Retirement Investors Launch Campaign Against Dual-Class Share Structures

The City of London financial district is seen in London, Britain October 22, 2021. REUTERS/Hannah McKay/File Photo

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  • Railpen and the Council of Institutional Investors lead the campaign
  • Plan to lobby policy makers, market players
  • Dual Class Actions Harm Corporate Governance Efforts

LONDON, June 13 (Reuters) – Major British and U.S. investors managing more than $1 trillion have launched a campaign to stop companies using dual-class share structures that concentrate voting power in the hands of some shareholders to the detriment of others.

Launched by Britain’s Railpen pension scheme and the non-profit Council of Institutional Investors (CII), others support the Investor Coalition for Equal Votes (ICEV), including the New York City Comptroller’s Office and the Washington State Investment Board.

Companies with two-class structures have two or more types of shares with different voting rights – usually one with larger voting rights for founders or early investors, and another for other shareholders with fewer votes. voting power.

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The imbalance means most investors have less control over how the company is run and can make it harder to collectively push back on issues such as executive compensation and corporate strategy.

Big fund managers have fought the arrangements with little success for years, arguing that such structures — often favored by high-growth tech companies — erode shareholder rights and undermine companies’ long-term performance.

Despite this, policymakers in countries like the United States and Britain have warmed to dual-class structures as a means of attracting new listings to their markets.

The group said it would lobby market participants and policymakers to make it clear that proportional shareholder voting is essential to effective management and long-term company performance.

“Voting is an important part of the stewardship toolkit, but dual-class share structures without time-based sunset clauses mean long-term investors try to influence with a tied hand in back,” said Caroline Escott, ICEV president and chief investment officer. director of Railpen, said in the statement.

“The issue is fundamental to the ability to engage and hold companies accountable for material risks and opportunities, and we hope that the ICEV’s work will mark a turning point in the debate over the dual-class ownership structure.” , added Escot.

Amy Borrus, executive director of CII, said the campaign would complement the group’s efforts to push for legislative change in the United States, where the group’s bill seeks to limit the use of classes of double actions.

Under the bill, national stock exchanges would be required to ban listings of new dual-class companies unless they have seven-year sunset provisions, or both classes of voters approve. structure within seven years of listing.

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Reporting by Tommy Reggiori Wilkes and Simon Jessop; Editing by David Holmes

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