that have made their debuts in recent years, including Facebook Inc., Google parent Alphabet Inc. and Snap Inc., have supervoting structures that give their founders control.”

Snap’s founders control about 90% of the voting power in the company, almost begging the question: why go public at all?

The need for public money, of course.

Investing Without Influence: A Disturbing New Trend?

Shares in a company have until recently meant that the holder has some say over the way the company operates. If a company acts unethically, concerned investors have the power to make their voice heard and demand change from the boardroom. In a country where the majority of our institutions are subject to great influence from titans of industry, these safeguards are extremely important.

Perhaps companies like Lyft and Snap don’t pose much of an existential risk for the public, but what if the next generation of defense contractors and domestic security outfits follow a similar model? The largely silent war of conscience might be left solely in the hands of people motivated only by money. Investors might find themselves funding repression or even genocide, with no legal recourse.

One Share, One Vote

Fortunately, not everyone is sleeping on the issue. The New York Stock Exchange has the power to place certain requirements on companies. A group called the Council of Institutional Investors would prefer that all companies have the “one share, one vote” model. Last year, they petitioned to require companies like Snap and Alphabet change their models within seven years of going public.

It’s possible to avoid the need for public input in your company. Just keep raising capital privately and do so without giving the expectation of “going public.”

The pool of capital available to companies with no IPO aspirations is more limited, but it’s out there.

The public stock model is valuable for a number of reasons, not the least of which is investor freedom to demand changes when the company is under-performing. Accountability has a miraculous effect on decision-making.

In the long run, the market will decide what happens to these companies. Snap shares have seen great improvement recently, but investors are clearly less excited about stock which holds no voting power, as demonstrated by its failure to retain anything like its IPO price.