On May 31, 2018, Cleary Gottlieb submitted a comment letter to MSCI regarding its public consultation on the treatment of unequal voting structures in the MSCI Equity Indexes. Cleary’s letter asserts that the approach in the proposal is highly problematic, arguing that the composition of broad equity market indexes is the wrong mechanism to address the relationship between equity interests and voting rights, and “one share, one vote” is the wrong principle.
Cleary’s letter focuses on the impact on Latin American equities. Dual-class structures are more common in Latin America than in the United States, so MSCI’s proposal would have more significant consequences for Latin American markets than in the United States. The proposal fails to take into account the alternative shareholder protections provided by law in many Latin American countries, and the specific characteristics of classes other than common stock in each jurisdiction. Cleary’s letter urges MSCI to instead consider following the example of the U.S. Securities and Exchange Commission and the principal U.S. securities exchanges, which broadly defer to home country corporate governance rules.
Please click here to read the full comment letter.