How Nonvoting Shares Can Help Promote Efficient Corporate Governance

Companies that go public with multiple classes of shares will be excluded from the major U.S. stock indexes of S&P Dow Jones Indices, the organization announced in July. A few days earlier, FTSE Russell said it would bar dual-class companies from its indexes unless public shareholders hold at least 5 percent of the voting rights. These policy changes were made in response to a recent surge in dual-class initial public offerings, which generated hostile reactions from investors, regulators, and the public. Such structures were historically favored by family-owned companies seeking to preserve control but have gained popularity among successful technology … Read more

The Case Against Passive Shareholder Voting

In the past few years, investors have begun to embrace the reality that academics have been championing for decades—that a broad-based passive indexing strategy is superior to picking individual stocks or actively managed mutual funds. As a result, millions of investors have abandoned actively managed mutual funds, or “active funds,” in favor of passively managed funds, or “passive funds.” This past year alone, investors withdrew $340 billion from active funds (approximately 4 percent of the total) while investing $533 billion into passive funds (growing the total by 9 percent).

This historically unprecedented shift is good news for investors, who benefit … Read more