NEW YORK (Reuters) - Investor groups are using the high-profile battle for control of Viacom Inc (VIAB.O) to rally support for their campaigns against dual-class share structures which give founders and insiders outsized voting rights.
Mercy Investment Services is partnering with Missionary Oblates, a Roman Catholic congregation in Washington, to submit a proposal in September to collapse the dual class shares at Viacom.
The socially responsible investor is going to start reaching out to shareholders next month in hopes that the public feuding at the company will help win support for the proposal, said Donna Meyer, director of shareholder advocacy at Mercy. Mercy presented a similar proposal by Missionary Oblates last February but it was rejected.
“This is really big news, so no one should say to me ‘I don’t know Viacom,’” Meyer said.
Similarly, the Council for Institutional Investors, an influential group of top U.S. pension plans, is using Viacom as a “top talking point,” to urge members to take a stronger stance against companies adopting the dual class structure, said Ken Bertsch, executive director of the trade association.
Investor concern about dual class companies, in which only one class of investors has voting rights, has been increasing as a growing number of companies are adopting this structure when they go public, Bertsch said. In March, the Council for Institutional Investors adopted a policy that all investors in IPOs should have equal voting rights.
There have been eight proposals to collapse the dual share class at S&P 500 companies so far this year, up from zero in 2012, according to proxy adviser Institutional Shareholder Services.
Ending the special voting rights is usually impossible without support from the insiders who benefit from the dual class structures. Defenders of the structure argue that it allows management, often founders, to focus on long-term performance.
The Viacom situation, where the company’s Chief Executive Philippe Dauman is questioning the mental competence of 93-year-old Sumner Redstone, shows the need for a sunset provision on this kind of structure, said Jon Lukomnik, executive director of New York-based Investor Responsibility Research Center Institute.
“Even if you were to accept the rationale that you have a visionary leader, there is a point at which that changes,” said Lukomnik.
A Viacom spokesman declined to comment. The company said in its 2015 proxy statement that the board periodically reviews the structure and believes it has helped protect the company from short-term pressures.
Reporting By Jessica Toonkel; Editing by Tom Brown