tag:blogger.com,1999:blog-582368152716771238.post5801052473853854734..comments2024-03-28T14:41:03.793-05:00Comments on The Grumpy Economist: Non-voting shares responseJohn H. Cochranehttp://www.blogger.com/profile/04842601651429471525noreply@blogger.comBlogger5125tag:blogger.com,1999:blog-582368152716771238.post-61017441869819972702017-06-26T19:35:47.612-05:002017-06-26T19:35:47.612-05:00An even simpler solution - all shares are voting s...<br />An even simpler solution - all shares are voting shares, but if you want to exercise the vote you pay a small but meaningful fee to the company - say 0.25-1% of VWAP - or forego a similar portion of the dividend. This effectively dilutes you with respect to shareholders who decide not to vote. In exchange for the dilution you get to vote for a year. Maybe big shareholders with more than a 5% holding need to declare their voting intentions and give other parties time to respond, like current takeover rules, to prevent some obvious shenanigans.<br /><br />Most of the time you'd expect just the board and a few shareholders to vote a very small portion of their shares to maintain status quo. But an activist with a large shareholding might announce their intention to vote and suffer dilution for all their shareholding - but enjoy the excess return for being an activist. It's then incumbent on other shareholders who like the current structure to vote too and suffer dilution. But the more people who vote - and gets diluted - effectively reduces the penalty for voting; so the more need there is to vote, the lower the penalty for voting.Patrick Chttps://www.blogger.com/profile/11010956691509926206noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-65719534063986040312017-06-25T22:46:36.239-05:002017-06-25T22:46:36.239-05:00Interesting topic. Shareholder democracy and good ...Interesting topic. Shareholder democracy and good corporate governance are interesting issues. The use of staggered boards to entrench management is worth looking at. <br /><br />Like John Cochrane, I do not favor legal solutions, but it would be nice if large shareholders lobbied exchanges and indexers etc. to delist companies that do not meet certain corporate governance minimums. <br /><br />I hope we get to the day where government starts taking cues from corporate governance on transparency and accountability! <br /><br />Side note: Is there any reason why most city governments are not completely online and transparent? That is, the city financial books are online, every payment made, all contracts and all meetings done in front of a webcam etc.?<br /><br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-80077342585891897462017-06-25T08:22:32.970-05:002017-06-25T08:22:32.970-05:00I too prefer a market for corporate voting. See my...I too prefer a market for corporate voting. See my post on this subject: <br /><br />http://jpkoning.blogspot.ca/2014/08/a-market-for-corporate-votes.html<br /><br />You'll see some links there to papers that discuss how voting power can be achieved via stock lending. It's a murky market.<br /><br />"The non-voting shares I have in mind need do need a lot of smart lawyering and contract writing by people like Todd and Dorothy."<br /><br />I think this is easy to achieve. Canada has a much more active history of issuing non-voting shares than the U.S. To protect investors who own non-voting stock, Canadian companies have been required to include "coattail provisions" in their corporate charters. See here:<br /><br />http://jpkoning.blogspot.ca/2015/12/riding-on-sergey-brin-and-larry-pages.html<br /><br />In essence, when corporate control is changed the non-voting shareholders get to ride on the coattails of the voting shareholders, enjoying all the same rewards and privileges.JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-27550652756791843952017-06-25T05:00:01.457-05:002017-06-25T05:00:01.457-05:00You could presumably make an index of non-voting s...You could presumably make an index of non-voting shares. And then track that. But the critique of who else would buy those shares (i.e. liquidity) is a good one.<br /><br />I get the impression that Henderson and Shapiro are suggesting that in the current regulatory framework index tracking funds are _obliged_ to vote, whether they want to or not. If that is true, then removing that obligation would make a lot of sense - why force uninformed shareholders to vote?PaulLhttps://www.blogger.com/profile/17880559466808887420noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-50022529314507443672017-06-24T16:10:16.763-05:002017-06-24T16:10:16.763-05:00The Henderson and Shapiro response was really good...The Henderson and Shapiro response was really good. After reading the response-response clarification, I sense that one of their important observations is being missed: that index trackers don't have a use for non-voting shares, because those are not the shares that are included in the index. Thus they will not buy them, and will not benefit from a discount. <br /><br />A mutual fund that is not necessarily committed to tracking an index might be interested in non-voting shares. But we haven't really heard them asking for such shares.Anwerhttps://www.blogger.com/profile/08277173974258559733noreply@blogger.com