In July 2017, S&P Dow Jones Indices decided that companies with multiple classes of common stock shouldn't be admitted to the S&P 500. The problem was straightforward: corporations were selling stock to the public while allowing founders to retain extraordinary voting power, sometimes leaving investors with no votes whatsoever.
In April 2023, S&P reversed itself.
Six years. That's how long one of the most influential institutions in American finance managed to defend a principle before deciding it could live without it. The industry had simply decided that excluding desirable companies was less attractive than accommodating their demands.
Mark Zuckerberg offers a particularly revealing illustration. According to Meta's April 2026 proxy statement, Zuckerberg controls 60.8% of the shareholder vote while holding roughly 13.5% of the company's outstanding common shares. On an ordinary matter decided by a simple majority, the remaining shareholders cannot outvote him even if they agree unanimously.
This isn't a secret. It isn't illegal. It isn't even especially complicated, which makes the willingness of professional investors to normalize it considerably more interesting than the usual complaints about financial stupidity. The warnings were in the prospectuses, the academic literature documented the risks, and the industry's own institutions recognized the problem sufficiently to establish restrictions. The people making money from these arrangements simply had different incentives from the people who ultimately bore the consequences.
Welcome to the Zuckfuck Clause: the mechanism by which Wall Street converts disproportionate founder control into ordinary investment exposure, particularly through index funds, distributing economic risk among millions of investors without providing them proportionate authority over the corporations they own.
The geniuses didn't misunderstand what they were buying. They were paid to care about something else.
I. The Safeguards Existed. Wall Street Dismantled Them.
For much of the twentieth century, the New York Stock Exchange restricted listings involving unequal voting structures. Its position reflected an elementary principle of corporate governance: if shareholders provide economic ownership, their voting rights ought to bear some reasonable relationship to that ownership.
These protections didn't disappear because somebody conclusively demonstrated that shareholder voting rights were worthless. They eroded during the 1980s as competition among exchanges made restrictive listing standards commercially inconvenient. The founders wanted flexibility, the exchanges wanted listings, and the investors could read the prospectus and decide for themselves. A familiar American solution: when a safeguard interferes with business, redefine it as an obstacle to progress.
Google's 2004 IPO helped normalize the modern arrangement. Larry Page and Sergey Brin retained superior-voting shares carrying ten votes apiece, and their founders' letter explained that investors were making a long-term bet on their judgment. Facebook followed in 2012. Its registration statement explicitly described Zuckerberg's ability to control matters submitted to shareholders, including director elections. SEC staff pressed the company to expand its risk disclosures concerning that concentrated authority.
Then came Snap.
Snap's 2017 IPO offered Class A common stock carrying zero voting rights. Not reduced voting rights, not one vote for every ten held by the founders, but no votes at all. Evan Spiegel and Bobby Murphy retained approximately 88.5% of the voting power at the offering.
Snap disclosed the arrangement in its prospectus, and investors bought the shares anyway. One can argue that a fully informed purchaser has every right to accept those terms. Certainly. But that doesn't make the terms wise, and it doesn't explain why the financial industry should treat securities without voting rights as interchangeable with ordinary voting equity.
S&P's July 2017 restriction was an acknowledgment of precisely that distinction. The S&P Composite 1500, including the S&P 500, S&P MidCap 400, and S&P SmallCap 600, would no longer admit new companies with multiple share-class structures. Existing constituents were grandfathered in. FTSE Russell chose a less restrictive approach, establishing a minimum threshold requiring more than 5% of voting power to be held by unrestricted shareholders.
And then S&P changed its mind.
In April 2023, it restored eligibility for companies with multiple share classes, provided they satisfied the other inclusion requirements. S&P's explanation emphasized the need to keep its indices representative of the evolving American equity market. That's a defensible objective, but it also means that a company's importance to the market can outweigh concerns about the voting rights of its shareholders.
Sources: S&P Dow Jones Indices, July 31, 2017; April 17, 2023.
This is the historical pattern that ought to concern investors. The market recognized the danger of disproportionate voting power, established protections against it, and then relaxed those protections as the commercial advantages of accommodation increased. Twice. Once at the exchange level and again at the index level.
The question isn't whether S&P had a legitimate reason to revisit its methodology. It did. The question is what happens when every institution involved in the transaction can explain why protecting shareholder voting rights isn't really its responsibility.
II. They Weren't Stupid. They Were Paid Not to Care.
The usual response is to ask how sophisticated investors could possibly have tolerated such arrangements. It's a satisfying question, but it assumes that Wall Street operates as a single institution with a common obligation to defend shareholder accountability. It doesn't, and once you examine the incentives of the individual participants, the mystery largely disappears.
Investment banks make money underwriting public offerings. When a desirable technology company demands a supervoting structure, an underwriter can challenge the arrangement and risk losing a lucrative assignment, or disclose the structure and proceed. Venture capitalists face a different incentive: they want liquidity, attractive valuations, and returns for their limited partners. If accommodating a founder's voting demands makes an IPO possible, the governance concessions may be a perfectly acceptable price for obtaining an exit.
Active portfolio managers have their own problem. Their performance is measured against benchmarks, and clients generally notice underperformance faster than they notice the voting rights attached to individual holdings. A manager who refuses to own Meta because of Zuckerberg's control may find that decision difficult to defend when Meta significantly outperforms the market. The consequences of accepting a governance risk that hasn't yet produced a measurable financial loss are considerably less visible.
Passive index funds face an even more mechanical situation. When a company enters an index, funds designed to track that index generally purchase its shares according to the fund's methodology. Their customers didn't necessarily select the company, examine its voting structure, or decide that founder supremacy was an attractive feature. They bought a diversified investment product, frequently through a retirement account, and inherited the governance arrangements of its constituent companies.
Major asset managers aren't entirely powerless. They operate stewardship programs, engage with companies, and cast proxy votes on behalf of their funds. But voting against management doesn't accomplish much when the founder already possesses enough votes to determine the outcome.
None of this requires fraud, conspiracy, or even incompetence. The investment bank completes a lawful offering. The venture capitalist realizes a return. The active manager protects relative performance. The index provider maintains a representative benchmark. The passive fund tracks the index. Each participant can plausibly claim to have fulfilled its responsibilities.
And there's the problem. An entire financial system can function exactly as designed while producing an outcome that systematically weakens the relationship between corporate ownership and corporate authority. Protecting the governance rights of the ultimate shareholders becomes everybody's concern in theory and nobody's decisive responsibility in practice.
That is considerably more damning than stupidity, because stupidity can sometimes be corrected by better information. A system that rewards people for ignoring a known problem requires changing the incentives themselves.
III. Zuckerberg and the Price of Permanent Control
At this point, defenders of dual-class ownership inevitably point to Meta's stock performance, and they're right to do so. Zuckerberg built one of the most profitable enterprises in modern history. Investors who bought Facebook at its 2012 IPO and held their shares have enjoyed extraordinary returns.
Founder control can protect long-term investment, allow management to ignore short-term market pressures, and prevent activist shareholders from forcing decisions that would improve quarterly earnings at the expense of a company's future.
But past financial success does not establish that a founder should possess effective immunity from shareholder replacement indefinitely. The ability to build an extraordinarily profitable company in 2012 is not proof that the same individual will always be the best person to manage it in 2032.
In October 2022, Brad Gerstner of Altimeter Capital published an open letter questioning Meta's spending and strategic direction. Meta's market valuation had fallen dramatically, investors were concerned about the company's metaverse ambitions, and Gerstner called for reductions in headcount expenses, capital expenditure, and metaverse investment. Among his recommendations was a proposal to limit annual metaverse spending to approximately $5 billion rather than the roughly $10 billion then being committed.
Source: Reporting on Altimeter Capital's October 2022 open letter.
He was a professional investor with a financial interest in Meta and a specific alternative to management's strategy. He could publish his objections, engage with the company, lobby other investors, and sell his shares. What he could not do was assemble an ordinary majority of outside shareholders capable of replacing Zuckerberg's control.
Meta's Reality Labs division subsequently continued reporting enormous operating losses. From 2021 through 2025, those losses totaled approximately $76.95 billion: $10.19 billion in 2021, $13.72 billion in 2022, $16.12 billion in 2023, $17.73 billion in 2024, and $19.19 billion in 2025.
These figures represent operating losses, not a precise calculation of permanently destroyed capital. Meta's profitable advertising business has financed these investments, and some of the technologies being developed may eventually produce substantial returns. That's entirely possible, and the outcome of the investment isn't the central question.
The question is what happens if shareholders conclude that the strategy has become unacceptable and that management needs to change.
In May 2026, Meta shareholders considered a proposal concerning the company's dual-class capital structure. The proposal received approximately 1.313 billion votes in favor and 3.648 billion against. It failed. A separate proposal requesting that Meta disclose voting results by share class also failed, receiving approximately 999 million votes in favor and 3.964 billion against.
Source: Meta Platforms, May 2026 Form 8-K.
The published consolidated totals don't reveal precisely how outside Class A shareholders divided. More importantly, Zuckerberg's voting majority means that he can defeat an ordinary majority-vote challenge even if every other shareholder opposes him.
The problem isn't that Zuckerberg must be wrong. It's that shareholders have limited means to correct him if he is.
IV. The Founder Is Not the Institution
In 2017, Harvard Law professors Lucian Bebchuk and Kobi Kastiel addressed precisely this issue in The Untenable Case for Perpetual Dual-Class Stock, published in the Virginia Law Review. Their argument was that superior founder voting rights may produce genuine advantages when a corporation first enters public markets, but those advantages can diminish as the company matures while the costs of entrenched control increase.
The skills required to create a successful company aren't necessarily the same skills required to manage it decades later. Businesses diversify, technologies change, markets mature, and founders develop new priorities. Some founders remain exceptional leaders throughout their careers. Others don't. Corporate governance exists partly because nobody can know in advance which outcome will occur.
Meanwhile, the founder's personal incentive to retain control doesn't necessarily diminish along with the business justification for maintaining it. If the corporate charter prevents shareholders from acting on that preference, the result is entrenchment.
The academic evidence concerning dual-class companies is mixed. Some studies identify advantages associated with protecting founder vision and long-term investment. Others find governance-related valuation discounts and accountability problems. There is no sound basis for claiming that every dual-class company will underperform or that every investment in such a corporation is foolish.
But there is equally little basis for treating a founder's initial success as sufficient justification for perpetual superior voting rights.
The remedy is not particularly exotic. Bebchuk and Kastiel argued for time-based sunset provisions under which superior voting rights expire after a defined period unless shareholders unaffiliated with the controlling founder approve their continuation. A period of ten or fifteen years would preserve substantial room for long-term strategic decision-making while preventing extraordinary authority from becoming automatically permanent.
If the founder remains the best person to control the company, shareholders can renew the arrangement. If the founder's judgment has deteriorated, the company's needs have changed, or the advantages of concentrated control have disappeared, shareholders can decline to renew it. That is the purpose of voting rights in the first place.
Index providers could reinforce that principle by incorporating meaningful sunset requirements into their eligibility methodologies. Disclosure rules could also require separate reporting of voting results by share class so that investors can distinguish the preferences of ordinary shareholders from those of superior-voting insiders. These reforms would not eliminate investment risk or guarantee competent leadership, but they would restore mechanisms through which shareholders can respond when leadership fails.
The issue isn't whether founders should be rewarded for building valuable companies. They should. The issue is whether that reward should include an indefinite right to control a public corporation regardless of the wishes of its other owners.
V. SpaceX and the Next Generation of the Problem
The arrival of SpaceX in the public markets demonstrates why this debate is no longer confined to companies that went public a decade or more ago.
SpaceX completed its IPO in June 2026, raising approximately $85.7 billion in gross proceeds. Its Class A shares began trading on June 12 under the ticker SPCX. Reuters reported that Elon Musk retained approximately 82% of the company's voting power after the offering, providing another striking example of public economic ownership coexisting with concentrated founder control.
Sources: SpaceX, June 15, 2026 IPO announcement; Reuters, June 22, 2026.
The scale of that offering renewed scrutiny of index eligibility and shareholder rights. In September, CFA Institute published a pulse survey examining attitudes toward dual-class stock, founder supermajority control, and the inclusion of prominent IPOs in major indices.
Forty-four percent of respondents said they did not invest in companies with dual-class shares, while another 28% indicated that the decision depended on investment prospects. Asked about founders retaining supermajority control after an IPO, 39% said they would not invest. The strongest result concerned index eligibility: 175 of 195 respondents favored retaining conventional public-float, trading-history, and profitability requirements rather than granting prominent IPOs immediate admission to major indices.
Source: CFA Institute, September 23, 2026.
The survey was informal and self-selected. It does not prove that 44% of investment institutions have formal exclusion policies or that a major market-wide shift has occurred. But it does establish that outright rejection of these arrangements is a recognizable position among respondents, and that the enthusiasm surrounding major technology offerings has not eliminated concerns about index standards.
SpaceX also illustrates the importance of distinguishing two related questions. The first is whether a company should qualify for inclusion in a particular index. The second is how much voting power public shareholders possess once they own the company's securities. A company may satisfy conventional index requirements while maintaining a governance structure that substantially limits shareholder authority.
The broader financial system can therefore normalize founder control without resolving its inherent accountability problem. As more companies with these arrangements enter public markets, the question becomes less about the wisdom of an individual investor's decision and more about the standards applied to the securities distributed throughout the investment system.
VI. The Zuckfuck Clause
The easy mistake is to turn this into an argument about whether Zuckerberg, Musk, or some other technology founder is a genius. That isn't the issue. A founder can be brilliant, build an enormously profitable enterprise, and make shareholders fantastically wealthy while still maintaining a corporate structure that gives ordinary investors insufficient protection against future failures of judgment.
The problem is not deception but the systematic separation of responsibility from reward. The institutions facilitating these arrangements are compensated for conducting transactions, producing investment returns, and representing markets. The ordinary shareholder's ability to remove ineffective leadership is not necessarily central to any of those incentives.
That is why disclosure alone is inadequate as a complete answer. Telling investors that they are surrendering meaningful governance rights establishes informed consent at the point of purchase. It doesn't establish that the surrender is economically prudent, that it should continue indefinitely, or that every subsequent investor obtaining exposure through an index fund has independently evaluated the bargain.
A company can be a spectacular investment while having a deeply questionable governance structure. A founder can deserve admiration without deserving permanent control. And an investor can make a fortune under a contract whose terms leave them dangerously exposed when circumstances change.
The Zuckfuck Clause is what happens when those distinctions cease to be theoretical and become part of the ordinary machinery through which the public owns corporate America.
The defenders of these arrangements will correctly point out that the voting structures were disclosed, the risks were known, and sophisticated investors accepted the terms. That's not an exoneration. It's the indictment. Wall Street understood the problem well enough to document it, regulate it, and in some cases remove the regulations when they became inconvenient.
The geniuses weren't too stupid to understand the problem. They were smart enough to make money from it.
And that is the Zuckfuck Clause.
Principal Sources
- Meta Platforms — 2026 Definitive Proxy Statement
- Meta Platforms — May 2026 Shareholder Voting Results
- Meta Platforms — 2025 Annual Report
- Snap Inc. — 2017 IPO Prospectus
- S&P Dow Jones Indices — July 2017 Share-Class Restrictions
- S&P Dow Jones Indices — April 2023 Reversal
- Bebchuk and Kastiel — The Untenable Case for Perpetual Dual-Class Stock, Virginia Law Review
- Aggarwal, Eldar, Hochberg and Litov — The Rise of Dual-Class Stock IPOs, Journal of Financial Economics
- Altimeter Capital's 2022 Criticism of Meta Spending
- SpaceX — June 2026 IPO Closing Announcement
- Reuters — SpaceX Financing and Founder Control, June 2026
- CFA Institute — The SpaceX IPO Puts Shareholder Rights to the Test, September 2026
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