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Executive search firm Caldwell Partners International Inc. is ending its two-class share structure as part of a settlement of litigation brought by three institutional investors.

Douglas Caldwell, who founded the firm in 1970, controls it through 85 per cent ownership of its class B voting stock, with the rest of the voting shares held in trust for senior executives of the firm.

Under the agreement announced Tuesday, there is to be a single class of voting stock, with each class B share converted into 1.149 common shares.

The conversion will not take place until Nov. 1, 2011.

The change, subject to a shareholder vote at a date yet to be set, will leave Douglas Caldwell with about 22 per cent of the voting power.

He will remain chairman of the board.

The decision to adopt a single share class is part of an agreement between Caldwell Partners and three major holders of its non-voting shares.

J.C. Clark Ltd., Tailwind Capital Inc. and McElvaine Investment Management had filed suit in November 2006, alleging Caldwell Partners had "oppressed, unfairly prejudiced and unfairly disregarded their rights and interests."

According to the settlement, two new directors will be appointed to the company's board, and Caldwell Partners will reimburse the shareholders for up to $500,000 of their costs in the litigation, which will be terminated.

The board will also be joined by John Wallace, who succeeded Douglas Caldwell as chief executive officer in September.

Speaking for the litigating shareholders, John Clark applauded the moves, adding: "We look forward to seeing the company continue to execute Doug's vision. John Wallace has an outstanding track record, and we are delighted by his proposed addition to the board."

Douglas Caldwell declared himself "pleased to have settled this lawsuit and to have gained the full support of the shareholders in doing so."

He stated that "while the North American economy is going through unprecedented change, The Caldwell Partners has a strong balance sheet with more than $18-million of cash ($1.12 per share) and no debt at its fiscal 2008 year-end, and a talented leadership team."

The firm, with a stock-market value of $13.5-million - down by half from a year ago - suspended its dividend on Oct. 27 while reporting a quarterly loss of $856,000 on a 10 per cent revenue decline to $4.5-million.