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BlackRock, State Street Global Advisors and other investors managing more than $17 trillion in assets are backing baseline expectations for good corporate governance in the U.S.
Among the principles for U.S.-listed companies are ‘one-share, one-vote,’ rather than dual-class shares or other structures that create unequal voting rights among shareholders. Another set of principles for institutional investors covers issues including proxy voting and engagement.
Companies such as Google and Facebook have popularized multiple-class shares. Snap Inc., set to go public later this year, is said to be giving public shareholders non-voting stock and thus no control over how the company is run.
“I think that’s our concern,” Rakhi Kumar, head of corporate governance at State Street, said. “You’re really just wanting the money but not the responsibility to shareholders.”
The principles also endorse proxy access, which gives shareholders the ability to nominate directors on management’s ballot. After decades of corporate resistance to the idea, proxy access has reached a tipping point now that just over half of S&P 500 companies have adopted it, according to a year-end count by Sidley Austin LLP.
The principles are the result of a two-year effort from backers that also include pension funds in California, Florida and Washington state, as well as Singapore’s sovereign wealth fund and the Royal Bank of Canada.
“Sometimes there’s a perception out there that asset owners and asset managers have different priorities,” Aeisha Mastagni, a portfolio manager at the California State Teachers’ Retirement System (CalSTRS), said. “Showing all the things that we do have in common is only going to make the engagement with our portfolio companies that much more productive.”
The group wants every institutional investor and asset management firm investing in the U.S. to sign onto the framework, which goes into effect in 2018.
The principles largely align with best practices for corporate governance laid out by the Council of Institutional Investors. The council’s executive director Ken Bertsch called them a “conversation-starter” on the rights and responsibilities of institutional shareholders.
“While stewardship codes are common in developed markets around the world, the idea is relatively new to the United States,” Bertsch said in a statement.
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The principles are available at http://www.isgframework.org/.
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
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