Mercer Insights


Building a Long-Term Shareholder Base: Assessing the Potential of Loyalty Driven Securities


Through building a base of more patient capital in the form of a more stable group of long-term shareholders, the intended aim would be to reduce short-term pressures on boards and senior executives and better align companies and investors with a shared focus on long-term value creation.

The concept of loyalty-driven securities is a share structure that provides differentiated rights or rewards to a group of shareholders identified on the basis of the tenure of their shareholding. Various models include the use of extra dividends, warrants, or additional voting rights granted to investors that achieve minimum holding periods (for example, shareholders that held their shares for three or more years would be eligible). Loyalty-driven securities have been presented as a potential means by which issuers could cultivate a base of long-term shareholders by incentivising longer holding periods. Through building a base of more patient capital in the form of a more stable group of long-term shareholders, the intended aim would be to reduce short-term pressures on boards and senior executives and better align companies and investors with a shared focus on long-term value creation.

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