In Focus

Dual-Class Race to the Bottom Accelerates

Snap Chair of the Board Michael Lynton, in a letter to CII, defended the company’s offering of no-vote shares to public investors in its upcoming IPO. Lynton was responding to a letter from CII and 18 investors that objected to the zero-vote shares. Lynton noted that the founders and top executives already have super-voting rights.  Lynton said the board concluded “it would benefit our stockholders to extend this control beyond the IPO” because the dual-class structure “prolongs our ability to remain a founder-led company,” which “will maximize our ability to create stockholder value.” In Asia, meanwhile, exchanges are rethinking their longstanding opposition to dual class shares. On February 16, the Singapore Exchange (SGX), launched a consultation on permitting dual-class share structures. A proposal by the Hong Kong Exchange to permit dual class was shot down by its regulator in 2015, but HKE’s CEO Charles Li in January suggested the topic be revisited.

CII Executive Director Testifies in Maryland House of Delegates in Support of Majority Voting

CII Executive Director Ken Bertsch is scheduled to testify today in the Maryland House of Delegates in support of a bill (HB 0589) that would make majority voting for directors in uncontested elections the default vote standard at companies incorporated in Maryland. State law currently requires companies incorporated in the state to use plurality voting for director elections, unless their governing documents specify otherwise. Maryland is the second-most populous state, after Delaware, for incorporations. And a disproportionate number of corporate directors who do not win majority shareholder support and yet remain on boards serve at Maryland incorporated companies. “It is not good for capital markets generally, or for Maryland, for the state to have policies that facilitate entrenchment of poor management,” Bertsch said in written testimony.

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CII Priorities

Majority Voting for DirectorsIn uncontested elections, directors should be elected by majority vote.

Universal Proxy In contests, investors should be free to vote for the nominees they prefer.

Proxy Access Long-term shareowners should have access to the proxy to nominate corporate directors.

Dual-Class Stock Each share of a public company's common stock should have one vote.

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