Fred Langan’s review of Wayne Lilley’s biography of Frank Stronach is almost as misleading in the discussion of multiple voting shares as the book itself. While the author and reviewer make it clear that dual voting shares are legal, the entire tone of the discussion is that there is something unsavoury about them—that while they are not illegal, they are certainly immoral, primarily because they allow the owners of the multiple shares to control companies with ownership of a very small proportion of the equity. They don’t seem to know that the concept dates back to the happy days when policy makers in Canada were concerned with keeping control of Canadian firms in the hands of Canadians. Dual shares were introduced so that Canadian entrepreneurs could raise capital without selling control of their companies to foreign investors. The staff of the Royal Commission on Corporate Concentration, 1976–1978, reviewed the concept in detail and its value to Canada as a part of Canadian public policy was reaffirmed at that time. The reason that they are not common in other western industrialized societies is that no other major developed country has such a high degree of foreign control of its economy—a proportion that would undoubtedly be even higher in Canada if there were no shares with multiple voting rights.
As to the specious comment that those who bought Magna A shares that have only one vote were suckers—all one can say is “some suckers.” At the end of 2005, as an easy check of the record shows, Magna had a total three-year Class A shareholder return of 16 percent and a five-year return of 17 percent. Magna’s 15-year return for shareholders is over 20 percent. And, of course, to imply because they were suckers that those who bought the shares—pension funds and so on—did not know that Stronach controlled Magna through multiple vote shares is ludicrous. They were not “suckers”—they were very smart investors.
While the Stronach system may be far from perfect, do Lilley and Langan really believe that executive compensation in companies where the shares are widely held leads to more equitable compensation? Are they unaware of the compensation of John Roth, CEO of Nortel the year before the company’s value collapsed? Do they really believe that the shareholders in companies where there are no multiple voting shares have anything to say about levels of compensation? Do they really believe that the vast majority of owners of shares in public companies are anything other than investors?
The bottom line is that they (the author and the reviewer) don’t like Stronach. Rather than admiring him they mock him for having the courage and the commitment to run for public office to fight for what he believes. How many other chief executive officers of Canadian firms can they name who have been willing to do the same? They report he is difficult to work with. How many other senior owner-executives did they compare him with? Rather than characterize Stronach’s rise from an almost destitute immigrant to pre-eminence in one of the major industries in Canada as a great Canadian business success story, they explain it as almost a fluke based on a flaw in the Canadian financial system.
There are some who believe that Frank Stronach, with all his idiosyncrasies, is an engineering and business genius. How unfortunate that the writer and reviewer of this unauthorized biography are so warped by their prejudices and their distaste for the characteristics and success of the person they are writing about that they cannot recognize his brilliant achievements.
James Gillies
Toronto, Ontario
