GS Ascertain Client Voting Preferences is a shareholder proposal filed by James McRitchie at Goldman Sachs (GS). We want Goldman Sachs to advance democratic corporate governance, to be aware of and report on the reputational and financial risks it faces over a misalignment between the proxy votes it casts and its client’s values and preferences.
What strategies will they use to address that gap? I am hoping they will be more granular in their approach than just offering two or three template voting policies. Clients have many choices when it comes to building their portfolios. They should also have many choices when it comes to voting for their values without having to read and digest proxies.
GS Ascertain Client Voting Preferences: Resolved
Goldman Sachs (“GS” or “Company”) shareholders request our Company prepare a report on the reputational and financial risks to the Company of misalignment between proxy votes it casts on behalf of clients and its client’s values and preferences, as well as strategies for addressing such misalignments on important issues. The requested report shall be available to stockholders and investors by October 1, 2024, prepared at reasonable cost and omitting proprietary information.
GS Ascertain Client Voting Preferences: Supporting Statement
Controversy over proxy voting – especially over environmental, social, and governance (“ESG”) proposals – is regularly reported on, debated, and enshrined in state law.[1]
Much debate centers on intermediaries, such as GS, and their role in casting votes on behalf of clients and beneficial owners. Every vote opens GS to controversy, either for failing to adhere to ESG principles or being too “woke.”
The issue has made its way to the highest levels of government. A proposed bill would require asset managers like GS to pass votes through to investors under certain conditions.[2] President Biden’s first veto was about consideration of ESG factors in retirement plans.[3]
The landscape has clearly shifted: GS can no longer execute votes in the best interests of clients (and avoid controversy) without first soliciting their preferences[4] on important social and environmental topics and determining if they are subject to legal mandates related to proxy voting. Similarly, GS stated one-size-fits-all approach of maximizing shareholder value[5] is at odds with many clients’ interests in maximizing portfolio-wide returns by pursuing voting strategies designed to push certain companies to address social and environmental externalities.
Votes are now filed in machine-readable format, which makes it easier for clients to identify votes misaligned with their preferences.[6] A review of GS’s current N-PX filings reveals a clear pattern in favor of management recommendations and against shareholder proposals, irrespective of the topic or political affiliation of the proponent.[7] Reliance on proxy advisors may invite further scrutiny.[8]
GS offers portfolio customization based on individual client needs and goals, but not for proxy voting, a core advisor responsibility subject to fiduciary duties.[9] GS goes so far as to disclaim responsibility for executing individual votes directed by clients.[10] In its commingled funds, GS does not currently offer investors any voting choices.
Criticism of BlackRock, Vanguard, and State Street[11] led them to adopt programs providing voting choices. However, these programs are denounced as limited and false choices due to overreliance on traditional proxy advisors.[12] New technologies can address the challenge of tailoring proxy voting on important issues such as climate change, diversity, executive pay, and political expenditures to the unique preferences and values of each investor.[13]
Investors want a voice. Approximately 83% of investors, irrespective of age, life stage, or ideological bent, want managers to consider their preferences when voting on environmental issues.[14]
Financial services companies that fail to engage clients on important voting preferences will be subject to ever-increasing legal and reputational jeopardy.
Vote to Ascertain Beneficial Owner Voting Preferences – Proposal [4*]
Number 4* to be assigned by the Company.
[1] https://corpgov.law.harvard.edu/2023/03/11/esg-battlegrounds-how-the-states-are-shaping-the-regulatory-landscape-in-the-u-s/
[2] https://www.sullivan.senate.gov/newsroom/press-releases/sullivan-introduces-index-act-to-empower-investors-and-neutralize-wall-streets-biggest-investment-firms
[3] https://www.nbcnews.com/politics/white-house/biden-issues-first-veto-congress-blocks-new-investment-rule-rcna72997
[4] https://ssrn.com/abstract=4360428
[5] https://www.gsam.com/content/dam/gsam/pdfs/us/en/miscellaneous/voting_proxy_policy.pdf?sa=n&rd=n#:~:text=A%3A%20Our%20Approach%20to%20Proxy%20Voting,-Proxy%20voting%20and&text=Our%20guiding%20principles%20in%20performing,influenced%20by%20conflicts%20of%20interest.
[6] https://www.sec.gov/news/press-release/2022-198
[7] https://www.gsam.com/content/gsam/us/en/advisors/resources/client-service/proxy-voting.html
[8]https://www.texasattorneygeneral.gov/sites/default/files/images/press/Utah%20%26%20Texas%20Letter%20to%20Glass%20Lewis%20%26%20ISS%20FINAL.pdf, https://www.wsj.com/articles/blackrocks-false-voting-choice-proxy-esg-ballots-iss-glass-lewis-66652357?mod=opinion_lead_pos1
[9] See 14 CFR 275.206(4)-6 and accompanying staff bulletins.
[10] https://www.gsam.com/content/dam/gsam/pdfs/us/en/miscellaneous/voting_proxy_policy.pdf?sa=n&rd=n#:~:text=A%3A%20Our%20Approach%20to%20Proxy%20Voting,-Proxy%20voting%20and&text=Our%20guiding%20principles%20in%20performing,influenced%20by%20conflicts%20of%20interest., page 3.
[11] https://ssrn.com/abstract=4580206
[12] https://www.wsj.com/articles/blackrocks-false-voting-choice-proxy-esg-ballots-iss-glass-lewis-66652357
[13] https://ssrn.com/abstract=4360428
[14] https://www.gsb.stanford.edu/sites/default/files/publication/pdfs/survey-investors-retirement-savings-esg.pdf
Conclusion
Academics, such as Jill Fisch and others, argue that to meet their fiduciary duties, fund managers must first solicit their client’s preferences on important social and environmental topics since not all fund clients have the same values. Voting decisions shouldn’t be based on assumptions of what clients want based on stereotypes. Client and investor values should be determined in an ongoing dialogue. Their values should then be reflected in both the engagement efforts and votes of Goldman Sachs, and it should publicly disclose how they have done so. Please vote for our proposal requesting that GS Ascertain Client Voting Preferences.
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