Luke Shane, a spokesman for S&P Dow Jones Indices, S&P’s indexing unit, declined to comment beyond the company’s official release. Companies with multiple share class structures “tend to have corporate governance structures that treat different shareholder classes unequally,” according to S&P’s July 31 press statement.

A media representative at index provider MSCI Inc. wasn’t immediately able to comment. Henry Fernandez, the company’s chief executive, has previously said that clients have voiced concerns about the use of dual classes.

Fewer Owners

The message is clear: Benchmarkers are listening to the growing chorus of concern over whether the rise of passive investing has weakened corporate governance.

Index-tracking funds now manage $5.7 trillion, with exchange-traded funds housing $3 trillion, up from $400 billion a decade ago, data compiled by Morningstar show. Active funds manage $10.6 trillion, the data show, but those assets have stagnated and begun to decline.

This growth has prompted handwringing about whether passive investing creates a less efficient stock market, with the Securities and Exchange Commission’s Kara Stein noting in a speech in February that stock ownership is becoming concentrated with just a few large institutional investors.

The argument goes that passive funds are less vocal as shareholders, giving companies free rein to do what they want without fear of repercussions on their stock price, leading to a kind of “ Marxism.” Indexing behemoths such as BlackRock Inc. and Vanguard Group have struggled to change the narrative. Until now.

Active Boost

S&P’s decision is “a huge win for investors,” according to Amy Borrus, deputy director of the Washington, D.C.-based Council of Institutional Investors, which lobbies for better corporate governance on behalf of more than 120 pension funds and endowments.

“FTSE Russell’s decision was an important breakthrough,” she said. “It was also a rebuke to companies that would deny public shareholders any voice in company matters and ensures that some minimal corporate governance standards are required to get into indexes.”