The Disappearing Taboo of Multiple Voting Shares: Regulatory Responses to the Migration of Chrysler-Fiat via SSRN
Pennsylvania State University – Dickinson School of Law; Bocconi University – Department of Law
March 5, 2015
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Penn State Law Research Paper No. 3-2015
ECGI – Law Working Paper No. 288/2015
In 2014, the Italian Government broke an old taboo of Italian corporate law, joining the ranks of many different legal systems that allow the issuance of multiple voting shares (MVSs), including the United States. The importance of the reform is therefore broad, also because it offers the occasion to review, more generally, the state of the debate on MVSs. The new rules are also interesting because they are both a cause and a consequence of regulatory competition in Europe, and can be considered an example of the recent trend toward greater flexibility and contractual freedom in corporate law. This article examines the new rules in a comparative perspective, considering similar experiences in Europe and the US, and discussing the empirical evidence on the effects of MVSs, especially in listed corporations. The second part of the paper illustrates some interpretative issues raised by the new Italian rules, and the possible motivations of the Italian legislature in taking this step also vis-a-vis the planned privatization of some large state-owned enterprises.
In August 2015, the Italian government, as part of a package of reforms designed to make listing more attractive for closely-held corporations – but, more generally, also to further enhance contractual freedom in corporate law –, allowed corporations to issue multiple voting shares and loyalty shares that attribute to their long-term holders increased voting rights (hereinafter, collectively, “MVS”).1 In doing so the Italian government has joined the ranks of several other European and American states and abolished an old taboo of Italian corporate law. It has also offered to practitioners, corporate executives, regulators and scholars a great new testing ground for the use of this controversial control enhancing device, a testing ground whose relevance goes beyond the relatively limited dimension of the Italian stock exchange.
The recent introduction of MVS in Italy brings immediately to mind two observations.
The first one can be summarized with a sentence whose attribution is uncertain (some attribute it to René Descartes, others to Marie Antoinette): “There are no new ideas, only ideas that have been forgotten.” Or, alternatively, we can use the less cynical and more ironic version of the American poet Ralph Waldo Emerson: “All my best thoughts were stolen by the ancients.” In fact, the French Code de Commerce of 1807, adopted also in part of Italy, did not include any limitation to the issuance of multiple voting shares, and both the Italian Commercial Codes of 1865 and 1882 granted similar freedom, even if the latter prohibited the issuance of nonvoting shares.3 At the end of the XIX and beginning of XX century, the issue was intensely debated, and the idea that all shareholders should have had equal rights was gaining traction. However, steep inflation after World War I lead to concerns of possible hostile takeovers of Italian corporations by foreign buyers from countries with a stronger currency, and the use of multiple voting shares was revamped. It is only with the Civil Code of 1942, and again after extensive discussion and conflicting proposals, that multiple voting shares were prohibited, and remained taboo until its recent overhaul. The pendulum of history, also of this little history, continues to swing and, as it is often the case, the idea of the Italian government is simply a return to the old ways.
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