EGC Corporate Governance Practices (May 2018)

EGC Corporate Governance Practices: A Survey and Related Resources PAGE 25 Figure 37 : N=848. Dual Classes of Stock 177 of the EGCs we reviewed had dual classes of common stock, including 21 issuers that had more than two classes of common stock. The primary reason for dual classes appears to be as a means for insiders to maintain control. In dual class structures, the classes differed only by the number of votes per share, although in some cases a class might not be entitled to certain economic benefits, such as dividend payments. 54 of the 177 dual-class EGCs were FPIs. Anti-Takeover Protections Shareholder Rights Plans A typical shareholder rights plan, or poison pill, grants the existing shareholders of a company (other than a hostile acquiror) the right to acquire a large number of newly issued shares of the company (and of the acquiror if the target company is not the surviving entity in the transaction) at a significant discount to fair market value, if the acquiror becomes an owner of more than a preset amount (typically 10-20%) of the target company’s stock without prior board approval. If “blank check” preferred stock can be issued by a company, a shareholder rights plan can usually be adopted at a later time rather than at the IPO. Approximately 7.4% of issuers had a shareholder rights plan, and approximately 92.6% did not. Present; 387 Absent; 461 Exclusive Forum Provision in Bylaws (By Frequency) Present Absent