Members of the COMPAS business panel were asked for their general thoughts about dual class shares following the controversial deal for Magna to purchase Frank Stronach’s voting shares for a large multiple in non-voting shares.

CEOs and Business Leaders on the panel have a moderate tendency to believe that dual-class shares should be allowed in a modern stock market - 52% favour allowing the two class system while 34% are opposed. Panelists agree that voting shares should be valued at many times the price of non-voting shares - 33 times more on average.

The small majority who favour permitting dual-class shares do so because of their belief in the freedom in a democratic society of non-governmental corporations to make contracts of their own design. Panelists nonetheless agree in varying degrees with three key criticisms of dual-class share systems, namely that

• Dual-class structures are non-transparent to retail stockowners, who may not fully understand that their shares are nonvoting or the limits on the value of their own shares(60% agree vs 16% disagree);
• It is too confusing to valuate properly the two classes of shares and too difficult to know the magnitude of the extra side-benefits that may accrue to those who own voting shares (56 vs 21); and
• Dual-class shares cause an atmosphere of mistrust that discourages retail investors from buying into the stock market (52 vs. 25).

These are the key findings from this past week’s Internet survey of CEOs and business leaders on the COMPAS panel. The weekly business survey is undertaken for Canadian Business magazine under sponsorship of BDO Dunwoody LLP.

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