Institutional investors continue to express concerns regarding dual class share structures. The Council of Institutional Investors has petitioned the Nasdaq Stock Market to change its listing rules in order to require that Nasdaq-listed companies with dual share classes incorporate a sunset provision in their charter. The CII letter cites a growing consensus in favor of sunset provisions. The letter also cites an increasing number of companies that had time-based sunset provisions. The CII letter recommends a sunset of seven years or less. Also, the CII letter offers as a compromise that the Nasdaq consider permitting a mechanism that would allow the shareholders of a listed company, with each class voting separately on a one-share, one-vote basis, to extend the multi-class structure for another term of seven years or less. In the meantime, index providers continue to consult on the eligibility for index inclusion of the shares of companies that have multi-class share structures. Recently, SEC Commissioner Jackson expressed concern for “governance by index,” noting that excluding certain companies from indices had the unintended effect of depriving holders of index-tracking funds from investing in such companies. The Commissioner appeared to call on the SEC and Delaware to take a more proactive role in addressing multi-class share structures.

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