Testimony to CalPERS 3/13/2023, Investment Committee Item 6b, by Jim McRitchie, a retired member. Note: Actual testimony was limited to 3-4 minutes. This version is slightly longer and includes links.
Testimony to CalPERS 3/13/2023: Opening
As a CalPERS retiree active in shareholder engagement, I was excited to see the pie charts on page 11b. It looked like CalPERS filed 411 proposals in 2021 and 522 in 2022. After posting the 2022 chart on social media, the staff informed me the charts represent ALL proposals on proxies, not just those filed by CalPERS. A more careful examination turns up only 2 on climate risk and 2 on diverse directors, aside from proxy access agreements. That’s far too few. I filed 90 and was able to get agreements on many. (2021 results)
Recommendation: Reports should highlight the work of CalPERS, not all shareholders. We should hire staff or partner with organizations such as Ceres, As You Sow, ICCR, The Shareholder Commons, etc. to file more proposals. I am sure many would be happy to co-file with CalPERS and do most of the work.
Testimony to CalPERS 3/13/2023: Proxy Access
CalPERS is targeting 50 companies for proxy access. Our proposal at KLA in 2020 sought to place an upper limit on the number of directors shareholders could nominate (2 or ¼ of the board) but no lower limit. Arch Resources (known for mountaintop removal) and EOG Resources (formerly known as Enron) limit nominees to one, yet it takes 2 directors to consider a motion.
Additionally, since the CalPERS proposal is silent on the size of nominating groups, companies are free to impose group limits, such as 20, which CII finds unworkable. These proposals are worse than nothing. They can’t be used by even the largest public pensions, and they can’t be amended since a group limit of 20 is fine for the Big 3. They won’t vote to raise group limits once set since they can use proxy access without any partners.
Compare the wording of the CalPERS filing at KLA, cited above, with that of my proposal at Alarm.com in 2022. CalPERS proposals don’t go to a vote, not because companies are intimidated but because CalPERS is willing to reach agreements on proxy access bylaws that can’t be used.
Recommendation: Either reword the proposals or stop the effort.
Testimony to CalPERS 3/13/2023: Survey Members
I’m sure the Board is aware of the anti-ESG movement to restrict the power of large funds. One tactic is to require that funds survey their investors or pass through the votes. They hope individual investors will vote against measures that address climate change, diversity, and other critical topics. CalPERS is not immune from such attacks. Companies, such as Iconikapp and Broadridge offer survey and pass-through voting services.
Recommendation: CalPERS should survey its members on broad categories of proxy issues. This would serve to first educate members and second to buttress the System when attacked.
Testimony to CalPERS 3/13/2023: Post Votes in Advance of AGMs
The new services offered by Iconikapp.com, Broadridge, and others also allow retail shareholders to automatically vote their values, much as CalPERS uses Glass Lewis to cast most of our votes automatically based on our proxy voting policies. The New York City Comptroller and others consistently post their votes before voting deadlines. CalPERS typically posts our votes after the meeting, so we don’t influence other voters, even though the Board committed to doing so years ago. (2021 comments to SEC)
Recommendation: CalPERS should post its votes in advance to increase our influence and help our proxy voting policies succeed.