ICEV backs FCA proposals in effort to protect against unequal voting rights

The Investor Coalition for Equal Votes (ICEV) has backed the Financial Conduct Authority’s (FCA) plans to maintain current premium listing protections around Dual Class Share Structures (DCSS) in any move to a single segment regime.

In its response to the FCA’s discussion paper, the ICEV argued that a “one share, one vote” listing requirement provides better investor protection on capital structure, citing evidence that capital structures providing disproportionate voting rights to founders and other insiders can cause long-term performance issues.

In addition to this, it argued that “the UK’s ‘USP’ as a destination for global capital is in large part the robust investor protections and historically high standards of corporate governance”.

In light of this, the group called for the Premium Listing Principles, including the current limits on use of DCSS, to apply to all issuers of equity shares under any single segment regime.

It also called for the prevention of further enabling of DCSS, without strict mandatory time-based sunset clauses.

Commenting on the response, ICEV chair and Railpen senior investment manager, Caroline Escott, stated: "Active investor stewardship and ensuring shareholders have a voice in proportion to their economic ownership is vital to achieving good investor outcomes and ensuring the UK remains a trusted hub for global capital.

“We believe that differential voting rights dilute the ability of public shareholders to positively influence company management.

"Research shows that benefits of holding dual-class stock can decline over time and, over the long term, companies with dual-class shares tend to be undervalued when compared with peers.

"The UK must continue to uphold robust investor protections and high standards of corporate governance to create and maintain long-term sustainable performance.”

Council of Institutional Investors (CII) deputy director, Glenn Davis, added: “As conversations pick up globally among companies, their advisors and investors that sound governance ultimately has to involve alignment between equity and control, the ICEV supports the FCA’s approach for its consistency with that principle.”

The ICEV is a coalition of global asset owners launched earlier this year, with Railpen and the Council of Institutional Investors (CII) as founding members, in an effort to fight against unequal voting rights at portfolio companies, and to protect investors and help them be effective stewards of capital.

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