New York Stock Exchange before the initial public offering of Snap Inc, the parent company of Snapchat, at the New York Stock Exchange in New York
© Nicole Bullock/FT

Index provider FTSE Russell is to consult with stakeholders about including Snap in its widely followed Russell indices, amid investor worries about lack of shareholder rights at the newly listed messaging app provider.

The consultation, to be officially launched in the coming days, is the latest sign of growing interest among “passive” fund managers in the corporate governance of the companies their index-tracking model obliges them to buy.

It also comes as various countries weigh the merits of abandoning one-share-one-vote principles as they seek to compete with New York in attracting listings such as Snap and before that, China’s Alibaba, which chose the US for its record $25bn listing after it could not reconcile its governance with Hong Kong’s standards.

Both London and Singapore are debating whether to allow more than one class of shares that carry different rights.

Snap, which runs the popular mobile messaging app Snapchat, set a new standard this month when it became the first in the US to sell shares with no voting rights. Its rules also ensure its co-founders will maintain control even if they leave the company.

“The new growth companies such as Snap have set alarm bells ringing particularly in the US,” said Mark Makepeace, chief executive of FTSE Russell. “It’s about where you get a balance between allowing [founders to maintain control] and protecting shareholders. There’s a feeling that Snap might be the first, but it won’t be the last.”

The Russell 3000 is a widely used benchmark among US fund managers who have voiced fears that Snap’s market capitalisation, currently $27.9bn, could earn it near-automatic inclusion in benchmarks such as the Russell 3000 and the S&P 500.

Mr Makepeace said the debate was an example of the increasingly central role being played by the big index providers.

“In the past it was the role of the regulator to set standards and ensure that these problems of governance which introduce risk were not allowed, and the role of the index provider to capture the investable opportunities,” he said. “Index providers are coming under pressure from asset owners who want higher standards from the indices which they used to get from the regulators.”

FTSE Russell is launching the consultation ahead of its annual June review of its indices. Later this year, it plans an in-depth review of stakeholder views on how it could, or should, treat companies with limited voting rights.

The role of index providers has also grown as the industry has consolidated. FTSE bought Russell in 2014 and earlier this month its rivals, MSCI and S&P Global, swiftly quashed reports that the two were tying up amid competition concerns.

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