Council of Institutional Investors, Ash Williams Tell NYSE, NASDAQ to Curb Multi-Share IPOs

The group wants newly listed companies to convert to one share-one vote structures after seven years on the exchanges.

The Council of Institutional Investors is petitioning the New York Stock Exchange and the NASDAQ to limit the listings of companies with dual-class structures, it announced during its Wednesday conference in New York.

The Council, which represents pension funds, corporate funds, endowments, and foundations totaling more than $4.1 trillion in assets, wants the two stock exchanges to require that companies seeking to list with them, which have a multi-class share structure with different voting rights, convert that to a single-share basis within seven years of its initial public offering (IPO).

“While some companies that are controlled by virtue of special voting rights function as benevolent dictatorships, we have seen others stumble because of self-dealing, lack of strategic planning, and ineffective boards,” said Ash Williams, the council’s chair and also executive director and CIO of the $202.8 billion Florida State Board of Administration. He criticized outside shareholders’ inability to do much about a company’s problems due to the dual-share clauses.

In addition to Williams, representatives from California’s largest pension funds, the California Public Employees’ Retirement System (CalPERS, $351 billion) and the California State Teachers’ Retirement System (CalSTRS, $229 billion), also backed the proposal.

“One of the strengths of the US economy is the dynamism of US companies. Successful American companies are constantly changing—and reinventing the way they do business,” said CalSTRS CEO Jack Ehnes. “So it only makes sense that they should embrace change in their own governance that ultimately will strengthen shareholder value.”


This one share-one vote arrangement would equalize voting power among investors. When companies go public with multi-class shares, investors with super-voting shares—like company founders—have far greater control over corporate policy than less-privileged investors. One prominent such company is Facebook, which has come under fire this year regarding its founder and CEO Mark Zuckerberg, who controls the company due to its dual-share structure. The social network has drawn criticism for not taking action in the wake of a massive data breach and incursions by political trolls.

Simiso Nzima, CalPERS’s head of corporate governance, said that while the organization believes in the one share-one vote policy, it also understands that in a company’s early public days, certain protections may be needed to let management achieve its goals. “We strongly believe such protection should not be perpetual, and mandatory time-based sunsets should act as an important safeguard against managerial entrenchment.”

Last year, 19% of all IPOs on US exchanges had dual-share classes.

“We believe seven years is sufficient time for a company to capitalize on whatever benefits and control a multi-class structure provides,” said the council’s executive director, Ken Bertsch. “After that, it starts to look like a management-entrenchment device.”

Other supporters of the initiative include asset managers BlackRock and T. Rowe Price.

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