Beware the voiceless shareholder

Active Ownership

Beware the voiceless shareholder

Few corporate governance watchers could have missed the crescendo building around multiple share class structures, carrying different or no voting rights. Such structures are akin to placing blind faith in company founders and managements to always act wisely and in the long-term interests of shareholders. We know history is littered with examples to the contrary.


Few corporate governance watchers could have missed the crescendo building around multiple share class structures, carrying different or no voting rights.

Recent high-profile cases, such as the initial public offering of Snap – which offered investors zero voting rights – clearly undermine the ability of investors to act as stewards. What’s more, as they compete to attract listings, some stock exchanges have softened the criteria for entrants, or at least contemplated doing so, potentially facilitating an erosion of what we believe is a fundamental shareholder right. 

There is a fightback though, and it is not just from investors. In July, S&P Dow Jones Indices announced with immediate effect, it would not be adding any companies with these types of share structures to the S&P Composite 1500 index (consisting of the S&P 500, S&P MidCap 400 and S&P SmallCap 600). This decision came hot on the heels of FTSE Russell’s proposed requirement that new index constituents offer at least 5% of their voting rights to public shareholders.

Active ownership is an integral part of our philosophy, and voting a key tool with which we try to hold investee companies to account. While, in some instances, the issuance of multiple share classes has merit, this practice needs to be accompanied by due shareholder protection (such as a ‘sunset clause’).

However, broadly speaking, such structures are akin to placing blind faith in company founders and managements to always act wisely and in the long-term interests of shareholders. We know history is littered with examples to the contrary. 

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