New Act Forces Companies to Reveal Who Really Holds the Voting Power in Multi-Class Stock Structures

If you’ve ever invested in a company with a high-profile founder, you might have heard of "multi-class shares." This bill, the Enhancing Multi-Class Share Disclosures Act, targets those companies by requiring the Securities and Exchange Commission (SEC) to mandate greater transparency around who is actually calling the shots.

The Fine Print on Voting Power

This legislation is all about leveling the playing field of information for shareholders. It specifically addresses companies where some shares—often held by founders and insiders—carry ten times the voting power of the common stock sold to the public. The bill mandates that the SEC create rules forcing these companies to clearly disclose specific voting details in annual meeting materials and other important filings.

What exactly has to be disclosed? Companies must spell out two key metrics for directors, executive officers, director nominees, and anyone owning 5% or more of the voting power. First, they must state the actual number of voting shares that person owns and what percentage that is of all outstanding voting shares. Second, and crucially, they must state the total voting power that person controls, expressed as a percentage of the total combined voting power available for electing directors (Sec. 2).

Why This Matters to Your 401(k)

Think of it this way: You might own 1,000 shares of Company X, and the founder might only own 100,000 shares. On paper, the founder owns 100 times more than you. But if the founder’s shares carry 10 votes each and yours carry only one, the founder’s actual voting power is dramatically higher than their share count suggests. Right now, that information can be buried or hard to calculate.

For the average investor—the person contributing to a 401(k) or managing a brokerage account—this bill cuts through the noise. It ensures that when you receive your proxy materials for the annual meeting, you get a clear, easy-to-read breakdown of exactly how much voting muscle the top executives and major owners wield. This increased transparency is designed to help standard shareholders understand who truly controls the company's direction and director elections, especially when the company is underperforming or facing a major decision.

The Trade-Off: Compliance vs. Clarity

This is a win for clarity, but it does mean a bit more work for the companies using these structures. Companies utilizing multi-class shares—often tech startups or family-controlled businesses—will face increased compliance costs to track and report these specific metrics. They will need to adjust their reporting systems to provide this detailed breakdown of voting percentages, which the SEC will define further in its rulemaking process.

The vagueness here lies in how the SEC defines an “important filing.” While annual meeting materials are clear, the SEC has the latitude to require this disclosure in other filings too, which could create an ongoing administrative burden. However, the core benefit remains solid: By requiring a straightforward percentage of total voting power, the bill solves an information asymmetry problem, giving the average investor a clearer picture of corporate control without needing a finance degree to decode it.