Dual Class Stock Research Articles

Why Dual Class Stock? A Response to CII's Petition to Nasdaq For Mandatory Sunset Provisions

On March 28, 2019 the Nasdaq Listing Council invited me to respond to the recent proposal by the Council of Institutional Investors (CII) requesting Nasdaq (and the NYSE) to adopt rules requiring a company going public with dual class shares to include a mandatory provision in the company's charter. Under the CII proposal, the company would generally have to convert the dual class shares into a single class after seven (7) years unless an extension was approved by stockholders voting separately as a class. This article briefly outlines my reasons for opposing CII's proposal and offers some alternative ideas for moving forward. My response focused upon three issues. First, I analyzed some of the governance and market forces that have led many of the most innovative and successful companies in the country (and indeed across the globe) to adopt dual class stock. This section focused upon what is the core issue of corporate governance but often goes unspoken: who gets to elect directors? This is the critical governance issue because directors manage the corporation and are responsive to those who elect them. Our corporate republic is not a direct democracy; stockholders do not run the corporation. Rather, corporations are managed and run by the board of directors. Yet over the last few decades, changes in the financial markets and the increased separation of from ownership has led to a situation where directors are increasingly elected by a small group of institutional investors and activist fund managers, including activist hedge funds. Confronted with a reality where directors are elected by this small group of investors, it should come as no surprise that some of our most innovative and entrepreneurial leaders, as well as those who support them, seek a better way to elect directors. Second, I identify some of the many problems with CII's analysis. As part of this, I demonstrate that many of the studies identified by CII do not support the claim for a seven (7) year sunset period, and in fact show that companies with dual class stock outperform their single class peers for considerably longer periods of time. Additionally, the most recent study by two highly respected scholars who have carefully reviewed all the literature and studies identified by CII concludes that compulsory sunsets, and time-based sunsets in particular, are an inappropriate response to the potential problems of dual class stock. In this section I further discuss recent studies that support a reality that I (and I suspect many practitioners) have long recognized: that there is little correlation between so-called best governance practices and either corporate performance or corporate governance. Rather, the studies on corporate governance typically measure adherence to the particular structural governance measures that are favored by certain institutional investors and/or academics, but that these studies do not measure whether in fact a company is well-governed, much less whether there is any correlation between a well-governed company and its performance. For this reason as well I discuss why it is important to continue to allow the system of private ordering on these types of governance issues to exist. The third section of my paper offered some specific compromise proposals to CII and other institutional investors, with the hope of better achieving the joint goals of fostering better governance while also opening up the process for director selection. In addition to discussing these proposals, I also call on the Nasdaq (and the NYSE) to continue to play their historic role as facilitators to this debate, and in my talk I suggested that Nasdaq consider convening a group of experts to consider the various issues and make recommendations to the exchanges.

Dual-Class Stock Structures and Society: How Unequal Voting Rights Affect Innovation, Insiders, Investors, and the Public

Publicly traded stocks often have less legal rights attached to them (in terms of voting, for example) than the class of stocks held by company insiders. This paper analyzes the winners and losers of such structures with multiple classes of stocks, and whether regulation is appropriate. I argue that governmental regulation would cause more harm than good, and that self-regulation within the industry--which itself is made up of opposing interests--is more appropriate.

The Lifecycle Theory of Dual-Class Structures

This academic presentation, based on our joint work on dual-class structures, was delivered by Lucian Bebchuk as his keynote address to the December 2018 ECGI-BIU conference on differential voting structures. The presentation focuses on the lifecycle theory of dual-class structure introduced in Bebchuk and Kastiel, The Untenable Case for Perpetual Dual-Class Stock, 2017 (https://ssrn.com/abstract=2954630). The presentation begins with discussion of precursor works to, and the motivation for developing, the lifecycle theory. The presentation then proceeds to describing the elements of the theory. In particular, it explains the reasons for expecting the efficiency benefits of dual-class structures to decline over time; for the efficiency costs to increase over time; and for controllers to choose to retain a dual-class structure even when it ceases to be efficient. The presentation also discusses a number of cases that vividly illustrate arguments advanced by the lifecycle theory. Among cases discussed are dual-class companies Viacom, CBS, and Facebook, as well as single-class companies Amazon, Microsoft and Yahoo!. We also explain that time-based sunsets can address the identified problems, and we discuss the design of, and objections to, such sunsets. Finally, we discuss the influence that our lifecycle theory has had on subsequent policy discourse and on empirical work testing the theory’s predictions. The presentation concludes that the lifecycle theory has solid theoretical foundations and is confirmed by recent empirical testing. We hope that the lifecycle theory that we introduced will continue to prove useful for researchers and policymakers and to contribute to the adoption of dual-class sunsets.

Dual-class firms’ choice of performance measures in CEO stock compensation contracts

PurposeThe purpose of this paper is to provide new evidence on the choice of performance measures used in dual-class firms to incentivize CEOs.Design/methodology/approachThis paper uses coarsened exact matching and propensity score matching to match the dual-class firm sample with a control group of single-class firms. This study uses matching estimators to provide an analysis of how a dual-class structure affects the design of performance measures in performance-based stock awards. In addition, regression models are used to investigate the effect of a dual-class structure on performance measure choices.FindingsThis paper finds that market-based metrics are less likely to be used by dual-class firms relative to single-class firms. In addition, peer-based measures are much less common for dual-class than single-class firms. This study also finds that the length of the CEO’s performance evaluation period does not differ between dual-class and single-class firms.Research limitations/implicationsThis paper attempts to investigate the choice of performance measures to find out the extent to which the board of directors focuses CEO efforts on firms’ long-term versus short-term objectives.Practical implicationsThe findings reveal the relationships between the dual-class stock structure and the contractual features of CEO performance-based stock awards, provide empirical evidence for the company’s compensation committee and provide implications for the evolving practices of performance measures regarding CEO stock compensation. The findings are also useful to regulators, compensation consultants and firms pursuing efficient design of executive compensation.Originality/valueThis paper is among the first to study the determinants of compensation contracts. Second, prior literature seldom controls for CEO stock ownership, but this study matches dual-class firms to a control group of single-class firms that are similar in terms of CEO stock ownership and other important firm characteristics. Finally, these findings suggest that dual-class firms shield their executives from short-term market pressures and design stock compensation contracts that deemphasize volatile stock prices.

Reexamining dual-class stock

Snapchat’s initial public offering, which provided shares with no voting rights, is a culmination of the growing trend of dual-class shares. It contradicts the precept of one-share, one-vote that is essential for corporate democracy. Snapchat’s action caused an uproar among influential investors. In January 2017, a coalition of the world’s biggest money managers, which together control more than $17 trillion in assets, demanded a total ban on dual-class shares. We reason that the increasing prominence of dual-class stock is explained by the confluence of three economic trends: the growing importance of intangible investments, the rise of activist investors, and the decline of staggered boards and poison pills. A dual-class structure offers immunity against proxy contests initiated by short-term investors. It enables managers to ignore capital market pressures and to avoid myopic actions such as cutting research and development, which hurt companies in the long term. Thus, a dual-class structure is optimal in certain scenarios. We put forth alternatives to dual-class structure that enable managers to maintain control while retaining focus on sustainable value creation.

Will Tenure Voting Give Corporate Managers Lifetime Tenure?

Dual-class voting systems have been widely employed in recent initial public offerings by large tech companies, but have been roundly condemned by institutional investors and the S&P 500. As an alternative, commentators have proposed adoption of tenure voting systems, where investor voting rights increase with the length of time that they hold shares. In furtherance of this proposal, some Silicon Valley investors have requested that the SEC permit the creation of a new stock exchange where all of the companies will be required to use tenure voting systems. Is tenure voting a better choice than dual-class stock for both corporate management and shareholders? In this paper, we review the arguments for and against tenure voting that have been made in the literature. In order to shed light on these claims veracity, we generate the first data base that documents institutional investor portfolio turnover rates for stock. We use this data to inform our mathematical voting model of tenure voting to show how its adoption would affect control rights within the corporation. We make two main findings that shed light on this question. First, we show that when corporate management holds a large block of company stock prior to the implementation of tenure voting, and retains at least 20-30% of the total number of company shares on a long term basis, then tenure voting will insure that corporate managers maintain control of the company even in the face of an attempted change of control transaction by a highly motivated dissident shareholder. Our second important finding is that if corporate management chooses to sell off its large initial block of the company’s stock over time, so that inside ownership levels drop eventually down to a low percentage level with the majority of ownership held by institutional shareholders with different investment horizons, then the use of tenure voting systems does little to protect management control in a proxy contest for corporate control. We conclude that tenure voting does indeed represent an intermediate form of voting control from a managers’ perspective: it does not guarantee management control, as dual-class share structures do, but does give control to management who maintain large equity stakes in the firm. Institutional investors are likely to see it as an improvement over dual-class stock structures in terms of giving them corporate governance rights, although less advantageous to these shareholders’ rights than a one share, one vote voting system.

Dual-Class Index Exclusion

One of the most contentious and long-standing debates in corporate governance is whether company founders and other insiders should be permitted to use multi-class stock structures with unequal votes to control their companies while seeking capital through a public listing. Stymied by the permissive attitudes of legislatures and regulators, institutional investors opposed to multi-class arrangements recently turned to a new potential source of regulation: benchmark equity index providers. At the behest of institutional investors, the three largest index providers recently changed the eligibility requirements for their benchmark equity indexes to exclude, limit or underweight companies with multi-class stock structures. Investors expected the prospect of exclusion from such indexes to discourage founders and directors from adopting dual-class stock structures in connection with their initial public offerings. While there is a voluminous financial literature on the effects of index inclusion and exclusion on stock prices, and legal scholars have recently explored the corporate governance implications of the exponential growth of passive index investing, focusing primarily on the incentives of index fund asset managers, neither the financial nor the legal literature have considered the corporate governance role and influence of the parties who write the rules for index investing: the index providers. We begin to fill this gap in the literature by assessing the efficacy of index providers as corporate governance arbiters through the rubric of their dual-class index exclusion decisions. We start with the premise that the index exclusion sanction will not discourage dual-class listings unless it is sufficiently costly to outweigh the perceived benefits of founder control through a multi-class stock structure. We expect the index exclusion sanction will not be sufficiently costly for several reasons. First, it is difficult, if not impossible, to implement a sanction through the public capital markets. Second, the index inclusion effect on which the anticipated sanction is premised has effectively disappeared in recent years and may never have been a long-term source of lower capital costs. Third, despite the explosive growth of index investing in recent years, funds following stock indexes still hold a relatively modest percentage of the market capitalization of U.S. equities – around 12% according to BlackRock. Finally, the proliferation of index investing opportunities has weakened the market-moving influence of any one benchmark index. To test the efficacy of the sanction, we conduct an event study of the S&P announcement that dual-class companies would henceforth be excluded from the S&P 1500 Composite Index and its components – the S&P 500, S&P 400 mid-cap and S&P 600 small-cap indices. Because S&P grandfathered dual-class companies currently in the index, we are able to compare movements in the stock prices of dual-class companies currently in the index with movements in the stock prices of dual-class companies not yet included in the index at the time of announcement. We do not observe any statistically significant abnormal returns in the stock prices of either included or excluded firms as a result of the S&P announcement, suggesting that exclusion is not expected to have a significant adverse cost of capital effect on firms that elect to list with a dual-class stock structures in the future and the sanction is ineffective. In the absence of an effective sanction, the exclusion of dual-class shares from benchmark equity indexes will not affect corporate governance choices. It may, however, have material adverse consequences for index investors and the index providers themselves.

Sarbanes Oxley at 15: The Success of 'Quack' Corporate Governance

At the 15th year anniversary of Sarbanes Oxley, the label of “quack” corporate governance proved incorrect. SOX succeeded in putting in place mechanisms that promoted investor confidence by raising the quality of financial disclosure. The legislation did so in a number of innovative ways. A regulator was created to oversee public company accounting firms but, rather than add another government agency, Congress assigned the task to the Public Company Accounting Oversight Board, a non-profit corporation overseen by the Securities and Exchange Commission. Congress strengthened the role of the gatekeeping function of the board of directors, primarily through listing standards applicable to audit committees. Boards were encouraged to add financial expertise through a system of “comply or explain,” something widely used in Europe but, until SOX, not in the US. Information flow to the board was increased and companies had to put in place mechanisms designed to allow employees to make confidential complaints to the audit committee about concerns over financial disclosure. Audits quality was improved and officers were made more responsible for financial disclosure through certification. Concern with the public securities markets has again arisen, with blame placed on SOX and other forms of regulation. Some have pointed to a reduction in the number of IPOs and the presence of a large number of unicorns (companies with a value of more than $1 billion) that have chosen to remain in the private equity markets. Calls have arisen to further restrict the requirement that outside auditors “attest” to a public company’s internal controls and to restrict the use of Rule 14a-8 by shareholders. Both proposals, however, are misplaced. Unicorns have a number of reasons for delaying IPOs. The strength of the private markets provides a degree of flexibility over the timing of public offerings that did not exist in earlier eras. Moreover, with the prevalence of dual class stock structures, founders, rather than private equity funds, likely have greater say over the timing of a public offering. The public markets can always be improved. The strength of the markets is transparency and transparency arises through disclosure. Investors could benefit from an improved system of disclosure. Reform should address both the method of filing and accessing information as well as the contents of disclosure. Much of the system of disclosure has been in place since the 1980s, before anyone had heard of the Internet, much less social media or artificial intelligence. In doing so, however, the focus should not be on disclosure overload but on disclosure effectiveness.

Sunrise, Sunset: An Empirical and Theoretical Assessment of Dual-Class Stock Structures

A battle is brewing for control of America’s most dynamic companies. Entrepreneurs are increasingly seeking protection from interference or dismissal by public investors through the adoption of dual-class stock structures in initial public offerings. Institutional investors are pushing back, demanding that such structures be abandoned or strictly limited through sunset provisions. The actual terms of dual-class stock structures, however, have been remarkably understudied, so the debate between proponents of prohibition and private ordering is often ill-informed. This paper presents the first empirical analysis of the initial, or sunrise and terminal, or sunset provisions found in the charters of dual-class companies, with a data set of 123 U.S. public companies. Careful selection of such provisions can satisfy both the desire of entrepreneurs to pursue their idiosyncratic visions for value creation without fear of interference or dismissal and the need of investors for a voice to ensure management accountability. Private law firms representing entrepreneurs in initial public offerings play a critical role in the selection of charter provisions, so the onus is on such firms to ensure that private ordering produces a satisfactory resolution before momentum builds for a regulatory solution to investors’ concerns.

차등의결권주 도입론에 대한 법적 고찰

IMF 외환위기 이후 경영권 공격방법에 대한 규제가 전면적으로 수용 되었지만 경영권 방어수단에 대한 조치는 매우 미약한 가운데 있어 적대적 M&A가 쉽게 이루어질 가능성이 매우 크다. 2015년 삼성그룹의 지배구조 재편과정에서 나타난 삼성물산(주)과 헤지펀드의 공방은 기업의 경영권 방어를 위하여 차등의결권주 도입을 강하게 주장하고 있다. 중국의 대표적 전자상거래업체인 Alibaba 창업자인 잭 마(Jack Ma)는 홍콩증권거래소에 기업 공개 시 이사회의 이사후보 과반수를 현 경영진으로 구성된 조합이 지명할 수 있는 권리를 가지는 지배구조를 허용해 달라는 요청을 하였다가 거절당하자 뉴욕증권거래소로 변경하여 상장하였다. 창업주 잭 마(Jack Ma)가 원하였던 것은 구글에서와 같은 경영권의 안정적 유지였다. 이는 기업가 정신의 유지와 장기적 관점의 경영을 위해 기업 공개 시 차등의결권주을 발행해 창업자들이 경영권을 안정적으로 확보하고자 하는 것이다.BR 차등의결권주는 경영자가 안정적인 경영권을 확보하여, 장기적 관점에서 기업가 정신을 발휘할 수 있도록 하여, 경영권 위협 없이 원활한 자금조달을 하고, 단기 주가 압력 없이 장기적 투자를 가능 하게 한다. 주요국의 사례에서 보듯이 벤처기업의 창업주나 폐쇄회사의 기업주에게 차등의결권을 발행할 수 있도록 하는 이유는 창업자가 구상했던 기업의 문화와 색깔을 그대로 유지하여 기업경영의 주도적 역할을 계속하기 위함이다. 주주평등의 원칙을 바탕으로 한 1주 1의결권원칙을 고집한다면 경영권방어를 위해 회사가 자기주식을 매입하거나 지배주주가 적정한 지분비율 이상의 과다한 자본을 투자하는 등 경영권을 방어하기 위한 불합리한 현상이 초래되는데 차등의결권주는 경영권 방어에 불필요한 비용을 감소시키고 자원배분의 비효율을 제거할 수 있다고 하겠다. 차등의결권 주식을 보유하는 주주는 경영권을 안정적으로 보장해 주어 기업경영에 매진할 수 있는 동기를 제공한다. 차등의결권주식의 도입은 효율적인 방어수단이 거의 없는 우리나라의 현실을 고려하면 매우 바람직한 측면이 있다.

The Untenable Case for Perpetual Dual-Class Stock

The desirability of a dual-class structure, which enables founders of public companies to retain a lock on control while holding a minority of the company’s equity capital, has long been the subject of a heated debate. This debate has focused on whether dual-class stock is an efficient capital structure that should be permitted at the time of initial public offering (“IPO”). By contrast, we focus on how the passage of time since the IPO can be expected to affect the efficiency of such a structure. Our analysis demonstrates that the potential advantages of dual-class structures (such as those resulting from founders’ superior leadership skills) tend to recede, and the potential costs tend to rise, as time passes from the IPO. Furthermore, we show that controllers have perverse incentives to retain dual-class structures even when those structures become inefficient over time. Accordingly, even those who believe that dual-class structures are in many cases efficient at the time of the IPO should recognize the substantial risk that their efficiency may decline and disappear over time. Going forward, the debate should focus on the permissibility of finite-term dual-class structures — that is, structures that sunset after a fixed period of time (such as ten or fifteen years) unless their extension is approved by shareholders unaffiliated with the controller. We provide a framework for designing dual-class sunsets and address potential objections to their use. We also discuss the significant implications of our analysis for public officials, institutional investors, and researchers.

Dividend policy and ownership structure: A study of Russian dual-class stock companies.

This paper explores the relationship between ownership structure and dividend policy in Russian public companies with dual-class shares. The sample includes all companies issuing both ordinary (voting) and preferred (non-voting) shares traded on the Russian Trading System (RTS) in the period of 2003-2009. Using panel data and employing both linear and nonlinear regression modeling approach, we tested the relationship between ownership structure and dividend payout. One of the major conclusions is the existence of a negative relationship between the dividend payout on ordinary shares and institutional ownership, as well as between dividend payout on ordinary shares and offshore ownership. Unlike for ordinary shares, ownership structure is not related to dividend payments on preferred shares. Dividend policy on preferred shares is, instead, essentially related to a company’s performance.

The Effect of Voting Rights on Firm Value

We present a simple framework for dual-class stock shares, in which common shareholders receive public and private cash flows (i.e. dividends and any private benefit of holding voting rights) and preferred shareholders only receive public cash flows. We isolate those two cash flows in order to identify the role of voting rights on equity-holders' wealth. In particular, we employ a structural cointegrated VAR model and find a negative relation between the value of the voting right and the preferred shareholders' wealth.

Disproportional Control Rights and the Governance Role of Debt

We examine the governance role of debt in the context of U.S.-based dual class ownership structures. We hypothesize that the use of debt alleviates the conflict between shareholder classes by balancing the power of controlling insiders. We document that dual class firms have higher leverage and a greater propensity to issue private debt; they also more frequently use cash sweeps and performance-based covenants. Dual class firms with greater agency conflicts and a greater need to access the capital market appear to rely more extensively on debt. These findings are consistent with controlling insiders bonding against the agency costs associated with dual class ownership. The governance role of debt is further corroborated by the valuation effect of debt for dual class companies. Private debt issuances trigger greater positive market reactions to the inferior dual class stock in relation to both the superior dual class stock and a matched sample of single class firms. Further, leverage attenuates the previously documented adverse effect of dual class status on Tobin’s q. Taken together, our analyses suggest that dual class firms use debt as a complementary governance mechanism. This paper was accepted by Mary Barth, accounting.

Tenure Voting and the U.S. Public Company

This paper examines an innovative response to the rise of dual-class stock: the use of tenure voting by U.S. public companies. Tenure voting is the award of an additional number of votes to shareholders depending upon the duration of their ownership. Tenure voting has the potential to be a more palatable alternative to high-vote and no-vote shares while also addressing current arguments about long- and short-termism in U.S. markets. This paper outlines the mechanics of tenure voting; discusses policy reasons for and against this voting mechanism; and explores the legalities of the adoption of tenure voting by currently listed U.S. public companies. It is intended as a resource and guide for those U.S. public companies considering this innovative voting mechanism.

The Bug At Volkswagen: Lessons in Co‐Determination, Ownership, and Board Structure

Although the primary cause of the emissions scandal at Volkswagen appears to have been misfeasance and malfeasance on a corporate-wide scale, we argue that such a problematic culture existed at Volkswagen because of the composition of the board itself in combination with the unique governance structure known as “co-determination,” that defines many German companies, including VW. There are three major problems from a corporate governance standpoint with the Volkswagen board. First, is the interest-conflicting nature of the dual-class stock held by the dominant shareholding Porsche and Piech families. Second, is the presence of a government as a major shareholder. And third is the organization of its characteristically German “two-tier” board around the principle of co-determination, which mandated significant labor representation. We argue that each of these elements of the VW ownership and governance structure contributed in varying degrees to the board failure of oversight that led to the management decision to evade emissions regulations.

The structure of corporate boards and private benefits of control: Evidence from the Russian stock exchange

This paper revisits the role of board size and composition in corporate governance, employing a measure of private benefits of control (PBC) as an indicator of governance problems in firms. We calculate PBC using the voting premium approach for a sample of dual class stock companies traded on the Russian stock exchange between 1998 and 2009. Using fixed-effects regressions, we find a quadratic relationship between PBC and board size, implying the optimality of medium-sized (about 11 directors) supervisory boards. This result is substantially stronger for PBC than traditional measures of corporate performance. There is also some evidence that director ownership helps to mitigate governance problems. Most remarkably, we find that non-executive/independent directors are associated with larger PBC and thus do not seem to help improve corporate governance. In contrast, regressions with accounting performance measures as dependent variables tend to suggest a positive role of these directors in corporate governance.

The Structure of Corporate Boards and Private Benefits of Control: Evidence from the Russian Stock Exchange

This paper revisits the role of board size and composition in corporate governance using a measure of private benefits of control (PBC) as indicator of governance problems in firms. We calculate PBC using the voting premium approach for a sample of dual class stock companies traded on the Russian stock exchange between 1998 and 2009. Using fixed-effects regressions, we find a quadratic relationship between PBC and board size, implying the optimality of medium-sized (about 11 directors) supervisory boards. This result is substantially stronger for PBC than for traditional measures of corporate performance. There is also some evidence that director ownership helps mitigate governance problems. Most remarkably, we find that non-executive/independent directors are associated with larger PBC and thus do not seem to help improve corporate governance. In contrast, regressions with accounting performance measures as dependent variables tend to suggest a positive role of these directors in corporate governance.

Investor Protection and the Value of Shares: Evidence from Statutory Rules Governing Variations of Shareholders' Class Rights in an Emerging Market

This article uses a quasi-experimental framework provided by recent changes in Russian corporate law to study the effect of investor protection on the value of shares. The legal change analyzed involves the empowerment of nonvoting shareholders to veto unfavorable changes to their class rights. We take advantage of the presence of well-defined treatment and control groups and use the voting premium, a traditional measure of private benefits of control and shareholder expropriation, as the outcome variable. Based on a novel hand-collected dataset of dual-class stock companies in Russia and using a difference-in-difference regression analysis as well as an event study, we find a statistically and economically significant effect of improved protection of preferred shareholders on the value of their shares. The result is robust to several changes in the empirical specification. (JEL G30, G38, K22) The Author 2012. Published by Oxford University Press on behalf of Yale University. All rights reserved. For Permissions, please email: journals.permissions@oup.com, Oxford University Press.

CEO and Board Characteristics as Determinants of Private Benefits of Control: Evidence from the Russian Stock Exchange

This paper investigates whether and how various characteristics of CEOs and corporate boards are related to the severity of corporate governance problems within firms. The latter is proxied by private benefits of control, which we measure for dual class stock firms using the voting premium approach. Our empirical analysis is based on data from Russia and takes advantage of the extreme corporate governance problems in the country, considerable variation in corporate governance practices across firms and over time, and presence of a large and exogenously created (during the process of privatization) group of dual class stock companies. The data are assembled from the RTS, SKRIN and SPARK databases and include over 200 firms observed in 1997-2009, with over 1000 observations in total. Our econometric analysis suggests a quadratic relationship between private benefits of control and CEO ownership with a minimum at about 4% CEO ownership, a positive association between CEO tenure and private benefits, and a quadratic in CEO age with a dip in private benefits at about 52 years of age. There is also a quadratic relationship between private benefits of control and board size, implying the optimality of medium-sized (about 9-10 directors) boards. We find no gender effects on private benefits of control.