Corporate Reputation Management in the Post Truth Era and the Age of Fake News
February 12, 2025
Brand Equity is defined as value and strength of the Brand that decides its worth whereas Customer Equity is defined in terms of lifetime values of all customers. Brand Equity and Customer Equity have two things in common- Both stress on significance of customer loyalty to the brand. Both stress upon the face that value […]
Ethics means a set of moral principles which govern a person’s behavior or how the activity is conducted. And advertising means a mode of communication between a seller and a buyer. Thus ethics in advertising means a set of well defined principles which govern the ways of communication taking place between the seller and the […]
Whenever one talks of E marketing strategy or plan, they normally include online selling, online promotions and advertising. However this could be a very narrow view or definition as applied to E marketing. Planning for Customer Relationship Management is as important as paying attention to online selling efforts. Let us look at understanding some of […]
Consumer behaviour deals with the study of buying behaviour of consumers. Consumer behaviour helps us understand why and why not an individual purchases goods and services from the market. There are several factors which influence the buying decision of consumers, cultural factors being one of the most important factors. What are Cultural Factors ? Cultural […]
Social Media Channels contain thousands of websites, blogs, forums, videos and so on. Individuals have now begun to spend most of their free time online catching up with various conversations and topics of their interest. When one wishes to get the latest update on news, entertainment, movies, music as well as catch up with what […]
The long term success of a company depends on the decisions made by its management. The appointment of management is done by the shareholders. However, the problem is that shareholders are considered to be one homogenous group. This is not an accurate reflection of reality. Different kinds of shareholders invest in a company. Some shareholders intend to hold on to the shares for a longer duration of time whereas there are others who would hold on to the shares only for a few days and in some cases just a few minutes.
The rule of law in most countries provides shareholders with equal voting rights no matter how long they hold the shares for. A decade old shareholder has the same rights as a day old shareholder. Proponents who endorse long term right to vote find this unfair. This is because short term shareholders are often speculators. They have nothing to do with the long term interest of the company. Since they have an equal vote, they end up distorting the company’s value creation process.
The French government has introduced differential voting rights in their companies. This means that shareholders who have held the stock for more than 24 months are listed down in what is called, the “loyalty register”. These shareholders have twice as much voting power as an average shareholder. These differential rights are the de facto standard for every company unless they decide to opt out of the process by mentioning it in their articles of association. A similar law is being introduced in Italy as well. Investors all over the world have opposing views regarding this law.
It must also be noted that the shareholders of major companies like the French carmaker Renault have overwhelmingly voted in favor of “one share one vote”. A similar case happened at L’Oreal where more than 95% of the shareholders voted in favor of maintaining the “one share one vote” rule.
Since the issue of loyalty dividends and loyalty shares requires a special majority i.e. 75% vote in Italy, no major Italian company has implemented these rules as of now.
While some believe that this law is a boon for the shareholders, other think it is a bane. In this article, we will understand both these points of view.
To sum it up, differentiated voting rights is a complex issue. There are significant pros and cons to be analyzed in this case. However, the “one share one vote” rule has been entrenched in the corporate culture for very long. Changing this rule will require a lot of influence and will lead to a lot of short term mayhem in the market. Instead of the government making the decision on the company’s behalf, each company can be given the right to decide on its own.
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