The ASX is home to many fantastic companies. From blue-chips like Woolworths Group Ltd (ASX: WOW) and Commonwealth Bank of Australia (ASX: CBA) to healthcare leaders like CSL Limited (ASX: CSL) and ResMed Inc (ASX: RMD) – there's certainly a lot of winners to choose from.
One consistent criticism that the ASX faces however, is its lack of big tech companies. Sure,we have our favourite WAAAX stocks like WiseTech Global Ltd (ASX: WTC) and Afterpay Touch Group Ltd (ASX: APT). But if we look to the US markets, there's nothing on the ASX that comes anywhere near the likes of Alphabet, Netflix or Amazon.
Even our (arguably) biggest home-grown tech success story Atlassian Corporation PLC (NASDAQ: TEAM) has fled our shores, now comfortably at home on the US Nasdaq exchange.
According to reporting in the Australian Financial Review, there's good reason. As the AFR report notes, there's a lot of appeal for tech start-ups in the American markets, including liquidity and differing tax rules. But it's the anti-democratic share structures that the US allows that's the main attraction.
Anti-democratic?
On the ASX, there are strict 'one-vote, one-value' rules for most listed companies. That means that one share gives every shareholder one vote in (almost) every company.
But over in the US and incredibly other global markets, the company's founders have the ability to undermine this principle through what's known as 'dual-class shares'.
Take Atlassian. Although there is 1 stock that you or I can buy if we want to invest with the company, there are actually 2 types of Atlassian shares out there – Class A and Class B. Class A stock are the TEAM shares available for public trading. But Class B shares are only held by Atlassian's founders Mike Cannon-Brookes and Scott Farquhar and aren't available publicly.
The difference? Class A shares offer 1 vote per share, but with Class B stock it's 10 votes per share.
That essentially means that the founders have unrestrained control over the company, even though they might not even have a majority of the company's financial ownership on side. That's right, Mr Cannon-Brookes and Mr Farquhar don't have to worry about pesky shareholders questioning their decisions as they always have the final say on… anything, really.
They aren't the only ones either… Alphabet, Facebook, Lyft, and Snapchat all follow similar structures – in fact, Alphabet and Snapchat take things one step further with a 'tri-class structure'.
Foolish takeaway
Whilst I like the fact that these 'anti-democratic' share systems aren't allowed on the ASX, the flipside means that Aussie founder-led companies may continue to flee to the US where they can more easily cement founder control using these structures. If we continue to see companies like Atlassian seek their fortunes outside Australia, the ASX might have to consider a change.
