Should Regulators Step in on Voteless Shares?

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By Andrea Vittorio

Securities regulators may want to look at a “troubling trend” of companies issuing shares with no voting rights, Vanguard Group’s former chairman and chief executive officer said.

“I think it’s a very real issue that should be addressed,” John J. Brennan said Feb. 28 at a Council of Institutional Investors conference in Washington.

Brennan, who now sits on the boards of General Electric and LPL Financial Holdings, compared the trend to a game of whack-a-mole.

It started with Alphabet Inc.’s Google and continued with Facebook Inc. as a way to insulate founders from dilution of their holdings when issuing a new class of shares. Now Snap Inc. is set to become the first company in the U.S. to go public with non-voting stock.

Investors Object

The Council of Institutional Investors has objected to Snap’s plan because it means buyers of its Class A common shares will have no say on topics such as executive compensation and director nominations.

BlackRock, State Street Global Advisors and other asset managers and owners with more than $17 trillion have also come out against dual-class shares or other structures that create unequal voting rights among shareholders. A voluntary framework for U.S. corporate governance and investor stewardship they put out earlier this month endorsed a one-share, one-vote standard.

“It’s being able to hold those folks inside the boardroom accountable,” Aeisha Mastagni, a portfolio manager at the California State Teachers’ Retirement System (CalSTRS) who helped write the framework, said at the conference. “They’re representing our interests and without those voting rights, it’s impossible to do that.”

Brennan said “there’s an argument” the issue needs to move up from the level of shareholders to regulators. “Should the SEC [Securities and Exchange Commission] address this issue?” he asked.

The SEC Investor Advisory Committee is scheduled March 9 to discuss unequal voting rights of common shares.

To contact the reporter on this story: Andrea Vittorio in Washington at

To contact the editor responsible for this story: Yin Wilczek at

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