AFTER today, Waterford Foods will be the odd-man-out. Kerry Group and IAWS have done it. Avonmore Foods will do it today.

If Waterford Foods wants to modernise its share structure, it should follow suit and have just one class of ordinary shareholder. Having two classes of ordinary shares is outdated and can cause confusion among investors.

When the co-operatives turned themselves into public companies with share listings, there was a concern that they might lose control; so they created two classes of shareholders to keep them in charge. They can still retain a 51 per cent controlling shareholding with one class of shareholder, though the brightest of the companies will get rid of that silly concept.

Look at the Jefferson Smurfit Group whose most senior management is selected from the Smurfit family (or non-family executives who are nominated by Dr Michael Smurfit). Indeed, control of the management by the Smurfit family has been increasing; Mr Michael Smurfit junior, for example, was appointed chief executive officer of the US operations, earlier this year.

Yet that family (including trustee holdings) owns only 7.9 per cent of the equity. This rises to just 10.8 per cent if the other board members' shareholding is taken into account. The exercise of options could add another 2 to 3 per cent.

Having less than 50 per cent makes the director shareholders more answerable to the views of the other shareholders. It was pressure from institutional shareholders that forced a modification of an incentive scheme for Dr Smurfit. Now some of the maximum potential payout, under a £10 million long-term scheme, will be clawed back if the company does not perform well in relation to its peers in the paper and packaging industry. That was a laudable move by the institutional shareholders; a move that would be welcomed by the other non-director shareholders.

Nevertheless, a reasonable minority stake, backed by strong management, would still pose a barrier to many predators.

The Irish Co-operative Organisation Society (ICOS), an intrinsically conservative group, has already taken the unusual step of pronouncing on the 51 per cent rule. Recognising the pressures to waive the rule, it has cautiously noted that while the matter of changing the 51 per cent rule is an internal one for each co-op, any co-op considering amending the rule should fully debate the implications of such a move. That was a move in the right direction as it allowed a serious debate to take place.

The pressure to change the rule is coming from two sides. First, any expanding group should have the flexibility to issue new shares if that is the right route to take. Second, the co-op shareholders should be able to unlock their investment and have this transferred to shares that can be traded on the stockmarket.

Kerry was the first to buck the trend in 1993 when the co-op shareholders reduced their holding from 58 per cent to 54 per cent. It went that bit further last July when the co-op shareholders voted by 1,457 to 375, to allow the holding go below 51 per cent. With the founding shareholders getting their shares at 35p, the subsequent flotation at 52p, and now trading at 598p (they were 640p prior to reduced forecast from its broking firm), it is not difficult to see why the farmer shareholders want to unlock their investment.

The approach by Avonmore this morning is much more sedate but it is a step in the right direction. It is asking its shareholders to remove the distinction between the B ordinary shares held by Avonmore Creameries and the A ordinary quoted shares held by outside investors. With a proposed conversion rate of one 5p A ordinary share (the quoted share) for every one 20p B ordinary share (held by Avonmore Creameries), it may appear to be a generous gesture. It is not.

While each class of share receives the same dividend, under the rules there can be no dividend on the B shares unless a dividend of at least the same value is paid to the A shareholders. In other words, the B shareholders could receive less, but never more. It could, therefore, be argued that the B shares have a lesser value, and the conversion should be less than one for one.

Waterford Foods has the same rules. Waterford Co-op owns 67 per cent of the company through the B shares it holds. This should be unlocked, so as to give the individual co-op shareholders the freedom to sell their shares if they want to.

A retention of two classes of ordinary shares is an outmoded practice.