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Lack of voting rights may keep Snap, others from MSCI indexes

Lack of voting rights may keep Snap, others from MSCI indexes
From Reuters - July 17, 2017

BOSTON (Reuters) - MSCI Inc has proposed leaving shares of Snap Inc (SNAP.N) and other companies including Eaton Vance Corp (EV.N) out of stock indexes because they lack voting rights, a sign of the rising skepticism facing corporate structures that boost the power of insiders.

In a paper sent to clients in June, MSCI (MSCI.N) said its proposal aimed "to address the growing concern pertaining to listings of only non-voting shares," and invited feedback.

Index providers have been reviewing the issue of whether to include companies with non-voting shares since Snap's IPO in March. MSCI's idea resembles a skeptical view that rival FTSE Russell has already put forward about companies that offer shares with unequal voting rights, even as some technology firms move in that direction.

A third index provider, S&P Dow Jones, has its own review underway, with decisions due in coming weeks.

Being excluded from stock indexes would be a blow to young companies like Snap by making it harder, or impossible, for some big fund managers to buy the stock. Critics including big pension funds worry giving shareholders less say over matters like executive pay or board elections will make corporate leaders less accountable, while some executives say tighter control helps them run their business with a longer-term focus.

Shares in the parent of Snapchat have already been under pressure since its $3.4 billion IPO in March and last week sank below their $17 initial sale price, amid concerns about the popular messaging platform's slowing growth and competition from Facebook Inc. (FB.O)

Under Snap's unusual structure, most power on matters like executive pay or board membership is concentrated with co-founders Evan Spiegel and Robert Murphy.

MSCI and Snap declined to comment. Snap previously said its voting structure would help it "remain a founder-led company" and that the majority of its board is independent.

Index clients include big fund sponsors like BlackRock Inc (BLK.N) and Vanguard Group, who have been critical of the turn away from voting shares but have also bought shares of Snap.

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