Starting from 1986, this practice of NYSE has been formalised. With the other competing stock exchanges, NASDAQ and American Stock Exchange, allowing listing of securities with unequal voting powers, there is no question of NVS being illegitimate in the US. The declared objective of NVS is to use such dual class shares as a defence mechanism against hostile take overs. Granted, corporate democracy is important. The defining principle of current American corporate law seems to be, if the existing shareholders agree to the creation of a new type of shares with no voting rights, why should we object? This is also the principal driving force behind Mr Chidambaram's proposal. At a recent meeting of corporate representatives, one entrepreneur pointed out, that he was somewhat mystified by the angry reactions of some FIIs to the proposal. Perhaps, this is because of a fear of fall of equity prices. Ofcourse, there could be a fall in value of the prices of existing stock of shares whenever additional shares are issued. But, this could happen even with new voting shares. Some experts feel that in a situation where NVS are being issued, the value of voting shares per se could go up, under certain circumstances.
I have seen a number of cases where promoters of well run small and medium sized companies have hesitated to issue additional shares, simply because they are afraid of losing their control. In such cases, the promoters have either to restrict growth or to resort to some other device of enhancing their access to resources. The only way now available
