Railpen launches equal voting rights campaign

Railpen and the Council of Institutional Investors have announced the launch of the Investor Coalition for Equal Rights (ICEV), a new collective investor initiative to push back against the unequal voting rights at portfolio companies.

The ICEV is a coalition of global asset owners including Minnesota State Board Investment, New York City Comptroller’s Office, New York State Common Retirement Fund, Ohio Public Employees Retirement System and the Washington State Investment Board, who collectively manage assets of over $1trn on behalf of five and a half million savers.

The group, which is expected to grow over time to include additional asset owners and potentially asset managers, will talk with key market participants and policymakers, emphasising the importance of the proportionate shareholder voice to effective stewardship and long-term sustainable company performance.

The founding ICEV members are concerned that differential voting rights dilute the ability of public shareholders to positively influence company management and hold them to account where necessary.

In the first phase of the initiative, ICEV will undertake a campaign with pre-IPO companies and their advisers, as well as policymakers, commentators and index providers in priority jurisdictions. This will take place through engagements with both private and public market participants as well as in policy forums.

Railpen ICEV chair and senior investment manager, Caroline Escott, commented: “At a time when policymakers increasingly recognise the value of effective investor stewardship to achieving good member outcomes, it’s vital that the shareholder voice is heard by company management.

“Voting is an important part of the stewardship toolkit, but dual-class share structures without automatic time-based sunset clauses mean long-term investors are trying to influence with one hand tied behind our backs.

“We are delighted to be working with the CII, a vocal and long-standing champion of corporate governance, and some of the world’s leading pension funds to make the case for equal voting rights at portfolio companies.

“The issue is fundamental to the ability to engage with, and hold companies to account on, material risks and opportunities, and we hope that the work of ICEV will mark a turning point in the dual-class share structure debate.”

Railpen executive director of CII, Amy Borrus, added: “Indefinite control is naturally alluring to any founder contemplating an IPO, so it’s incumbent on investors to communicate early and together about this long-term corporate governance trainwreck. We are pleased to be partnering with Railpen as co-leaders in this campaign, as this issue is increasingly global.

“This effort complements CII’s draft legislation in the U.S. that would require national stock exchanges to bar listings of new dual-class companies unless they have seven-year sunset provisions, or if each class, voting separately, approves the unequal structure within seven years of the IPO. We will look to coalition members for their continued support in advancing the legislation.”

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