CalSTRS Praises S&P Dow Jones Multi-Class Shares Decision

Dow Jones’ decision made after committee’s market reviews, consultation responses.

Concerned with the increasing number of companies with multi-class shares, the California State Teachers’ Retirement System (CalSTRS) praised the S&P Dow Jones Indices’ July 31 decision to exclude them from the S&P Composite 1500.

CalSTRS Director of Corporate Governance Anne Sheehan lauded the decision in a statement Friday, citing that dual- and multi-class shares violates the one share, one vote concept—a view which she called “a core corporate governance principle.”

“This step by S&P, developed in consultation with their clients, represents the first major pushback against these types of governance structures. CalSTRS is hopeful this action will give pause to companies thinking about adopting these structures as they contemplate an IPO,” Sheehan said.

“CalSTRS supports the one share, one vote principle which aligns a shareholder’s voting rights with their economic interests. We will continue to advocate for one share, one vote structures. CalSTRS believes improvements in governance will augment long-term value creation for us as shareholders with liabilities that stretch over 30 years—benefit payments to our beneficiaries, including more than 914,000 of California’s educators.”

This pressures companies with desires to go public without giving any control to shareowners to relinquish their authority over stockholders regarding companywide decisions.

Existing companies with multi-class shares in the indices will remain as they were grandfathered in before the change.