Arguments favoring weighted voting rights should take into account that this share-class structure will entail several corporate governance issues.

The first issue is that weighted rights will violate the principle of proportionality. The proportionality principle, enshrined in the "one share, one vote" structure, ensures that all major shareholders are given a proportionate say on corporate affairs.

The weighted structure, however, will not treat shareholders as having equal say on matters affecting the value of their stockholding, and therefore on future capital gain and cash flow.

Second, a weighted voting structure may tempt controlling shareholders to extract personal benefit from the company. That is because they can enjoy full benefits from the company, but suffer less downside risk in equity value reduction due to their acts of private benefit extraction.

Third, weighted rights can prevent non-controlling owners from removing directors who extract private benefits and fail to manage the business.

The entrenchment risk that this structure brings should not be ignored.

However, arguments favoring weighted voting say that allowing this corporate structure may encourage more quality companies, which follow this setup, to seek to list in Hong Kong.

A weighted structure may also inspire controlling shareholders to take a long-term view since it gives directors the freedom to run a business to maximize growth and value for shareholders over the long term.

Moreover, backing such a structure may spark an expansion in investors' ability to put their money into companies that use this structure, and thus render HKEx more efficient in achieving capital allocation from investors for listed companies.

A weighted voting structure also enables fast-growing enterprises to expand without further diluting the ownership of their founders, so that they can maintain management continuity.

oswald@chinadailyhk.com