Under the new plan announced Monday, the Ottawa-based e-commerce company will issue Lütke a non-transferable founder share that will have a variable number of votes that, when combined with his other holdings, will represent 40 per cent of the total voting power attached to all of the company's outstanding shares.
However, the founder share will sunset if Lütke no longer serves as an executive officer, board member or consultant whose primary job is with the company or if Lütke, his immediate family and his affiliates no longer hold a number of class A and class B shares equal to at least 30 per cent of the class B shares they currently hold.
In the event of a sunset of the founder share, Lütke will also convert his remaining class B shares into class A shares.
The shakeup comes as Shopify's stock has experienced a significant slump in recent months, after surging following the onset of the COVID-19 pandemic.
Yet Lütke, who started Shopify with an investment from father-in-law
If Monday's "unprecedented" proposal is approved, more control over the company could eventually be wrested away from Lütke and handed to common shareholders, said
Shopify estimates that if the conversion were completed Monday the total voting power held by class A shareholders would increase to roughly 59 per cent from about 49 per cent.
"This is so unique ... because most of the time the founder thinks they're going to live forever and they don't want to relinquish control," Leblanc said.
"There's many companies in
The arrangement would also prevent a power struggle from unfolding within the founder's family like telecommunications giant
Leblanc believes more companies will follow Shopify's lead, especially after the public Rogers battle, because "there's an increasing intolerance by investors for absolute control by family members."
Shopify's proposal is the result of a board process it said was conducted under the supervision of a special committee of independent directors.
It framed the move as a way to "modernize" Shopify's governance structure, align it more closely with long-term market opportunities and follow the company vision Lütke outlined in a 2015 public letter, where he prioritized long-term value over short-term revenue opportunities.
That ethos has extended to the stock price. Lütke is known for requiring anyone at the office caught checking the company's stock price during the day to purchase Timbits for their team.
Those that took a peek likely noticed Shopify's stock has been more than halved over the last year. It sat at
As of July, the company will begin giving staff a "total rewards wallet" that allows them to choose between cash and stock options for their compensation, Shopify spokesperson
The share split requires approval by a two-thirds majority of shareholders and at least a majority of the votes cast by shareholders excluding Lütke and his associates and affiliates. The matter will face a vote on
If approved, Shopify director
Shopify also announced Monday that it purchased Dovetail, a software company behind a creator management system, for an undisclosed total.
This report by
Companies in this story: (TSX:SHOP)
Note to readers: This is a corrected story. A previous version had the incorrect November stock price high.
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