Magna International and Dual-Class Share Unification

After the management of Magna International Inc. (Magna) tabled a proposal to shareholders in May 2010 to acquire all of Frank Stronach's Class B voting shares for approximately US$1 billion, vociferous opposition emerged, heavily criticizing the process by which the terms had been agreed on and the lack of information provided by the board. The Ontario Securities Commission ruled that Magna needed to provide more information to shareholders. In compliance with that order, Magna released an amendment that included a report from its financial advisor, its advisor’s advice to the Magna board, and PricewaterhouseCooper's evaluation of the deal. In late August 2010, a Magna shareholder needed to decide whether to keep or sell her shares, and wanted to understand what amount, if any, would have been appropriate for Stronach’s Class B voting shares. As a consumer conscious of the environmental, social, and governance aspects of a corporation, she was also concerned whether Magna’s board and special committee had applied good governance principles.

This case was designed for use in undergraduate- and graduate-level courses on strategic management, business policy, and corporate strategy. In a strategy course, it is recommended for use later in the course to illustrate the concepts of corporate governance. The case is also suitable for an elective course on corporate governance. After working through the case and assignment questions, students will be able to</ul><li>assess the use and impact of dual-class shares on a firm, and the benefits and risk associated with such a structure;</li><li>discuss corporate governance in the context of corporate officers’ fiduciary responsibility to shareholders;</li><li>assess the trade-offs of “paying off” a corporate officer for control of their voting share, and evaluate the feasibility of such a decision both quantitatively and qualitatively; and</li><li>illustrate how various shareholders can sometimes take polarizing positions to advance their own interests.</li><ul>

• dual share unification
• corporate governance
• responsible governance