Wise founders' row puts dual-voting structures in the spotlight

Times

23-07-2025

When two billionaires fall out over a fundamental principle, you can expect a certain amount of argy-bargy. So it transpired this week as the co-founders of Wise, the £10 billion London-listed cross-border payments platform, came to blows.
Taavet Hinrikus went public to berate his erstwhile friend, business partner and fellow Estonian Kristo Kaarmann over a plan to extend his near-stranglehold over the company and, in Hinrikus's view, to tighten it still further.
In a stinging letter, he rebuked his co-founder for risking reputational damage to the company by proposing to extend a dual-class share system by another ten years. Wise had previously promised to dismantle the system, which gives Kaarmann 55 per cent of the voting shares, and bring in a more democratic approach by June 2026 at the latest.
• Wise founders fight over two-tier share structure
Not only was Kaarmann entrenching 'rule by the few', he was also sneaking the reform through in an underhand way by 'bundling' it in with a different proposal to switch the company's primary listing from London to New York, argued Hinrikus, who left the business shortly after it listed in 2021 but still owns an 11.8 per cent voting stake.
The enfranchisement proposals were not even mentioned in the official announcement about the listing move and were 'buried' in an accompanying 94-page circular, he said. So was another tweak to the arrangements which would compound Kaarmann's dominance still further by reducing the majority threshold on future votes.
'Wise owners deserve governance structures that enhance value, not entrench power,' was Hinrikus's barbed sign-off line.
Wise and Kaarmann, who is chief executive, have hit back, insisting that they have been transparent and that extending the dual-class structure was 'essential to ensuring our continued successful performance and safeguarding our focus on executing our strategy'.
• Wise to incorporate in Jersey ahead of US listing
The row over voting rights has overshadowed a different concern over Wise's transatlantic flit, a move already seen as a blow to the City of London's reputation as a nurturing jurisdiction. For Wise is that rare thing in Britain: a large tech-driven disrupter, loved by its clients, expanding fabulously fast and already spectacularly profitable.
Hinrikus has a point. There seems no insuperable reason why the US switch and the dual-class share proposal shouldn't be unbundled so that shareholders can make separate decisions on each. They are very different matters deserving of different votes. Yet the arrangement makes it look as though Kaarmann is using the sweetener of the primary listing change to steamroll through a personal power grab.
The haste to get the proposal done and the failure even to mention the dual structure in the initial regulatory news announcement hints at a board rather embarrassed about all this and hoping no one will notice.
That haste has led to confusion. Wise has been wrongly claiming the support of at least one proxy voting agency, PIRC, which had completely changed its verdict on the proposal after seeing the full details and is now emphatically recommending that Wise shareholders vote against. Glass Lewis has also modified its position after learning all the details.
There is no explanation as to why a company that set a five-year limit on the dual-share structure at the time of its listing in 2021 now thinks a total of 15 years is necessary. Most so-called sunset clauses in founder-led flotations are for five to seven years.
Dual-voting structures divide opinion. Allowing founders to maintain control gives them the confidence to make long-term decisions and not be distracted by the need to generate smooth quarterly earnings progress of the kind unhelpfully expected by some outside shareholders.
On the other hand, they can entrench power. Unsackable bosses are not immune from making strategic blunders, while their companies could sometimes benefit from unwanted takeover bids or activist pressure. Private fiefdoms can work well for a while but ultimately get complacent and need outside challenge. There is much to be said for the simpler philosophy of 'one share one vote'.
• Wise value tumbles after revenue growth slows and profit dips
Ever since Sergey Brin and Larry Page floated Google (now Alphabet) in 2004 and claimed it as a virtue that their shares carried ten times as many votes as anyone else's, the doctrine of special privileges for founders has prevailed, especially in tech companies.
No one could complain they weren't warned. 'Google is not a conventional company and we do not intend to become one,' proclaimed Brin and Page, who have long since stepped down but still control the votes. And investors have of course done exceptionally well, making 63 times their money
Research on dual and multi-share structures is patchy and ambiguous. One of the more credible global studies, by academics at the University of Virginia, found that there was no meaningful difference in either total shareholder return or return on invested capital between listed companies with multi-share structures and those more democratically structured.
The pendulum towards founder-favourable terms shifted even further in the UK with recent reforms to the listing rules that allow dual-class structures and do away with the need for independent shareholder votes on related-party transactions.
• Wise investor 'unhappy' over listing move from London to New York
Some mainstream investment institutions in the UK believe it has gone too far, on Monday launching a new lobbying strategy, the Governance for Growth Initiative, to fight a rearguard action for shareholder rights.
Wise owes its remarkable success to what it used to call 'radical transparency' — its clear explanation of the fees charged to its customers. This, it was able to boast, was in sharp contrast to the obfuscation and impenetrable fine print of the high street banks.
With this proposal, it is in danger of the very same sin itself. It claims 'overwhelming support' from its shareholders but this may have been before they understood exactly the concession they were being asked to make. It is not quite too late to vote against.