Twenty-five years ago this autumn, two American founding families, the Fords and the Hewletts, pushed back against their companies’ management. On 30 October 2001, William Clay Ford Jr., known as Bill Ford, a great-grandson of Henry Ford, became chief executive of Ford Motor Company. On 6 November, Walter Hewlett, son of Hewlett-Packard co-founder William Hewlett, said that the Hewlett family and its foundation would vote against HP’s purchase of Compaq.
One family took the top job; the other narrowly lost a shareholder vote, then a lawsuit. Part of the difference was structure: the Fords hold special voting shares, while the Hewletts held an ordinary block, partly through a foundation.
Ford: a fixed 40% of the votes
Ford has two classes of stock. Common shares carry one vote each. Class B shares, held almost entirely by Ford family members and their trusts, carry as many votes as a formula in Ford’s certificate of incorporation requires, so that together they hold 40% of the general voting power. A 2022 Ford filing says this holds while at least about 60.7 million Class B shares remain outstanding.
In February 2002, Ford’s annual report counted about 1.74 billion common shares and 70.9 million Class B shares. By our calculation, the family’s class was about 4% of the shares but carried 40% of the votes.
The votes cannot be sold as votes: there is no quoted market for Class B shares, and a holder who wants to sell converts them into common shares. And the family votes together. Ford’s 2024 proxy statement shows a voting trust holding 99.9% of the Class B shares; its four family trustees, including Bill Ford, must vote them as a plurality directs.
Bill Ford had been chairman since 1 January 1999. Jacques Nasser, chief executive since 1999, was pushed out in 2001, and on 30 October Bill Ford took the job himself. The board appointed him, but every director knew where 40% of the votes sat.
On 5 September 2006, with Ford losing money ($1.4 billion in the first half of 2006, according to GoAuto), he handed the CEO job to Alan Mulally, a Boeing executive, and became executive chairman. “I’m not going anywhere,” he told employees, according to Ford’s release. Ford’s 2024 proxy still listed him as chair of the board.
Hewlett: a block of ordinary shares
HP announced the Compaq deal on 3 September 2001 and planned to pay in its own shares, so its dollar value moved with HP’s share price: about $25 billion at first and $18.4 billion on 6 November 2001, both according to CNN Money. Walter Hewlett, an HP director, had joined the board’s unanimous vote in favour.
Two months later he announced that the Hewlett holdings, about 5% of HP or roughly 100 million shares, would vote against. The holders were Walter, his two sisters, a family trust and the William and Flora Hewlett Foundation, which he chaired. He argued that HP would create more value on its own. HP’s shares rose $2.92 that day, to $19.81.
On 7 November, eWeek reported that David Woodley Packard, son of co-founder David Packard and owner of about 1.3% of HP, also opposed the deal. In December, eWeek reported that the David and Lucile Packard Foundation, with about 10%, had provisionally decided to vote against too.
The HP vote and Hewlett’s lawsuit
Shareholders voted on 19 March 2002. The certified count, published by HP on 1 May, was 838.4 million shares for and 793.1 million against: by our calculation, about 51.4% to 48.6% of the votes cast for or against, a margin of some 45 million shares.
On 28 March, Walter Hewlett sued in the Delaware Court of Chancery. He alleged that HP had misled shareholders about the deal’s finances and integration, and had pressured Deutsche Bank so that its asset management arm voted 17 million shares for the deal, by eWeek’s count. On 30 April 2002, Judge William Chandler III ruled that Hewlett had not proven his claims. He called “troubling” a call that Deutsche Bank’s bankers set up between its asset managers and HP managers, but found that coercion had not been proven. Hewlett did not appeal. By then he was off the board: HP had not renominated him, and he left at the annual meeting a week before the ruling, eWeek reported.
What special voting shares and a foundation’s block can and cannot do
Special voting shares give a family a lasting voice that does not shrink when the company issues new shares. They cannot make a company profitable, and they draw criticism: Ford’s 2024 ballot included a shareholder proposal to give each share an equal vote, which the board opposed. They also work only while the family stays united.
A foundation’s block of ordinary shares is a voice, not a veto. It can vote, campaign and go to court, but it has no rights beyond any other shareholder’s. To win, it must persuade others, mostly institutions, and it does not guarantee a board seat. Its board must also serve the foundation’s purpose, which may differ from the family’s wishes. Size matters: with about 66% of Tata Sons, the Tata trusts are owners in charge. Other families bind votes by contract, like the Henkels; the wider menu is in Holding Structures in Plain English.
A fair caveat
Neither story proves which tool is better. The Fords kept control, yet Ford was still losing money when Bill Ford handed over. Whether the Compaq deal was good for HP is still debated, and we take no side. Deal values vary by date and outlet, and the Packard Foundation’s decision comes from press reports.
Five lessons to take away
- Control has to be written in. Ford’s 40% sits in its certificate of incorporation, not in goodwill.
- An ordinary block is a voice, not a veto. About 5%, even with allies, lost by some 45 million shares.
- Unity is the real asset. Ford’s voting trust makes the family vote as one.
- A family board seat is not guaranteed. HP’s board did not renominate Walter Hewlett.
- Control includes knowing when to step aside. In 2006 Bill Ford handed the CEO job to an outsider and stayed on as chairman.
Questions to bring to your advisors
If our company lists or takes outside money, how will we keep a say as our share of the capital shrinks? Are special voting shares allowed where we are, and would investors accept them? If part of our stake goes to a foundation, who will decide how it votes? These are questions to bring to your advisors, not advice.
