After decades of being considered, it is finally here. Dual class shares are being allowed for publicly listed companies on the Pakistan Stock Exchange, and Mughal Steel has decided to jump into the fray by announcing the existing of what they are calling “Class C” shares, which will not be tradeable, not eligible for dividends or bonuses, but will have 50 times the voting power of ordinary shares listed on the exchange.
Needless to say, this move is expected to be highly controversial, and many people – especially the handful of advocates for the rights of minority shareholders – are likely to be deeply upset by this development.
So why is the Securities and Exchange Commission of Pakistan (SECP) even allowing such a thing to exist, whose explicit purpose is to reduce the power of minority shareholders and give insiders even more control over the companies they run?
Because there is more to dual class shares than meets the eye, and while it certainly has its downsides, it has benefits which the regulator is likely keen to see realized.
In this story, we will examine what dual class shareholding is and what its benefits and downsides might be, how it is done in other parts of the world, and then finally how it applies to the case of Mughal Steel. The content in this publication is expensive to produce. But unlike other journalistic outfits, business publications have to cover the very organizations that directly give them advertisements. Hence, this large source of revenue, which is the lifeblood of other media houses, is severely compromised on account of Profit’s no-compromise policy when it comes to our reporting. No wonder, Profit has lost multiple ad deals, worth tens of millions of rupees, due to stories that held big businesses to account. Hence, for our work to continue unfettered, it must be supported by discerning readers who know the value of quality business journalism, not just for the economy but for the society as a whole.To read the full article, subscribe and support independent business journalism in Pakistan
