The State Board of Administration of Florida (Florida SBA) is the fourth largest public pension fund in the US and was early to announce their votes in advance of annual meetings. Those announcements can be found on the Florida SBA site, as well as on Proxy Democracy. The following is from a press release that Florida SBA issued out last week on their accomplishments during the recent proxy season. They certainly did a lot to shift us to more democratic forms of corporate governance. Congratulations to Ash Williams, Michael McCauley and all those working at Florida SBA.
Florida SBA cast votes at over 9,500 public companies across 80 countries, voting more than 10,000 proxies and 92,000 individual ballot items during the 2014 proxy season. Florida SBA actively engages portfolio companies throughout the year, addressing corporate governance concerns and seeking opportunities to improve alignment with the interests of our beneficiaries. As fiduciary, active engagement is an effective way to advocate for board accountability, robust corporate disclosures, accurate financial reporting, and ethical business practices. With every engagement and corporate proxy vote, Florida SBA upholds its fiduciary duty to beneficiaries to increase shareowner value and promote long-term stewardship. Said Ash Williams, Executive Director & Chief Investment Officer of the SBA,
The SBA recognizes the important role sound corporate governance plays in a company’s capital efficiency, management incentives, risk management, and transparency.
During the 2014 fiscal year, Florida SBA experienced a record volume of global proxy votes–voting at over 10,000 shareowner meetings. This was accomplished by systematically reviewing the corporate governance practices of companies in Florida SBA’s global portfolios and applying Florida SBA’s corporate governance principles. Highlights from the 2014 proxy season included the fourth year of Say-on-Pay in the United States, the first ever binding votes in the United Kingdom regarding executive remuneration policy, and record support levels for annual director election cycles.
Florida SBA Key Vote Summary During Fiscal Year 2014
- Votes were cast in 80 countries, with the top five countries comprised of the United States (2,933 votes), Japan (1,208), Hong Kong (669), United Kingdom (426), and Taiwan (420).
- Executed votes on 10,037 (9,820 in FY 2013) public company proxies covering 92,488 (89,060 in FY 2013) individual voting items—representing a four percent increase in the number of total proxy votes.
- Across all voting items, voted 78.7 percent “For”, 17.9 percent “Against”, 3.1 percent “Withheld”, 0.1 percent “Abstained” or “Did Not Vote” (due to various local market regulations or liquidity restrictions placed on voted shares). Of all votes cast, 19.4 percent were “Against” the management-recommended-vote (up from 18.2 percent during the same period last year).
- Votes “For” Say-on-Pay = 77.7 percent for U.S. companies / 62.3 percent for Non-U.S. companies (FY 2013 = 77.1 and 61.6, respectively).
- Votes “For” Director Elections = 79.8 percent (FY 2013 = 81.6 percent).
- Votes “For” External Auditor = 94.9 percent (FY 2013 = 93.7 percent).
- Votes “For” Corporate Governance Proposals = 62.5 percent (FY 2013 = 68.2 percent).
- Votes “For” Environmental and Social Issues = 44.0 percent (FY 2013 = 42.7 percent).
- Among all global proxy votes, the SBA cast at least one dissenting vote at 6,885 annual shareowner meetings, or 68.6 percent of all meetings.
Florida SBA Key Proxy Voting Items During Fiscal Year 2014
Board of Director Elections — Florida SBA supported 79.8 percent of individual nominees for boards of directors, voting against the remaining portion of directors primarily due to concerns about candidate independence, qualifications, attendance, or overall board performance. Florida SBA’s policy is to withhold support from directors who fail to observe good corporate governance practices or demonstrate a disregard for the interests of investors. During the first half of 2014, only 34 nominees at 21 companies in the Russell 3000 stock index failed to receive majority support by shareowners as part of uncontested director elections. Board elections represent one of the most critical areas in voting due to the fact that shareowners rely on the board to monitor the performance of a company’s management.
Declassifying Board Elections — During the 2014 proxy season, Florida SBA continued its partnership with the Harvard Law School’s Shareholder Rights Project (SRP), submitting shareowner proposals at a half-dozen U.S. companies. The shareowner proposals urged repeal of the companies’ classified board structure and a transition to annual director elections. The use of annual board terms at S&P 500 companies has increased five percent over the last three years – from 67.4 percent in June 2012 to 74.6 percent in 2014. As a result, management proposals in 2014 outnumbered shareowner proposals by a margin of 71 to 15. Consistent with policy, the SBA votes in favor of all proposals to de-stagger director terms and has been a long-standing advocate of annual elections for all companies, regardless of size or domicile.
Proxy Access — Proxy access shareowner proposals facilitate investor-nominated director candidates. This proxy season, six proposals received majority support from shareowners. Florida SBA voted in favor of 75 percent of proposals submitted by investors. Nine of the proposals, proposing to allow shareowner groups holding at least three percent of shares outstanding to nominate directors, averaged 54.7 percent support.
Executive Compensation — Florida SBA considers on a case-by-case basis whether a company’s board has proposed or implemented equity-based compensation plans that are excessive relative to other peer companies or plans that may not have an appropriate performance orientation. As a part of this analysis, Florida SBA reviews the level and quality of a company’s compensation disclosure—believing strongly that shareowners are entitled to comprehensive reporting on compensation practices in order to make efficient investment decisions.
The fourth year of mandatory advisory votes on executive compensation (Say-on-Pay) in the United States saw an increase in overall proposals as companies that elected triennial vote frequency in 2011 held their second advisory vote in 2014. Among the Russell 3000 companies, 76.8 percent received more than 90 percent support for their executive compensation plans. As of the end of June, 51 companies had failed to garner majority support for their plans. The leading proxy advisors, Institutional Shareowner Services (ISS), Glass Lewis, and Farient Advisors, supported executive compensations plans approximately 87 percent, 81 percent, and 83 percent of the time, respectively, while the SBA supported 78 percent of all U.S. pay plans.
Beginning in October 2013, companies domiciled in the United Kingdom, have been required to receive binding shareowner approval for their executive remuneration policy at least once every three years. The proposal requires an approval of a simple majority, 50 percent plus one. The remuneration policy sets out all components of executive pay and the maximum amount payable under each component, including recruitment and exit payments. Once effective, no payments can be made above those limits or outside of the approved components without separate shareholder approval. Florida SBA has supported 80.4 percent of UK remuneration policies proposed through June.
Sustainable Business Practices — Environmental and social shareowner proposals dominated in 2014 with a 15 percent increase, a total of 460 proposals, surpassing governance topics for the first time since the 1980s. Investor proposals to strengthen sustainability reporting requirements or improve environmental disclosures allow investors to better gauge a firm’s potential environmental risks and business practices. Florida SBA supported 79 percent of shareowner resolutions asking companies to publish sustainability reports, 33 percent of shareowner resolutions asking companies to produce reports assessing the impact on climate change, and 33 percent of shareowner proposals designed to improve human rights standards or company policies.
To maximize the transparency to beneficiaries, invested companies, and other institutional investors, the SBA posts proxy voting records on its website. This real-time vote disclosure occurs in advance of all annual shareowner meetings. Voting data covers every publicly traded equity security for which Florida SBA retains voting authority. Florida SBA’s current and historical proxy votes can be viewed in the voting disclosure section of its website.
Florida SBA prepares additional reports on corporate governance topics and significant market developments, covering a wide range of shareowner issues. Historical information can be found within the governance section of the SBA’s website.
The State Board of Administration is a body of Florida state government that provides a variety of investment services to various governmental entities. These include managing the assets of the Florida Retirement System, the Local Government Surplus Funds Trust Fund (Florida PRIME™), the Hurricane Catastrophe Fund, and over 30 other mandates.