(Adds details, MSCI quote)
By Trevor Hunnicutt
NEW YORK, Oct 30 (Reuters) - Index provider MSCI Inc said on Tuesday it would allow companies that give shareholders unequal voting rights to remain on its current equity indexes, backing down from an earlier proposal that would have reduced exposure to such companies.
But MSCI, whose indexes guide hundreds of billions of dollars in assets, said it would launch a new set of indexes that could give investors a choice to avoid companies based on voting rights next year.
A decision to restrict companies in its flagship indexes would have affected dozens of stocks around the world, including technology heavyweights Facebook Inc and Google parent Alphabet Inc.
Many fund operators merely copy the index rather than making a choice about which stocks to hold and could have been forced to sell stock as a result of the decision.
The proposal raised concern among some investors who want indexes to mirror the full market.
BlackRock Inc, the world's largest fund manager and a top MSCI client, in April said securities regulators, not index providers, should set international standards for shareholder voting rights. It said MSCI's proposal could distort markets.
Uneven voting structures has been a hot corporate governance topic, especially as a number of newly listed U.S. technology firms, such as Snap Inc and Dropbox Inc, have listed shares that retain lopsided decision-making power with company founders and other insiders.
Remy Briand, a MSCI managing director and chairman of its Index Policy Committee, said in an interview that regulators or stock exchanges are the logical institution to address voting rights.
He said MSCI did not take competitive concerns into account in making its decision and faced very divided opinion from its clients.
"There was a divide, a divide which was quite clear, which is a little bit unusual," said Briand. "The topic is difficult and the shock was quite high in the context of Snap in particular."
Last year, S&P Dow Jones Indices started excluding companies with multiple classes of shares from the S&P 500 and other indexes, a move that effectively barred Snap after its decision to offer stock with no voting rights.
It did not apply the rule to existing index components, including Alphabet and Berkshire Hathaway Inc.
FTSE Russell implemented a similar rule last year, requiring new constituents of its indexes to have at least 5 percent of their voting rights in the hands of public shareholders, while giving a five-year grace period to existing constituents that did not meet the threshold. (Reporting by Trevor Hunnicutt; editing by Tom Brown and Rosalba O'Brien)