Topic– Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.
4) Critically examine the need for dual-class shares vis a vis the Indian market.(250 words)
Why this question
Dual-class share issuance is on the rise in a number of markets around the world. Many jurisdictions allow dual-class share structures, including the United States, Canada, Brazil, France, and Italy. Other economies such as Singapore and Hong Kong are reconsidering whether to allow dual-class share structures. It is therefore essential to discuss the desirability of dual class shares vis a vis India.
Critically examine- Here we have to probe deeper into the topic, get into details, and find out the causes or implications if any. Based on our discussion we have to form a concluding opinion on the issue.
Key demand of the question.
The question wants us to dig deep into the issue and deliberate upon both the sides of dual-class shares in terms of their implications for the economy, market and the shareholder. It then wants us to form a personal opinion on the issue.
Structure of the answer
Introduction-write a few introductory lines about dual-class shares and how they are different from normal shares. E.g such shares offer different voting rights ( or dividend payments) to different class of shareholders-e.g founders vs general public. Mention that dual-class share issuance is on the rise in a number of markets around the world. Many jurisdictions allow dual-class share structures, including the United States, Canada, Brazil, France, and Italy.
- Discuss the pros of dual class shares. E.g Even without dual-class shares, outside shareholders do not enjoy much control; the dual-class share structure makes insider control more transparent. It will signal the firms in which insiders enjoy absolute control; allowing dual-class shares is the only way we can have an Indian-owned unicorn etc.
- Discuss the cons of dual-class shares. E.g Supporters feel that the structure allows strong leadership and the placing of long-term interests over near-term financial results etc.
Conclusion– Based on your discussion, form a fair and a balanced opinion on the issue.