BlackRock Backs Limits on Listings With Separate Share Classes

(Bloomberg) -- BlackRock Inc. and T. Rowe Price Group Inc. are backing a push to restrict a type of stock-exchange listing that investor advocates say limits shareholders’ ability to hold companies accountable.

Dual-class stock structures that can bolster founders’ control by denying or diluting the voting power of other shareholders should expire within seven years of an initial public offering, the Council of Institutional Investors said Wednesday in a petition to the New York Stock Exchange and Nasdaq. Companies would revert to one-share, one-vote unless shareholders vote to extend the separate classes, CII said in the petition, which was endorsed by BlackRock, T. Rowe Price and the California Public Employees’ Retirement System.

“We encourage U.S. exchanges to show global leadership on voting rights by requiring companies to either automatically convert or give shareholders the right to extend a multi-class structure,” Barbara Novick, a BlackRock co-founder and vice chairman, said in CII’s statement. “Doing so will re-establish the importance of equal voting rights for all public shareholders.”

Companies, particularly in the tech industry, often issue special share classes that give their leaders free rein in making key corporate decisions such as mergers and acquisitions. Silicon Valley giants like Alphabet Inc. and Facebook Inc. have multiple types of shares, and photo-sharing app Snap offered no voting rights to investors in its $3.4 billion IPO last year.

Securities and Exchange Commission member Robert Jackson Jr., a persistent critic of dual-class share structures without so-called sunset provisions, said the arrangement is inherently unfair.

“Perpetual dual-class stock creates a permanent class of corporate royalty by allowing corporate insiders to pass control of America’s most important companies to their chosen heir,” Jackson said. “The ball is now in the stock exchanges’ court.”

Nasdaq President Nelson Griggs said his company is a “firm believer in the flexibility of share structure,” but he left the door open for future changes.

“We consider the input of all stakeholders when establishing and modifying listing standards,” Griggs said in a statement. “We will continue to review our listing standards to make sure they protect investors, while also allowing those investors access to innovative companies.”

NYSE declined to comment.

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