An international coalition of institutional investors, collectively managing $1 trillion in assets, has launched a campaign to push back against unequal voting rights at portfolio companies.
Founding organisations of the Investor coalition for Equal Votes (ICEV) include the UK-based pension scheme Railpen, the Minnesota State Board of Investment, the New York City Comptroller’s Office, and the New York State Common Retirement Fund.
Together the ICEV will contest company founders’ monopoly on votes.
These investors will collectively lobby policymakers and engage with market participants to highlight the importance of proportionate shareholder votes and prevent further development of dual class shares without mandatory “sunset clauses,” or specific cease dates, across areas like the US and the UK.
“At a time when policymakers increasingly recognise the value of effective investor stewardship to achieving good member outcomes, it is vital that the shareholder voice is heard by company management,” said Caroline Escott, ICEV chair and senior investment manager at Railpen.
“Voting is an important part of the stewardship toolkit, but dual-class share structures without automatic time-based sunset clauses mean long-term investors are trying to influence with one hand tied behind our backs,” she added.
Differential voting rights “dilute” public shareholder ability to influence company management and hold them to account, Railpen argued.
In recent years, public shareholder rights have been eroded at a minority of IPO firms spanning several counties as policymakers sought to attract domestic company listings.
Executive director at partner organisation Council of Institutional Investors (CII), Amy Borrus, added:
“Indefinite control is naturally alluring to any founder contemplating an IPO, so it is incumbent on investors to communicate early and together about this long-term corporate governance trainwreck.
“We are pleased to be partnering with Railpen as co-leaders in this campaign, as this issue is increasingly global.”
The CII is currently drafting US legislation that would block listings of new dual-class companies without seven-year sunset provisions, or “if each class, voting separately, approves the unequal structure within seven years of IPO.”
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