By Jessica DiNapoli
NEW YORK (Reuters) – A U.S. House of Representatives panel is considering discussing a bill requiring companies that go public with dual-class shares to terminate the structure after seven years, according to a copy of the bill released Thursday evening.
Dual-class share structures, which give some shareholders more voting rights, are not popular with investors, but popular with fast-growing tech companies. U.S. investors have been pushing companies out of the structure for years, but stopped short of not investing in those companies.
The bill targets newly opened businesses and would apply to social media companies such as Facebook Inc and Snapchat, parent company Snap Inc. The bill also allows the dual-class structure to remain in place for seven years. additional if the majority of shareholders of each class approve it.
Shareholder advocacy group the Council of Institutional Investors wrote to the committee on Friday in support of the bill, as did the New York State Comptroller, which oversees $ 268 billion in public pension funds, and the Ohio Public Employees Retirement System (OPERS), with $ 113 billion in assets under management.
OPERS wrote in the letter that the divestiture of dual class businesses eliminates the “possibility of any constructive dialogue” it might have with the businesses.
The bill also requires companies to disclose the racial and ethnic diversity of their boards of directors and officers. The United States Securities and Exchange Commission is already considering implementing a similar rule.
(Reporting by Jessica DiNapoli; Editing by Richard Chang)