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Self-Expropriation versus Self-Interest in Dual-Class Voting: The Pirelli Case Study


  • We wish to thank Bill Christie (Editor), an anonymous referee for the great criticism and suggestions, and Wendy Jennings for the wonderful editorial help. We would also like to thank Paolo Volpin, Luca Enriques, Pierre Chollet, Julio Pindado, Alexander Muravyev, Andrea Carosi, and seminar participants at University of Bologna and University of Paris XII. This paper represents the authors' view and all errors are ours.


Called to vote for a reduction in their dividend privileges, Pirelli's nonvoting shareholders appeared to expropriate themselves and favor the voting class of shares. However, what initially seemed to be self-expropriation became self-interest when the media coverage, voting decisions, and dual-class ownership of 36,361 shareholders were investigated. Most of the institutional investors voting “for” the proposal were found to have ownership ties with controlling shareholders or to have held voting shares. Moreover, dual-class ownership significantly increased the likelihood of shareholders voting to expropriate one class of shares if they benefited from the other class in their portfolios.