To optimize its own financial returns, our Company underwrites initial public offerings providing perpetual control to insiders with high-vote stock, contributing to poor governance that harms investors as a class.

These structures give unchecked power to insiders, whose concentrated interests are not aligned with
diversified shareholder interests. As one Nobel laureate notes, “initial entrepreneurs are not welldiversified and so they want to maximize the value of their own company, not the joint value of all companies.” The SEC’s Investor Advocate underscored the economic risk of multiclass structures recently:

[W]hat we now have in our public markets is a festering wound that, if left untreated, could
metastasize unchecked and affect the entire system of our public markets. The question,
then, is what can be done to avoid the inevitable reckoning.

Similarly, an SEC Commissioner said:

Structures where a minority of insiders lock out the interests and rights of the majority may… be harmful for the economy as a whole.

By lending its reputation and expertise to these structures, the Company jeopardizes the viability of the governance model that created significant economic wealth. By continuing to underwrite such offerings, the Company prioritizes its own financial returns over the health of the global economy, in keeping with the Chairman’s description of the Company’s “stock price [as] a measure of the progress we have made over the years.”
But improving Company share price by practices that threaten “the economy as a whole” is a bad trade for most of the Company’s shareholders, who are diversified, relying on broad economic growth to achieve their financial objectives. A Company strategy that increases its own share price but threatens global GDP is a threat to these owners: a drag on GDP created by facilitating poor governance will directly reduce their long-term returns.

To address the reduced returns that would come from foregoing multiclass underwriting revenues, the Proposal would encourage the Company to study how it could (1) participate in public and private collaborations to end poor governance and (2) explicitly account for performance improvements in its shareholders’ diversified portfolios. Such a report would help diversified shareholders determine whether to seek a change in corporate direction so that the Company can better serve their interests.