Snowflake announced previously this month that it would quit its dual-class investor structure, a corporate governance setup that typically provides executives and founders exceptional ballot rights, usually involving 10 times as numerous elect their own shares as others receive. The mechanism can allow founders to preserve control regardless of later dilution and might in some cases even grant ironclad control to a private in eternity.

For numerous companies, these supervoting shares represent a highly effective tool, allowing creators to have their cake and consume it, too— to go public and get the benefits of being a public business while limiting the power of external investors to influence how they run the business when it floats.

Some founders and their financiers argue that these preferred shares secure them from the short-term whims of the marketplace, but the point of view isn’t generally accepted. Dual-class shares are a controversial governance structure, and some marvel if they are establishing an unfair playing field by enabling a cabal to wield outsized power.

Why would Snowflake quit such a powerful tool a mere six months after it went public? We decided to look at the notion of dual-class shares and why Snowflake might have wanted to let them go.

Snowflake’s choice

If one of the primary purposes of dual-class shares is to combine CEO power, then maybe Snowflake felt they weren’t required, provided the history of CEO-shuffling at the business. While Snowflake’s founders are still part of the organization, they hired Sutter Hill investor Mike Speiser to be their first CEO, followed by previous Microsoft officer Bob Muglia prior to lastly generating veteran CEO Frank Slootman to take their business public.

Without an all-powerful CEO founder in place, maybe the business felt that supervoting shares weren’t necessary. Regardless, Snowflake CFO Mike Scarpelli framed the relocation as a decision that works for all parties when he announced that his company would abandon the unique shares during its earnings call previously this month.

“Today, we announced that on March 1st, 2021, our Class B shareholders in accordance with our governing files transformed all of our Class B typical stock to Class A common stock, getting rid of the dual-class structure of our typical stock and making sure that each share has an equivalent vote. We view this as operationally useful to the business and our shareholders,” Scarpelli stated throughout the call.

Article curated by RJ Shara from Source. RJ Shara is a Bay Area Radio Host (Radio Jockey) who talks about the startup ecosystem – entrepreneurs, investments, policies and more on her show The Silicon Dreams. The show streams on Radio Zindagi 1170AM on Mondays from 3.30 PM to 4 PM.