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Manchester United's float and the issue of shareholder voting rights

So Manchester United are to float 30% of their shares on the Singapore Stock Exchange to capitalise on Asian interest in the club.

But they are going to operate a dual share structure. For every voting share there will be a non-voting share. You can invest, but they don’t want your shareholding to give you much control.

In the UK we don’t like dual share structures. If you invest you should be entitled to have a vote in electing the board and deciding the fate of the company.

And yet….while the tidiness of one shareholder one vote may be fair, it does not do much for stewardship. Companies need the certainty of having some constant, solid blocs of ownership. Too many shareholders owning a handful of shares do not feel it is worth the bother to get involved. If no-one gets involved the risk is the board do what they like, pay themselves what they like, and generally commit the three deadly sins of corporate governance which I once described as Greed, Sloth and Fear (of market reaction)

Some people are arguing that investor stewardship, which we badly need to keep companies on track, will only work when shareholders who have held shares for a longer time receive rewards either through an enhanced dividend or through enhanced voting rights. Both are solutions that involve treating some shareholders differently, as Manchester United plan to do.

So, in footballing parlance, this is a game of two halves. Dual voting rights may expose minority investors to abuse by dominant majority owners. But perfectly level playing fields of one shareholder one vote expose companies to investor indifference and a stewardship deficit.

That’s one of the issues we need to tackle as we take the tomorrow’s stewardship agenda forward.

The next question to think about might be: “what proportions of a listed company’s investors need to be stewardship investors?” In order to give a company some stability to enable it to tackle the long term issues of people, reputation, and responsible stewardship?

But that’s for another discussion

Posted by Mark Goyder.

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