Ken Bertsch is Executive Director and Jeff Mahoney is General Counsel of the Council of Institutional Investors (CII). This post is based on a comment letter that CII submitted to the Corporation Law Section of the Delaware State Bar Association. Related research from the Program on Corporate Governance includes The Untenable Case for Perpetual Dual-Class Stock (discussed on the Forum here), and The Perils of Small-Minority Controllers (discussed on the Forum here), both by Lucian Bebchuk and Kobi Kastiel, the keynote presentation on The Lifecycle Theory of Dual-Class Structures, and the posts on The Perils of Dell’s Low-Voting Stock, The Perils of Lyft’s Dual-Class Structure and the Perils of Pinterest’s Dual-Class Structure (discussed on the Forum here, here, and here).
September 13, 2019
Henry E. Gallagher, Jr. Council Chair
Corporation Law Section of the Delaware State Bar Association
1201 North Market Street, 20th Floor
Wilmington, DE 19801
Dear Mr. Gallagher:
We are writing on behalf of the Council of Institutional Investors (CII) to request that the Delaware State Bar Association propose to the Delaware General Assembly that Delaware General Corporation Law (DGCL) be amended to limit the authority of Delaware corporations listed on national securities exchanges to adopt multi-class common stock structures with differential voting rights (“multi-class voting structures”). [1]
A proposed new Section 212(f) of the DGCL is attached as Annex A to this letter. Pursuant to that language, no multi-class voting structure would be valid for more than seven years after an initial public offering (IPO), a shareholder adoption, or an extension approved by the vote of a majority of outstanding shares of each share class, voting separately, on a one-share, one-vote basis. Such a vote would also be required to adopt any new multi-class voting structure at a public company. The prohibition would not apply to charter language already existing as of a legacy date.
The reasons for our request are explained below.
