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John C. Coffee Jr.

The most important issue in corporate governance today is dual class capitalization, and the most important recent development is the petition submitted on Oct. 24, 2018 by the Council of Institutional Investors (CII) to both the New York Stock Exchange and Nasdaq, asking them to place a “sunset” on differentials in voting rights. Under the CII’s proposal, both exchanges would agree not to list an initial public offering (IPO) that had dual classes of stock with different voting rights, unless the disparity in per share voting power ended no later than seven years after the IPO. The CII sees this as a compromise (with some of its members viewing it as an overly lenient proposal). In fairness to the CII, it has offered a constructive compromise, but there are problems with the incentive effects of its proposal.

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