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 Major U.S. corporations from Viacom Inc to Facebook Inc have classes
of shares that give founders, CEOs and other insiders extra
influence, creating a long-running debate over the balance of power
between them and outside investors.
The change in policy has not been reported. Portfolio managers can
vote counter to the policy, where warranted, the asset manager said.
Still, the change at one the largest publicly traded fund firms,
with $763 billion in assets under management at the end of last
year, sends a message to boardrooms and could boost efforts by
activists to equalize voting rights at some established companies.
At Viacom, investors are calling for controlling shareholder Sumner
Redstone to end a dual-class structure, saying it insulates leaders
from investor pressure.
Meanwhile, Rupert Murdoch maintains his influence at Twenty-First
Century Fox Inc and News Corp thanks to a similar structure, as do
the founders of Google parent Alphabet Inc. In all, more than 10
percent of companies in the Russell 3000 Index have unequal voting
of shares, according to FactSet.
Donna Anderson, head of T. Rowe Price's corporate governance
efforts, said the Baltimore-based company adopted the new policy
last month after becoming alarmed by the rising number of initial
public offerings with dual-class structures, mimicking the larger
companies.
Proponents of new rules say outside investors should have an equal
vote in corporate decisions, while backers of dual-class structures
say they help ensure that founders and other trusted leaders can
plan for the long term - and that outside investors understand the
rules when buying shares.
There were no immediate signs that other big fund firms would make a
similar change. A spokeswoman for Vanguard Group said it had no
plans to change its voting policies to follow T. Rowe Price’s lead.
A spokesman for BlackRock Inc declined to comment on the matter and
Fidelity Investments did not immediately return a request for
comment.
T. Rowe Price and other fund firms have backed efforts for change
before, but the new policy specifically focuses on directors the
company has backed in the past.
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"To just endorse their re-election every year sends the wrong
message," Anderson said in an interview this week.
Under the new policy, at dual-class U.S. companies with unequal
voting rights, T. Rowe Price funds now will vote against lead
independent directors, or independent chairs, and all nominating and
corporate governance committee members.
While the new policy may not determine whether directors are
re-elected, T. Rowe Price's size means the change will "make those
directors take notice," said Laura Campos, director of shareholder
activities for the Nathan Cummings Foundation, which has pressed
News Corp to end its dual-class structure.
Since August, a half-dozen IPOs have included unequal voting rights,
according to FactSet, including dating website operator Match Group
Inc and digital payments company Square Inc.
Shareholder resolutions calling for companies to give all shares an
equal vote also have gained ground. At Ford Motor Co such a proposal
received 36 percent support in 2015, up from 19 percent support in
2009, according to Manhattan Institute data.
On March 14 a vote on a similar advisory proposal will be held at
Viacom. The proposal is not expected to pass as Redstone still
controls a majority of the media company's voting stock.
(Reporting by Ross Kerber; Editing by Peter Henderson and Bill
Rigby)
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