The Confederation of Swedish Enterprise strongly believes that dual class share structures with differentiated voting rights is an important and valuable feature of the Swedish stock market.
Late 2022, Institutional Shareholder Services Inc. (“ISS”) (one of several providers of proxy advisory services), introduced updates to the ISS benchmark proxy voting policies. The updates include a new policy on unequal voting rights structures targeting Continental Europe intended to apply as from February 2024. Under the new policy, ISS will recommend voting against directors individually or against the discharge of (non-executive) directors for maintaining a corporate structure with unequal voting rights.
In Sweden, dual class share structures with differentiated voting rights have been an important feature of the stock market for hundred years, contributing to the success of Swedish companies and a well-performing stock market. A short set of arguments why the Confederation of Swedish Enterprise strongly believes that dual class share structures with differentiated voting rights is an important and valuable feature of the Swedish stock market are highlighted in the document below.
The new ISS policy is concerning. Votes against discharge from liability for individual board members or against election of board members, just because a company has shares with differentiated voting rights cannot be seen as good governance. Instead, it may be harmful to the investor community and to individual companies due to the uncertainties created by the recommendation.