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Some of the best-performing companies in their sectors in
Canada have multiple-voting share structures.
17 Costs of Dual-Class Shares
Opposition to dual-classes is growing, led by large
institutional investors: Canada Pension Plan Investment
Board, the Ontario Teachers’ Pension Plan, the Ontario
Municipal Employees’ Retirement System, and the
British Columbia Investment Management Corporation,
all support single-class share structures.
The Canadian Coalition on Good Governance believes
“any corporate governance regime is suspect if all the
structures, protections and processes can be negated by
a voting interest well beyond the economic interest.”
18 Costs of Dual-Class Shares
They confer economic power to insiders while permitting
them to pass off the majority of the financial risk.
Insiders are able to expropriate funds from those holding
lesser voting shares through self-dealing, extravagant
executive pay, and also by directing the company’s cash
flow to personal projects unrelated to the core business.
They entrench poorly performing management and
insulate managers from accountability for their actions,
since they preclude shareholders from mounting
Some studies have shown that, as an investment, dualSome
class share structures tend to under-perform single-class
structures over time. But evidence not conclusive.
19 Dual-Classes at Hollinger Intl.
Hollinger International Inc. presents an extreme example
of the detrimental effects of dual-class share structures.
Former Chief Executive Officer Conrad Black controlled
all of the company’s Class B shares, which gave him
30% of the equity and 73% of the voting power.
Mr. Black appointed the majority of board members, who
were unlikely or unwilling to oppose his authority.
Mr. Black exacted excessive management fees,
consulting payments, and personal dividends
The aggregate funds taken by Mr. Black and Hollinger...
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This document was uploaded on 03/09/2014 for the course COMM 371 at The University of British Columbia.
- Spring '13