Following the recent initial public offering of Snapchat in March 2017, the Council of Institutional Investors lobbied the major index providers to remove companies offering non-voting shares from their most restrictive indices. Global index providers have responded by reviewing their index policy in order to exclude companies with multiclass capital structures and limited public voting rights.

On 31 July 2017, the S&P Dow Jones Indices announced its decision to exclude, with immediate effect, multiclass share companies from the S&P Composite 1500 and its component indices comprising S&P 500, S&P MidCap 400 and S&P SmallCap 600, which cover approximately 90% of U.S. market capitalisation.

  • Such companies will remain in the broad market S&P Global BMI Indices and S&P Total Market Index, which follow less restrictive eligibility rules; and
  • in order to minimise the impact of such changes, companies already included in the S&P Composite 1500 and its component indices will not be affected by the new S&P Dow Jones policy. Furthermore, a newly public company offering multiclass shares spun off from a S&P Composite 1500 index constituent will be exempted from satisfying the new criteria by benefiting from its parent's grandfathering.

On 26 July 2017, FTSE announced that companies which do not have at least 5% of their voting rights held by unrestricted (free float) shareholders will no longer be eligible for inclusion in its standard indices, including the Russel 3000 and Russel 2000 indices. These measures will not be immediately operative – companies included in the Russel indices will have until 2022 to comply with these new restrictions. The 5% free float requirement will be reviewed on an annual basis.

The S&P Dow Jones Indices press release is available at:

https://www.spice-indices.com/idpfiles/spice-assets/resources/public/documents/561162_spdjimulti-classsharesandvotingrulesannouncement7.31.17.pdf?force_download=true

The 'FTSE Russel Proposal' is available at:

http://www.ftse.com/products/downloads/FTSE_Russell_Voting_Rights_Consultation_Next_Steps.pdf

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