Index provider MSCI delays decision on unequal voting rights stocks

Reuters

Published Jun 21, 2018 05:52PM ET

Index provider MSCI delays decision on unequal voting rights stocks

NEW YORK (Reuters) - Stock index provider MSCI said on Thursday it extended its review of how to treat stocks with unequal voting rights and expects to make a decision by the end of October.

That decision, which could affect dozens of stocks around the world, including technology heavyweights Facebook (NASDAQ:FB) and Google parent Alphabet (NASDAQ:GOOGL), had been expected by Thursday.

But MSCI said in a statement that it "determined that it is appropriate to give further consideration to the full breadth of views expressed by the investment community before announcing a final conclusion."

MSCI has been considering a plan to reduce the influence within its indexes of stocks that have share structures with unequal voting rights. Such a move could have resulted in portfolio managers selling their shares to rebalance their holdings.

More than $660 billion in passively managed funds track MSCI indexes around the world, according to Lipper data.

Uneven voting structures has been a hot corporate governance topic, especially as a number of newly listed U.S. technology firms, such as Snap Inc (NYSE:SNAP) and Dropbox Inc, have listed shares that retain lopsided decision-making power with insiders.

Last year, S&P Dow Jones Indices started excluding companies with multiple classes of shares from the S&P 500 and other indexes, although it did not apply the rule to existing index components, including Alphabet and Berkshire Hathaway Inc . (NYSE:BRKa)

FTSE Russell implemented a similar rule last July, requiring new constituents of its indexes to have at least 5 percent of their voting rights in the hands of public shareholders, while giving a five-year grace period to existing constituents that do not meet the threshold.

The MSCI proposal, made in January, has not been universally welcomed.