Council of Institutional Investors

CII Urges Boards to Adopt ‘One Share, One Vote’
Thursday, August 28, 2014
by: Matthew Frakes

Section: CII Governance Alert




CII sent letters dated August 12 and August 20 to seven companies requesting that they implement a “one share, one vote” stock structure.  These companies had been recipients of shareholder-sponsored resolutions calling for the repeal of their existing dual-class stock structures.

In the 2014 proxy season, less than a dozen companies in the Russell 3000 received shareholder proposals requesting the repeal of a dual-class stock structure. Of these, CII sent letters to seven where the superior class of stock is especially closely held by one or several individuals: Cablevision Systems, Donegal Group, Facebook, Ford, Google, Spirit AeroSystems and Swift Transportation. Given these companies’ existing dual-class structures, none of the proposals won outright majority support.  However, analysis by CII staff found that if all shares were adjusted to have one vote equally, the proposals at these companies would have received clear—and at times overwhelming—majority support from shareholders. Only the disproportionate voting power held by certain individuals skewed the outcome.

The letters from CII emphasized he crucial importance of the principle of “one share, one vote” to CII members, who generally have long-term investment horizons and rely on passive investment strategies. The view it as a tool for holding boards accountable.  CII called on the boards of these seven companies to implement a one-vote-per-share stock structure, given the strong preference expressed by shareholders at the companies’ 2014 annual meetings.  To view the letters, please visit the “Dual-Class Stock” page https://www.cii.org/dualclass_stock of CII’s website.

The principle of “one share, one vote” has long been a central tenet of CII’s corporate governance policies and advocacy.  When CII was formed in 1985, the first provision in its original set of corporate governance best practices affirmed the importance of equal voting power that is proportional to the economic interests of the shareholders. 
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