(Adds comment from FTSE Russell CEO; adds dateline and additional byline)
BOSTON/SAN FRANCISCO, July 26 (Reuters) - FTSE Russell said on Wednesday it plans to exclude Snap Inc from its widely followed stock indexes because the owner of the Snapchat messaging app has an unusual share structure that denies voting rights to investors.
The stock index provider said it made the decision based on client feedback, the latest sign of the growing importance of corporate governance rights to investors.
It plans to require new constituents of its indexes to have at least 5 percent of their voting rights in the hands of public shareholders, though current constituents will be given a five-year grace period to comply.
FTSE Russell Chief Executive Mark Makepeace told Reuters in an interview many of his clients had worried that Snap's structure could set a bad precedent.
"There were strong opinions that voting rights are an important issue. For shareholders to perform their function they have to be able to influence a company," he said. "Shareholders won't be able to hold boards accountable if they don't have voting rights," Makepeace said.
He added that some clients may now push for an even higher minimum voting standard, though he does not expect an adjustment before the plans become effective in September.
"We may hear views asking for a higher minimum, but I think this represents a very strong first step and I think it's a prudent way forward that recognizes the issues investors are raising," he said.
A Snap representative did not immediately respond to questions.
How index providers should treat Snap and its lack of voting rights has been a hot topic for technology investors after the company disclosed its unprecedented corporate structure ahead of its $3.4 billion initial public offering in March.
Big investment firms including BlackRock Inc and State Street Corp recently have stressed their attention to shareholder rights.
That could put major investors on a collision course with Silicon Valley companies keen on keeping decision-making power in the hands of founders and other insiders -- although to be sure many big fund managers went ahead and bought Snap despite its structure.
Inclusion in a stock index has been an important milestone for young companies, making their shares eligible to be held by index funds and others who closely follow indexes like the S&P 500, a guidepost for trillions of dollars of capital worldwide.
Snap surged in its first two days of trading but since then has slumped to 21 percent below its IPO price, as investors worried about its valuation and competition from Facebook.
Shares of Snap were unchanged in extended trade, after closing down 3.53 percent at $13.40, a new low, on the New York Stock Exchange. (Reporting by Ross Kerber in Boston and Noel Randewich in San Francisco.; Editing by Leslie Adler and Tom Brown)