Tag: CalSTRS

Public Pension Funds’ Shareholder-Proposal Activism

James R. Copland is the director of the Manhattan Institute’s Center for Legal Policy. The following post is based on a report from the Proxy Monitor project; the complete publication, including footnotes, is available here.

America’s largest publicly traded companies are facing more shareholder proposals in 2015, driven principally by a “proxy access” campaign led by New York City Comptroller Scott Stringer, who oversees the city’s $160 billion pension funds for public employees. Elected in 2013, Stringer has launched a Boardroom Accountability Project seeking, in part, proxy access, which grants shareholders with a certain percentage of a company’s outstanding shares the right to list a certain number of candidates for the company’s board of directors on the company’s proxy statement. As noted in an earlier finding, Comptroller Stringer’s proxy-access campaign has won substantial shareholder support at most companies where his proposal was introduced.

Although it is too soon to assess the impact of Comptroller Stringer’s push for proxy access, we can evaluate shareholder-proposal activism by state and municipal public employee pension funds in previous years. From 2006 to the present, state and municipal pension funds have sponsored 300 shareholder proposals at Fortune 250 companies. More than two-thirds of these were introduced by the pension funds for the public employees of New York City and State.


Proxy Access, SEC Uncertainty and Related Issues in 2015

The following post comes to us from Bill Libit, Chief Operating Partner concentrating in corporate and securities and municipal finance at Chapman and Cutler LLP, and is based on a Chapman publication by Mr. Libit and Todd Freier; the complete publication, including footnotes, is available here.

The rise of shareholder activism in the realm of corporate governance has increasingly focused on board performance and the right of shareholders to replace those directors who are perceived to underperform. One proposed approach to facilitate the replacement of underperforming directors is to give shareholders direct access to the company’s proxy materials, including permitting the inclusion of a shareholder-proposed director nominee (or slate of nominees) and a statement in support thereof in the company’s proxy statement (which such approach is more commonly referred to as “proxy access”). Although current U.S. securities regulations do not grant shareholders access to company proxy materials, proxy access may be available to shareholders by way of a company’s organizational documents (e.g., articles of incorporation, bylaws or corporate governance guidelines), as permitted by state corporate law.

While proxy access did not garner significant attention over the past two proxy seasons, it is one of the most notable early developments of the 2015 proxy season. It has been reported that shareholders have submitted an estimated 100 proxy access proposals to U.S. companies, a considerable number of which will be voted upon by shareholders over the next several months. Proxy access will very likely be one of the most contentious corporate governance issues this proxy season.


CalSTRS Releases First Annual Corporate Governance Report

Anne Sheehan is Director of Corporate Governance at the California State Teachers’ Retirement System. The following post relates to the CalSTRS Corporate Governance 2013 Annual Report, available here.

The California State Teachers’ Retirement System (CalSTRS) was established in 1913 for the benefit of California’s public school teachers. This year we celebrate our 100th anniversary serving the retirement needs of our 862,000 members and beneficiaries. The long-term nature of CalSTRS liabilities, and our responsibilities as fiduciaries to the educators of California, makes us keenly interested in governance issues that affect our investment portfolio. We expect the companies in our portfolio to be responsible stewards of our capital and we have an obligation to effectively engage those companies while balancing risks and rewards.

This year, CalSTRS published its inaugural corporate governance report to communicate our governance program priorities to the investment community. While we pursue a variety of initiatives throughout the year, our engagements focused on four main themes:

Online Shareholder Participation in Annual Meetings

The following post comes to us from Janice Hester Amey, corporate governance portfolio manager at the California State Teachers’ Retirement System, and Elizabeth Danese Mozley, vice president at Broadridge Financial Solutions. The post is based on a report, available in full here, which was issued by the Best Practices Working Group for Online Shareholder Participation in Annual Meetings.


It is a generally accepted cornerstone of sound corporate governance that shareholder participation is a key component of a successful annual meeting of shareholders. State laws require companies to hold annual meetings of their shareholders to elect directors and act upon other matters properly brought before the meeting. From a governance perspective, the annual meeting often serves as an opportunity for management to update shareholders on company developments, for shareholders to ask questions of management and directors, to consider shareholder proposals and to review the company’s performance.

In recent years, there has been ongoing dialogue regarding best practices, or safeguards, to ensure that annual meetings are accessible, transparent, efficient and meet the corporate governance needs of shareholders, boards and management.

To that end, a group of interested constituencies, comprised of retail and institutional investors, public company representatives, as well as proxy and legal service providers, has been discussing best practices and safeguards for annual shareholder meetings, online shareholder participation in annual shareholder meetings and rules of engagement for such meetings.


Lessons Learned: The Inaugural Year of Say-on-Pay

Anne Sheehan is Director of Corporate Governance at the California State Teachers’ Retirement System.

One thing is for certain: Pay is unique at every company. There are as many iterations of pay as there are companies in America. This uniqueness makes our job as shareholders very challenging. For the most part, we must rely on the members of compensation committees to develop the compensation philosophy and structure in order to incentivize management and align their interests with those of shareholders. We believe that poorly structured pay packages harm shareholder value by unfairly enriching executives at the expense of owners – the shareholders. On the other hand, a well aligned compensation package motivates executives to perform at their best. This benefits all shareholders.

There have been many changes this proxy season and although the evaluation of compensation is still a challenge, we have learned a few things along the way. Given the unique nature of compensation, CalSTRS tried to evaluate pay holistically at every company. We not only looked at the alignment between pay practices and the performance of the companies, but also corporate peer groups, problematic pay practices, and disclosures.