Game of Votes: Loyalty Shares Across the Corporate Lifecycle

In the complex landscape of corporate governance, few mechanisms provoke as much intrigue—and as much contention—as tenure voting rights, more commonly known in Europe as loyalty shares. Much like the Houses of Westeros, where allegiances are earned through time, oaths, and bloodlines rather than transactional alliances, modern firms are turning to governance structures that reward patience and permanence. Loyalty shares bestow greater voting power on shareholders who endure: a promise that time itself shall be recognized as the ultimate claim to influence.

But as in Game of Thrones, no tool of power can be understood in isolation from the arc of its wielder. Just as the utility of a Valyrian blade depends not merely on its sharpness but on when and by whom it is drawn, so too the impact of loyalty shares is deeply bound to the stage of a firm’s evolution. Their purpose, their consequences, and even their dangers vary profoundly depending on whether the firm stands at the threshold of growth, sits atop hard-earned dominance, or faces the twilight of legacy.

Drawing on a dataset of 412 Italian listed companies observed between 2013 and 2022, this study offers a detailed empirical analysis of how loyalty shares affect firm behaviour across the corporate lifecycle. Italy provides an unusually fertile empirical terrain: not only has it witnessed a steady and substantial adoption of loyalty share mechanisms since their regulatory introduction in 2014, but it also offers the kind of granular firm-level data—across ownership structures, financial indicators, and market behaviors—that is seldom available with this degree of consistency. Although specific in its jurisdictional framing, the Italian case offers valuable insights for other countries wrestling with similar questions about long-term control, shareholder rights, and capital market dynamics. The patterns emerging from this study are archetypes of what happens when loyalty shares are deployed in markets shaped by concentrated ownership, family control, and evolving investor expectations.

Lifecycle Dynamics: A Governance Weapon Forged in Time

The findings challenge the static notion of loyalty shares as either mere shields against short-termism or veils for entrenched control. Instead, the evidence supports a dynamic interpretation: loyalty shares exert lifecycle-contingent effects, shaping and being shaped by a firm's financial structure, strategic behavior, and market interactions.

Most notably, the analysis reveals that companies adopting loyalty shares exhibit significantly lower trading volumes—an average of 7 million shares per year versus 41.8 million in non-adopters—underscoring the role of tenure voting in fostering investor stability and reducing market churn. This illiquidity, while potentially limiting market efficiency, signals a shift in shareholder composition and behavior, privileging long-term alignment over speculative agility. In terms of M&A activity, the results are unexpectedly counterintuitive. While prior scholarship often links tenure voting with governance entrenchment and strategic inertia, the study finds that firms with loyalty shares engage in more M&A deals on average (0.72 per firm) than their counterparts (0.35), a result reinforced by a highly significant p-value (≈ 1.21e-10). This relationship, however, is temporally bounded: Poisson regressions show a strong correlation in the current year (coefficient = 0.366, p < 0.01) that fades in subsequent years, suggesting loyalty shares enable short bursts of strategic consolidation rather than sustained acquisition campaigns.

The most nuanced insights emerge among emerging companies—those at the beginning of their public journey. Though adoption rates remain modest (around 4.4%), the subset that does adopt loyalty shares shows distinct traits. These firms are larger, more leveraged, and exhibit greater revenue per share than their non-adopting peers, with higher EBITDA margins and operational efficiency. They also maintain higher cash buffers and exhibit broader distributions in returns, reflecting a more volatile, yet potentially more rewarding, performance profile. For these fledgling actors, loyalty shares function less as entrenchment tools and more as credibility devices—a signal to markets that they are committed to strategic continuity despite financial fragility. Yet, this signaling function is not available to all: only those with sufficient size and governance sophistication seem able to bear the administrative and reputational costs of adoption.

The overarching insight is that the effects of loyalty shares are path-dependent and lifecycle-contingent. They do not act as governance panaceas, nor do they function uniformly across contexts. In this regard, the Italian experience offers a revealing case study for jurisdictions considering similar mechanisms. Its combination of family capitalism, historically tight control, and a regulatory framework that permits but does not mandate tenure voting structures has allowed the data to speak across categories. The patterns that emerge—from lower trading volumes to higher M&A probability, from governance stability to sector-specific heterogeneity—are not merely descriptive, but diagnostic. They reveal what tenure voting does in context, and how firms calibrate its function in light of lifecycle pressures.

Conclusion: Power Is Contextual

This paper argues that loyalty shares are neither saviors nor saboteurs. They are, rather, tools of governance that derive their force from timing and intention. Their lifecycle effects offer a compelling answer to one of the most enduring questions in corporate law: how should power be distributed and preserved as a firm grows? The answer, like all good political strategy in Westeros, is that it depends. It depends on who wields the power. It depends on the stage of the kingdom. It depends on what enemies lie beyond the wall—and what ambitions stir within. Ultimately, as every ruler of the Seven Kingdoms has learned: the game of votes is not won by force alone—but by understanding when to claim the throne, and how to share it.

The full paper can be accessed here.

Maria Lucia Passador is an Assistant Professor of Corporate Law and Financial Markets Regulation at Bocconi University.