Should index providers require listed companies to have voting rights?

A demonstrator stands for a photograph with a “#evictsnapchat” sticker over his mouth while protesting outside the Snap Inc. office in the Venice neighborhood of Los Angeles, California.


July 25, 2017
4:47 PM EDT

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BOSTON — Index provider FTSE Russell said on Tuesday that a majority of investors it surveyed supported its suggestion that companies should offer at least some voting rights in order to be included in its stock indexes.

FTSE Russell, part of the London Stock Exchange Group, said in a report posted on its website that respondents to the survey, which included asset managers and other stakeholders, offered comments on whether to include a voting rights threshold and if so, at what level.

FTSE Russell began the survey amid concerns about the initial public offering of Snapchat parent Snap Inc, which lacked voting rights, and said it will give a detailed outline of its proposed approach in coming weeks.

The company had previously said it was leaning toward setting a minimum threshold for the percentage of voting rights given to public investors, and that most stakeholders backed the idea, but the report on Tuesday was a more formal statement of its findings.

A FTSE Russell spokesman said executives were not immediately available to give more details.

Other index providers are also reviewing the corporate structure of companies which list non-voting shares, which increases the power of company insiders.

Just how aggressively the index providers should insist on voting rights is a hot topic in corporate governance. Companies with the structure have argued it allows them to focus on longer-term business planning.

There are currently no index eligibility requirements concerning voting rights for FTSE Russell’s indexes, and members of a committee advising on the issue worry that if a threshold level for voting rights is not set, “the door could potentially be opened for an increasing number of companies to list without voting rights in the future,” FTSE Russell’s report on Tuesday stated.

Robin Greenwood, a finance professor at Harvard Business School, said he is troubled by the listing of companies with no voting rights, or limited voting rights, but added he is torn about how index providers should respond.

“On the one hand, I don’t think the index providers should be sanctioning the departures from one-share-one-vote. On the other, I often thought of the index providers as being surely passive, so in that sense they are just buying what investors are buying anyway,” Greenwood emailed.

“If I were in their shoes, I would probably decline to include them, to send a message, but this is just my personal view on the tradeoff,” he said.

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