Dual-Class Shares: Not the Enemy

Published in the October 2010 issue of Lexpert magazine as part of Barry Reiter's regular column.

Shareholder activists like to project democratic values onto corporate share structures. But multiple-voting shares can be useful — for common and controlling shareholders alike

Dual-class shares have been taking a beating as of late. In the Magna International case, the concern was over a hefty premium to be paid to the Stronach family, holders of the superior class, for relinquishing their 300:1 voting preference. More generally, activist shareholders seem concerned about disenfranchisement of holders of inferior classes of shares. Institutional Shareholder Services (part of the RiskMetrics Group) recently recommended that dual-class share structures be eliminated entirely for all future newly listed companies, and that corporate law be changed to require sunset provisions for companies with this kind of structure, causing all shares to revert to common shares after