FORTUNE – In many ways, 2012 has been the year of investor class-based perks. A few cases in point: The Facebook (FB) and Carlyle (CG) initial public offerings (IPOs), both with dual class shares; preposterous defenses of privileged share classes during Google’s (GOOG) stock issuance and News Corp’s (NWSA) annual meeting; and the IPO-lite provisions of the JOBS Act.
These events have gotten institutional investors’ knickers in a twist and some are actually going into battle. The goal? Responsible investing.
The California Public Employees’ Retirement System (known as CalPERS) is leading a charge to set standards for investment participation that could result in withholding investment in initial public offerings (IPOs) that don’t meet minimum governance prerequisites.
CalPERS plans to take a close look at whether to set prohibitions for IPOs that have unequal shareholder voting rights, board elections that don’t use majority rule, and classified boards (where directors don’t come up for vote every year). CalPERS’ new standards will also deal with IPOs that take advantage of the JOBS Act by, for example, providing weaker disclosures to investors.
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The California system hasn’t been working in a vacuum. As part of its overall IPO governance strategy, the giant pension fund has been talking with others in the investment arena to garner broader support for their new standards, Anne Simpson, senior portfolio manager and director of corporate governance, told me. So far, CalPERS has met with strong proponents of the JOBS Act like the National Venture Capital Association and with private equity firms that use dual class structures. Simpson says they are also in conversation with other pension funds and investment managers, including members of the Council of Institutional Investors (CII). Large international investment managers are also very interested, she says. And even investment banks are in CalPERS’ sights.
For their part, some new issuers are also stepping up to address weaknesses created by the JOBS Act.
Companies don’t want to give the impression that they represent a lower class of stock. The Wall Street Journal reported last month that “85% of emerging-growth companies that went public since April said they wouldn’t use the [JOBS Act] law to delay the adoption of any new accounting standards.”
And CII has appealed to the New York Stock Exchange (NYSE) and to NASDAQ to refuse new listings to companies that have “two or more classes of common stock with unequal voting rights.” Ann Yerger, executive director of CII, told me via email that she has held follow-up talks with NYSE and plans to do the same with NASDAQ. CalPERS’ Yerger also confirmed that her organization is “energetically studying” the IPO issues, which are a “high priority for [our] Policies Committee.”
While investment managers and issuers may want to raise the bar, underwriters appear to be sitting on the sidelines for now. A glimmer of hope arose when it appeared that Goldman Sachs might have refused to underwrite Russian firm Megafon for governance reasons. But a person close to the matter told me that Goldman had stepped back not for corporate governance but for technical reasons. The structure for the deal wasn’t set and so it simply wasn’t possible to proceed, the person told me.
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“Underwriters always look to find a way [to underwrite the stock],” Bob Monks, founder of proxy advisory firm Institutional Shareholder Services and and co-founder of GMI Ratings, told me. Goldman Sachs (GS) declined to discuss its underwriting standards for this article. Neither Morgan Stanley (MS) nor Citigroup (C), who underwrote Megafon, responded to requests for comment. And Megafon did not respond to an email seeking answers on its governance and Goldman’s participation.
“It would be nice if underwriters paid more attention to the corporate governance of the companies they underwrite. It would be a great trend,” says Myron Kandel, founding financial editor at CNN and former president of the Initiative for Corporate Responsibility and Investor Protection.
Until that happens, actions by CalPERS and CII are paving new ground. It’s time investment managers and companies committed to their responsibilities to you, me, and everyone else who collectively give them their charters.
Eleanor Bloxham is CEO of The Value Alliance and Corporate Governance Alliance (http://thevaluealliance.com), a board advisory firm.
