Board directors of U.S. public companies going public with dual-class share structures were identified in a list released Wednesday by the Council of Institutional Investors.
CII's "Dual-Class Enablers" lists the other boards those 159 directors also serve on. CII Executive Director Ken Bertsch said that can alert investors "who may want to raise concern about that in their engagement with other boards on which these directors serve."
"The board that brings a company to public markets with unequal voting rights is responsible for the decision to disempower public shareholders," Mr. Bertsch said in a statement.
The list, which will be updated, currently identifies 68 dual-class directors in 2018 and 91 so far for companies that made their IPO in 2019, and excludes companies with IPOs less than $200 million, special-purpose acquisition companies, foreign private issuers and real estate investment trusts.
It also does not include directors of dual-class IPO companies that put in place time-based "sunsets" of seven years or less to wind down to one class of stock with equal voting rights. The list focuses on directors of companies that made their initial public offering in 2018 and so far in 2019.
According to CII, dual-class structures with differential voting rights are becoming more popular with IPO companies, particularly in technology sectors, with 26% in the first half of 2019, up from 11% in 2018. The trend is partially offset by an increasing number of dual-class IPOs with sunset provisions.
The list "may cause directors of private companies that are considering an IPO to think more carefully about the benefits and costs of adopting a dual-class structure," and directors who serve on nominating committees at single-class companies may think twice about a candidate for board service who was responsible for taking a company public with an open-ended dual-class structure," Mr. Bertsch said.
Differential voting rights are a key issue for CII, which represents pension funds and other long-term investors. Last October, CII petitioned the New York Stock Exchange and the Nasdaq, asking them to amend their listing standards to require that companies seeking to list with multiple share classes and differential voting rights include sunset provisions to convert the share structure within seven years of an IPO to one share/one vote.
That would ameliorate concerns for CII and other investors about the lack of accountability, Mr. Bertsch said in the statement.
Differential voting rights are a key issue for CII, which represents pension funds and other long-term investors with combined assets of $4 trillion. Associate members include non-U.S. asset owners with more than $4 trillion in assets and asset managers with more than $35 trillion in assets under management.
