Classified Stock as Control Multiplier

“Power Corporation is a classified-stock corporation, with three types of shares that constitute its capital stock: first preferred shares, 3.75- cent participating preferreds and subordinate voting shares. The first preferred shares carry no votes, but are entitled to a $2,375 dividend (5 percent of their $47.50 issue price); the dividend is also cumulative, so, if the dividend for a certain year can’t be paid, it would be credited to the shareholder and paid the next year, or whenever the company could afford to pay. (Preferreds are, for the most part, issued to raise capital.) The 3.75-cent participating preferred carries 10 votes per share, pays a fixed annual dividend of 3.75 cents per share, and participates in company profits. The subordinated voting is a common share car¬ rying one vote and participates in profits by way of dividends.”

“So Desmarais also learned and applied the notion that 50.1 percent voting power is absolute control, but in the modem world of corporate capitalism, where corporations might have thousands of small share¬ holders, it’s possible that the owner of a relatively tiny percentage of voting stock has effective control, as long as that person is the largest single shareholder. Economists, securities commissions and business theorists differ wildly when defining the breaking point, so any expert and any number could be quoted; the reality is, though, that there are companies like Bell Canada and American Telegraph and Telephone whose controlling shareholders own less than one percent of voting stock.”