Avoiding Governance Improvements
A number of corporations are concerned that various requirements to improve corporate governance will constrain top management’s ability to effectively manage the company. For example, more U.S. public corporations have gone private in the years since the passage of Sarbanes-Oxley than before its passage. Other companies use multiple classes of stock to keep outsiders from having sufficient voting power to change the company. Insiders, usually the company’s founders, get stock with extra votes while others get second-class stock with fewer votes. For example, Brian Roberts, CEO of Comcast, owns “superstock” that represents only 0.4% of outstanding common stock but guarantees him one-third of the voting stock. The Investor Responsibility Research Center reports that 11.3% of the companies it monitored in 2004 had multiple classes, up from 7.5% in 1990.