Casten Introduces Bill to Increase Transparency for Proxy Voting, Support Shareholder Rights
Washington, D.C. — U.S. Representative Sean Casten (IL-06) introduced the Multi-Class Stock Company Voting Transparency Act, legislation that directs the Securities and Exchange Commission (SEC) to improve the transparency of the voting results at multi-class companies and strengthen the quality of information available to investors.
“The Multi-Class Stock Company Voting Transparency Act would help American retirement savers, pension funds, and university endowments better understand exactly how multi-class stock structures are impacting their rights as shareholders,” said Rep. Sean Casten. “Investors deserve to know whether the board’s response to the outcome of a proposal reflects the preferences of the majority of shareholders—or whether super vote shareholders swayed the results.”
Shareholder proposals are an important mechanism for promoting good governance, corporate accountability, and transparency at public companies. The shareholder proposal process enables investors to engage in a meaningful dialogue with the companies that they own and offer their perspectives on important, financially material issues.
About 75% of publicly traded companies have shares with equal voting rights, where one share represents one vote on the shareholder proposals that are presented at a company’s annual meeting. The remaining 25% of companies sell shares with differential voting rights, which are known as multi-class or dual-class structures. For example, a company may offer Class A shares that are in line with the ‘one share, one vote’ principle to the general public. Class B shares that represent 10 votes per share may be reserved for founders, executives, and industry insiders. This provides them with significantly more voting power, and, therefore, they can significantly influence the voting outcomes of shareholder proposals.
Current SEC rules require that all public companies disclose the aggregate vote tallies for each shareholder proposal and whether each proposal passed or failed. The Multi-Class Stock Company Voting Transparency Act directs the SEC to conduct a rulemaking to require that multi-class companies also disclose the total number of votes cast for, against, or withheld on by Class A shareholders and Class B shareholders on each proposal, alongside other required disclosure information.
The legislation has been endorsed by the Council of Institutional Investors (CII).
Text of the legislation can be found here.
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