The European Commission hired Institutional Shareholder Services to research and analyze equity structures in the European Union that give disproportionate control of a company to a few shareholders in excess of their ownership interests, said Jean-Nicolas Caprasse, managing director of ISS Europe. EC officials want to use the study as a basis for potential policy initiatives, he said. The EC had issued an RFP, he added.
ISS will profile the structure of about 450 companies in 16 of 25 EU countries and survey investors in European and international markets on the value they place on control-enhancing mechanisms, compared with the one-share, one-vote standard. ISS will also provide an international comparison with other markets, including the U.S., Japan and Australia.
ISS subcontracted with Shearman & Sterling, a global law firm, to research the extent the legal framework in the EU countries permits ownership and control, and with the European Corporate Governance Institute to research academic and other studies on the issue and shareholder value. ECGI is a network of academics, institutional investors, corporate executives and others promoting research in corporate governance.
In a study commissioned last year by the Association of British Insurers, a group of U.K. insurance companies found that 62% of European large-cap companies do not conform to one share, one vote. In the U.S., an academic study found that only 8% of companies deviate from one share, one vote, Mr. Caprasse said.
"If you look at the United States, there is no restriction to having dual classes of shares, like Google has, but the market forces are such that 92% of companies decide to respect one-share one-vote, probably on the grounds that it is the cheapest way for them to attract capital," he said.