19 octobre 2010

« Do your shares have the power? »

David Milstead | The Globe and Mail

[ … ]

« Yvan Allaire, chairman of the board of the Institute for Governance of Private and Public Organizations (IGPPO) and a professor emeritus at Universite du Quebec a Montreal, estimated that 13 per cent of the 253 companies on the TSX/S&P composite index in 2008 had some form of dual-class voting structure.

For the last three decades, any company choosing to list on the TSX must include some sort of « coattail » provision that protects the lesser-voting shareholders. In essence, it says that the terms of any sale of the super-voting shares must be offered to all shareholders. Magna was one of roughly a dozen companies on the TSX that are grandfathered in and need not abide by that clause.

Not required, and not as common, is a « sunset » provision such as the one at Gluskin Sheff that sets out from the beginning a time frame for the special voting rights to expire.

[ … ]

Some dual-class companies give the vote solely to a controlling class of shareholders, giving no vote at all to the second set. Others set an unequal ratio of voting rights: Mr. Allaire says 10 votes to 1 is common, and the median in a 2005 study was 4.38 to 1. Yet there are outliers (Mr. Stronach’s Magna shares had 100 votes, while public shareholders got one.)

A shareholder owning stock with 10 votes per share needs only 9.1 per cent of a company’s equity to control it, Mr. Allaire notes. The IGPPO, the group Mr. Allaire chairs, advocates that legal control of a company (50 per cent plus one of the votes) should not be achieved with less than 20 per cent of the equity. That, he says, implies a ratio of no more than 4 votes for the controlling shareholder to 1 for the others.

[ … ]

Hot-button issues

Yvan Allaire, in a paper earlier this year for the Canadian Institute of Chartered Accountants, listed questions directors should ask before joining the board of a company with a dual-class share structure. The questions also would serve potential shareholders:

1. What is the nature of the difference between the share classes?

  • Do both classes have full rights to vote, differing only in the number of votes to which they are entitled?
  • Is there a class without voting rights?
  • Is there a provision allowing the class of shares with inferior voting rights to elect a number of board members?
  • Are both classes of shares traded on stock exchanges and, if so, how are they valued by the market?

2. Does the company have a strong coattail provision in place to protect minority shareholders in the event of the controlling shareholder selling his/her interest?

3. How does the controlling shareholder’s voting power compare with his/her economic interest? »

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