Wise moves? Governance lessons from a co-founder fallout

The recent public dispute between Wise’s co-founders has brought corporate governance sharply into focus. The dispute stems from a proposal to extend the company’s dual-class share structure by ten years, tied to a separate plan to move its primary listing from London to New York.

This is far more than just a business disagreement; what it highlights is the delicate balancing act that growing businesses all too-often face between managing founder control and protecting shareholder interests while maintaining the core values on which the business was established as it expands.

Understanding dual class share structures

A dual class share structure gives certain shareholders (typically founders) enhanced voting rights through a special class of shares, meaning they can retain a decisive say over major decisions, even if their economic interest in the company declines over time.

Advocates see this as a way to protect long-term strategy from short-term market pressures, allowing the key decision-makers to focus on continuous innovation and long-term development over short-term gains, which may be of particular importance for sectors such as fintech, in which Wise operates.

Some critics say these structures give too much power to too few people, with enhanced voting rights over other shareholders that are disproportionate to their economic interests, which may weaken accountability and, in turn, dissuade investors who may feel more comfortable with more traditional “one share, one vote” structures. Like most governance tools, it all comes down to how they’re built, used, and kept in check.

Why is Wise’s situation significant?

When Wise listed in London in 2021, investors were told the dual-class structure, that granted much heavier voting rights to Class B shares, would revert to a single class structure in 2026. Extending this enhanced voting arrangement by a decade instead represents a significant shift in the company’s governance framework.

The lack of transparency around the proposed resolution to extend has caused much controversy, however the decision to bundle this proposal with the move to a dual US listing has been a central point of contention. Governance changes of this magnitude should be presented in a clear and transparent way that allows shareholders to assess proposals independently. Combining them risks creating the impression that one decision is being used to disguise or secure agreement on the other.

Clear communication matters just as much as the idea itself. Even if the business case is solid, poor transparency can create an environment of doubt and mistrust, even where such fears may ultimately prove unfounded.

Implications for investor trust

Investors need to have confidence in the way in which the business they have invested in is being managed and that any key governance changes will be handled openly, with clear reasoning and proper safeguards in place. If voting rights are involved, the process by which approval is obtained should be crystal clear for all involved.

In Wise’s case, concerns have centred on whether shareholders have been given sufficient information and opportunity to consider the proposals separately, and whether the change to the expiry date of the dual-class structure aligns with the expectations set at the time of the IPO. Ashese issues have played out in public, there are now reputational concerns to deal with in addition to the legal and commercial considerations.

What can scaling businesses learn?

The Wise dispute offers broader lessons for other founder-led businesses:

• Review governance structures regularly: Structures that made sense at an earlier stage may need to evolve as the business grows;
• Separate distinct decisions: Material changes to voting rights should be considered independently from unrelated strategic moves;
• Prioritise clear communication: Governance proposals should be accessible and transparent, avoiding complex or overly bundled documentation; and
• Bespoke governance documents, whatever the size of your business: A well-crafted shareholders’ agreement or constitution can set out how control is exercised, how changes will be made and what safeguards will be in place, ensuring that all involved know exactly how the business will be governed and their place in it.

These measures, if properly considered, can help strike the right balance between founder control and investor protection, allow for innovation and future development and avoid unnecessary disputes that can distract from the company’s growth ambitions.

The takeaway for businesses

Good governance isn’t just about ticking legal boxes, it’s about creating a transparent operating structure tailored to your business, where ambition and accountability go hand in hand. Whether you’re listing, bringing in investors or simply looking to changing your share structure, transparency, fairness and clarity should be at the heart of every decision.

Ultimately, founder control and wider shareholder protections do not need to be in conflict, but maintaining the right balance requires deliberate, clear and careful attention at every stage of a company’s growth.

‍