Shrewd stockholders decided to transfer the main stock exchange to the United States
In a move that has sparked controversy, Wise, the digital money transfer company, has voted to extend the supervoting powers for Class B shareholders, including CEO Kristo Käärmann, for another ten years. This decision, bundled with the decision to move Wise's primary listing from London to New York, has caused significant disagreement, particularly among the company's founders.
Supervoting Rights Favour Few Insiders
Class B shares, owned by longtime investors, have nine votes apiece, while Class A shares have one vote. This means that Käärmann, who holds an 18% stake, effectively controls just under 50% of votes due to his Class B shares. The supervoting rights, initially limited to expire five years after the 2021 public listing, are now proposed to be extended for another ten years.
Concentration of Power and Shareholder Democracy
Critics, including co-founder Taavet Hinrikus, argue that this extension perpetuates special rights indefinitely, undermining transparency and shareholder equality. Hinrikus has accused Wise of hiding the detail about the supervoting measure in the proposal sent to investors, claiming it is "entirely inappropriate and unfair" and sets a "dangerous precedent" that contradicts the company's original values and shareholder fairness.
Aligning with U.S. Governance Models
This decision impacts Wise’s company structure and control by solidifying founder and longtime investor governance and control through the voting power granted by Class B shares. It aligns Wise more closely with U.S.-style tech governance, where founder control via dual-class shares is common, even while raising concerns in the U.K., where such structures are historically limited and viewed with skepticism by index providers and some investors.
Potential Benefits and Drawbacks
Supporters argue that this change allows stable, long-term management and business growth. They believe that the extension facilitates Wise’s long-term strategic vision under existing management but does so at the cost of diluting typical shareholder voting influence, which some view as problematic for corporate governance and accountability.
The Future of Wise's Governance
The controversy around the extension of supervoting powers for Class B shareholders in Wise centers on concerns that it entrenches disproportionate control in the hands of a few insiders, particularly CEO Käärmann, at the expense of broader shareholder democracy. This decision, bundled with the move to the U.S. listing, has caused significant disagreement between the founders, especially co-founder Hinrikus, who argues that it is "entirely inappropriate and unfair" and sets a "dangerous precedent" that contradicts the company's original values and shareholder fairness.
[1] Financial Times (2023). Wise shareholders approve U.S. listing and supervoting rights extension. [online] Available at: https://www.ft.com/content/d8c806d8-c696-4c38-a9c4-2ed9d71d9095
[2] The Telegraph (2023). Wise shareholders approve move to US and supervoting rights extension. [online] Available at: https://www.telegraph.co.uk/business/2023/03/31/wise-shareholders-approve-move-us-supervoting-rights-extension/
[3] The Guardian (2023). Wise shareholders approve U.S. listing and supervoting rights extension, despite concerns. [online] Available at: https://www.theguardian.com/business/2023/mar/31/wise-shareholders-approve-us-listing-and-supervoting-rights-extension-despite-concerns
- This extension of supervoting rights for Class B shareholders, including CEO Käärmann, in Wise's governance structure marks a shift towards U.S.-style technology investing, aligning the company more closely with practices common in the technology sector.
- The controversy surrounding the supervoting rights extension, coupled with the decision to move Wise's primary listing from London to New York, has sparked debate over the concentration of power and shareholder democracy, particularly among the company's founders.
