Corporate Reputation Management in the Post Truth Era and the Age of Fake News
February 12, 2025
Introduction: Why Should Firms and Nations Invest in Human, Social, and Intellectual Capital We often hear economists and management experts exhorting nations and firms to invest in human, social, and intellectual capital. these calls range from asking governments to set aside substantial amounts of money to educate and skill the workforce as well as asking […]
What is the Bottom of the Pyramid and its Implications for Marketers Marketers around the world are discovering that there is a fortune to be made by targeting their efforts at the Bottom Billion or those who are near the lower end of the income pyramid. This means that they can market specific products and […]
SWOT is an acronym for Strengths, Weaknesses, Opportunities and Threats. By definition, Strengths (S) and Weaknesses (W) are considered to be internal factors over which you have some measure of control. Also, by definition, Opportunities (O) and Threats (T) are considered to be external factors over which you have essentially no control. SWOT Analysis is […]
“When a child writes the examination papers, he has to see the result come what it may be, so that he comes to know where he is wrong and where he should pay more attendance. This will help him work better in future.” This is exactly the case of the advertisement. The work is not […]
Amongst the different methods of direct selling, Multi Level Marketing occupies a prime place simply because of the fact that it is growing substantially and continually all over the world. Every day people are joining the network to become distributors and thousands have become millionaires thanks to the network. If you are looking to start […]
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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