In a speech given early in the week at Stanford University’s Rock Center for Corporate Governance, titled, “Mutualism: Reimagining the Role of Shareholders in Modern Corporate Governance,” Commissioner Stein addressed a broad range of topics, including cybersecurity issues and shareholder engagement. Commissioner Stein also commented on dual class capital structures. Commissioner Stein, not speaking on behalf of the Commission, noted that in her view, dual class capital structures were not democratic and created a disconnect between the interests of shareholders and control parties.
Later in the week, Commissioner Jackson, speaking at Berkeley and making his first public remarks since joining the Commission, commented on perpetual dual class structures. Commissioner Jackson cited statistics showing that the trend was on the rise, noting that 14% of the 133 companies that listed on U.S. exchanges in 2015 had dual class voting structures, compared to 12% in the prior year. Commissioner Jackson outlined some of the benefits of dual class structures that have been noted in academic literature, as well as some of the disadvantages, and focused his comments on companies that adopt dual class structures and provide for these in perpetuity, as opposed to allowing for some sunset provisions. The Commissioner cited research from a review of 157 dual-class IPOs that were undertaken in the last 15 years and noted significant differences in performance between those companies that had sunset provisions and those that did not. Included in the remarks are additional data points and analyses. While solely voicing his own views, Commissioner Jackson seemed to favor seeing modified listing standards from the national securities exchanges that would address the inclusion of sunset provisions.