The Extra Vote as Bonus for Loyalty Shares in the Evolution of the French Model What Effects does it have On Shareholder Relationships, “Long termism,” And Company Market Value?
Bruna Ecchia, Raffaele Visconti

Abstract
With the recent introduction into Italy of the traditional French model of Loyalty Shares, in the meantime modified in France, the debate has been reopened about the real nature of the type of loyalty premium based on an extra vote for shares owned uninterruptedly for a given period (loyalty period) by the same shareholder, and with the condition that such an award ceases when the share is transferred to another investor. Is such a premium real award for loyal shareholders and an incentive for all the others to translate from short to long termism in the holding period, with an indirect support to business long termism? Instead is it a simply Control Enhancing Mechanism in the hands of majority shareholders? This paper will show that, whatever the scheme in which this model is applied (the old one and the new French scheme, and also the one Italian), it is not able to realize the conversion of all the minority shareholders to long termism, and this failure grants to the majority and most loyal shareholders leverage for increasing their control. These results in a variety of controversial effects, among which: a worsening in the agent/principal relationship, but with some exceptions, and the possibility of other more complex intermediate situations, a tendential block in the market of the control, a stronger long termism thanks to ambiguously achieved governance stability. The balance of these contrasting effects is the object of a difficult case-by-case market evaluation.

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