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In direct response to legal action taken by the California Public Employees' Retirement System, IAC/InterActiveCorp and its chairman Barry Diller ended their efforts to create a new class of non-voting IAC stock. The proposed change would have diluted the voting power of shareowners and effectively secured Diller's control over the company indefinitely.
Diller currently owns less than eight percent of IAC's equity, but controls more than 44 percent of the company's voting power through his ownership of all of IAC's outstanding super-voting Class B shares. Absent a change in IAC's capital structure, Diller's voting power would naturally dilute over time as IAC issues additional stock to fund acquisitions and for executive compensation.
However, in an apparent attempt to ensure Diller's control would never be diminished, the IAC Board last November authorized a new class of non-voting Class C stock. If IAC had distributed the Class C stock, the Diller family would have been protected from dilution of their voting control.
"CalPERS has a long history of supporting a one-share, one-vote structure for all shareowners, and IAC's proposal to create another stock class was an egregious violation of that principle," said Matthew Jacobs, CalPERS general counsel. "We're committed to proactively protecting shareholder rights against abuses of power by corporate fiduciaries."
CalPERS advocates for investor rights through its Global Governance Principles (PDF) and continued corporate engagement efforts. As of June 30, 2016, CalPERS held 178,907 shares of IAC/InterActiveCorp.
CalPERS filed its lawsuit in December 2016 against the board of directors of IAC/InterActiveCorp and Diller. The case is In re IAC/InterActiveCorp Class C Reclassification Litigation, C.A. No. 12975-VCL (Del. Ch.) (PDF). CalPERS was represented by the law firm of Bernstein, Litowitz, Berger & Grossmann LLP.
