Differential voting rights
Ben & Jerry’s had three equity classes: class A common, class B common, and class A preferred. The holders of class A common were entitled to one vote for each share held. The holders of class B common, reserved primarily for insiders, were entitled to 10 votes for each share held. Class B common was not transferable, but could be converted into class A common stock on a share-for-share basis and was transferable thereafter. The company’s principals—Ben Cohen, Jerry Greenfield, and Jeffrey Furman—effectively held 47% of the aggregate voting power, with only 17% of the aggregate common equity outstanding. Nonboard members, however, still maintained 51% of the voting power (Exhibit 5). The class A preferred stock was held exclusively by the Ben & Jerry’s Foundation, a community-action group. The class A preferred gave the foundation a special voting right to act with respect to certain business combinations and the authority to limit the voting rights of common stockholders in certain transactions such as mergers and tender offers, even if the common stockholders favored such transactions.
Vermont Legislature
In April 1998, the Vermont Legislature amended a provision of the Vermont Business Corporation Act, which gave the directors of any Vermont corporation the authority to consider the interests of the corporation’s employees, suppliers, creditors, and customers when determining whether an acquisition offer or other matter was in the best interest of the corporation. The board could also consider the economy of the state in which the corporation was located and whether the best interests of the company could be served by the continued independence of the corporation.
Those and other defense mechanisms strengthened Ben & Jerry’s ability to remain an independent, Vermont-based company, and to focus on carrying out the threefold corporate