Should stock exchanges allow listing of shares with different voting rights? The length of the report...

Should stock exchanges allow listing of shares with different voting rights?

The length of the report should not exceed 2000 words excluding tables, appendixes and graphs (if any).

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Expert Solution

Companies with dual-class shares have two designations of common stock, typically A shares and B shares, with one class having more powerful voting rights than the other. Holding the more powerful shares allows some group of shareholders often the founders to control boardroom decisions even as economic interest in the firm is dispersed more widely. Some of the largest companies of recent times by market capitalization, such as Facebook, Alphabet, and Alibaba, carry dual class-shares.

Instead of recommending a total ban on listing of shares with different voting rights we recommend a more flexible shareholding structure. Companies with dual-class structures could be required, after a period of predetermined years, to gain approval from a majority of all shareholders to continue the dual-class structure. Furthermore, single-class firms should be given an option to convert to dual-class shares through a shareholder vote, in order to carry out significant transformations, instead of having to completely delist in order to achieve that goal.

jeff jeffy answered 1 year ago

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