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The creation of the new share structure – which was opposed by two shareholder advisory firms – was passed at the e-commerce company's annual shareholder meeting on Tuesday. Shareholders also approved of the 10-for-1 share split, a move the company says would make its class A and class B shares more affordable to a broader segment of the population and enable it to "broaden and diversify its ownership base."
The founder share will sunset if Lutke leaves the company, or if he and his immediate family no longer hold 30 per cent of the class A and class B shares.
"The progress we have made advancing our vision for the future of commerce would not have been possible without our founder and CEO," Shopify said in its management proxy circular released in advance of the shareholder meeting.
"The Board believes that the proposed updates to our governance structure... will allow Shopify to remain mission-driven and merchant-obsessed, focused on long-term value creation. The updates will also strengthen the foundation for long-term stewardship by Tobi, a proven leader who has delivered significant shareholder value."
The changes come amid a turbulent time for the company's stock, which has plummeted more than 70 per cent since the start of the year. Shopify has been struggling through the post-pandemic recovery, as demand for online shopping moderates from COVID-19 highs and investors lose enthusiasm for e-commerce stocks.
Richard Leblanc, a professor of corporate governance, law and ethics at York University, said in an interview that solidifying Lutke's voting power protects the company from possible activist investors that may try to swoop in and buy the company at a time when the stock is depressed. He says it will ensure the board is "not looking over their shoulder all the time for someone in the waters ready to pounce," something he adds is currently happening at Twitter with Elon Musk's proposed takeover.
"The net effect is that Lutke now has 40 per cent control, which effectively insulates him from any outside purchase," Leblanc said.
"Activists do not like dual class shares, or a proposal like this that strengthens a founder's control, but what the proposal does is ensure that class A shareholders can continue to invest in Shopify knowing that the founder will be there."
Shopify's stock was up nearly 4 per cent as of 2:01 p.m. ET, trading at $470.61 a share on the Toronto Stock Exchange, far below the company's 52-week high of $2,228.73.
With files from Bloomberg
Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.