See: Voting Shares.
Companies are owned by their shareholders. Oftentimes, shareholders (especially in public companies) have very little stake in the firm. You can own a million shares of a large company and still only possess a fractional percent of the outstanding number. It makes it difficult to hold any sway over company decisions. A voting trust attempts to pool influence, giving its participants more leverage to control company decisions.
To create this structure, shareholders will donate their shares to a trust. That trust then becomes the holder of all their shares, able to vote them as a block. The trust itself (owning a bunch of shares from many different shareholders) has much more influence over the company. Meanwhile, the former shareholders are granted voting power within the trust.
So...you own 5% of a company's stock. You donate that to a voting trust with four other shareholders with a similarly sized interest. Now, instead of owning 5% of the public company, you hold a 20% stake in a trust that owns 25% of the company. The added power the shares get from voting in a block gives you more influence in the company than you had previously.
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Finance: What is non-voting stock?4 Views
finance a la shmoop- what is non-voting stock? hmm well it's stock that doesn't
vote. bet you're shocked to hear that. most people need a PhD in finance to [stock wears an "I didn't vote" sticker.
understand that notion. but really that's it in most cases common stock carries
with it the right to vote. and in fact it's the common shareholders who elect
the board of directors. but every now and then a potentially hostile investor
comes along and buys or wants to buy a big chunk of stock in a company. well the
amount might be a block large enough to elect that potentially hostile investor
slate or the group of people that investor wants to place on the board to
represent her evil intentions .when that happens companies will often create a
class of common stock similar in every way to its normal common only with its [stock checklist of privileges listed]
voting rights stripped away .that way the investor can own an economic interest in
the company but not monkey with the board.
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