Can investors have voting rights at all?

In some cases, investors take on entrepreneurial responsibility for a company – for example, if the founders invest in the company themselves or in the case of very active and entrepreneurially involved investors. There are grey tones and options for people that invest capital to also take on voting rights, but it should be noted that the relevant point here is that they take on voting rights and also invest in the company, not take on voting rights because they invest in the company. The access to entrepreneurial control comes from the active role in designing and steering the company’s future; it is about the stewards choosing to share their formal stewardship role with others because they recognize a benefit and need for the company or the current group of stewards. It can sometimes be tempting to believe that someone is the right steward simply because they are willing to invest a significant amount of money. So, be aware and mindful to separate their financial contribution from their suitability for a stewardship role.

Additionally, in these cases, it becomes relevant to ensure that the people exercising voting rights can independently, detached from personal financial and external incentives, decide what is best for the company; that the question of “how much is enough?” is answered; and that there is no unlimited extraction of value from the company at the cost of its purpose. To do so, mechanisms should be in place that prevent a conflict of interest. This can include striving for a model in which the control remains with people without financial stakes in the company, and by ensuring that the investment return is limited.

In the case of individuals or organizations which are primarily investors and are not taking on entrepreneurial responsibility but are looking for voting rights anyway, the relevant discussion to have is about why they feel the need to have voting rights. Holding voting rights is not the only way to be included in decision-making in the company and not the only way to get your needs met as an investor. A healthy investor-company relationship in steward-owned businesses can also be based on specific governance and provision rights for investors – and usually doesn’t involve any voting rights held by investors.