S&P Global has received backlash from large pension funds over its decision to allow companies with dual-class share structures into its indices, according to media reports.
The Council of Institutional Investors (CII), a representative of pension funds and advocate against dual-class share structures, said it was “surprised and disappointed” by S&P’s decision to reopen the S&P 500 and other indices to companies with unequal voting rights, according to a letter to the index seen by the Financial Times.
CII added that it was disappointed at the lack of transparency in S&P’s decision-making process.
The reopening of the indices reverses a five-year-old policy of barring new companies with dual-class shares, which was enforced following the decision by Snap to go public in 2017 with no voting rights. The new rules pave the way for private equity giants Blackstone and Ares to join the S&P 500.
Investors told the Financial Times that they had been caught off guard by the decision, with Caroline Escott, senior investment manager at Railpen, telling the newspaper that she was “deeply dismayed to hear of the retrograde decision.”
“It is currently unclear the extent to which the wider investment industry was appropriately consulted during the decision-making process over the last few months…We are writing to S&P to ask for further information,” Escott added.
S&P moved to explain that it sometimes reviews its index methodologies and the change in tack on multiple class shares was as a result of a public consultation in 2022 with members of the market.
It further added that changes in the market since its initial decision have meant that restricting multi-class companies “no longer served the index family’s objective.”