Tag Archives | CalSTRS

NAM: Stop Supporting ‘Main Street Investors’ Coalition Say Real Investors

NAM Board Targeted

Investors led by Walden Asset Management, New York Common and the California State Teachers’ Retirement System (CalSTRS) called on 45 companies sitting on the Executive Committee and Board of the National Association of Manufacturers (NAM) to end the trade association’s attacks on shareholders.

The investors’ letter asks the companies to distance themselves from NAM’s recent attempts to discredit shareholder engagement, particularly on climate change. These efforts have been undertaken primarily through NAM’s membership in the Main Street Investors Coalition (MSIC) and through a report NAM funded and distributed that wrongly asserts that shareholder resolutions diminish company value. MSIC represents no investors. In my opinion, it is a front group for corporate managers attempting to generate fake news, stirring public opinion against investor rights.

Quotables on NAM

“The irony is that many companies on the NAM board are active business leaders on climate change,” said Timothy Smith, Director of ESG Shareowner Engagement at Walden Asset Management.

They understand the very real risk to our environment and have active forward-looking policies and programs on climate. Yet their dues to NAM are funding an aggressive attack against the very investors they meet with regularly to address climate change. We are appealing to these companies to clearly state their opposition to these positions taken by NAM and Main Street Investors Coalition. It is important to do so to protect their company reputations and integrity.

“Environmental risk consideration is part of the evolution of investing. Whether a retail or institutional investor, assessing the risks of investments is a standard practice,” said CalSTRS Portfolio Manager in Corporate Governance Aeisha Mastagni.

NAM appears out of touch with its own constituents. Over the last decade more than 75 percent of the environmental-related proposals CalSTRS filed were withdrawn because the companies were willing to negotiate a mutually agreeable outcome.

The Letter’s Key Paragraph

The MSIC perpetuates the myth that incorporating environmental, social and governance (“ESG”) factors inherently conflicts with protecting and advancing shareholder value. However, the 1,200 members of the United Nations-backed Principles for Responsible Investment – including Fidelity, BlackRock, Vanguard and State Street – with over $70 trillion in assets under management, have committed to consider ESG issues in the investment decision-making process since these factors may affect shareholder value. There is ample evidence that incorporating ESG issues into investment decisions is part of responsible management as a fiduciary. Moreover, hundreds of global companies demonstrate leadership and transparency on sustainability issues. These companies’ action are not guided by “political and social interests” but by what is good for their investors and stakeholders over the long term.

NAM Background

NAM is a trade organization that represents and advocates for manufacturers across industrial sectors. Many NAM members are taking active steps on climate issues as a result of shareholder engagement. Nevertheless, NAM has established significant ties to MSIC, which purports to speak for investors, but which instead appears to be engaged in an attempt to undermine shareholders’ rights by denouncing ESG-related shareholder proposals and by suggesting shareholders’ concerns are politically motivated.

Why NAM is Attacking Shareholders Now

The investor letter noted that, “The emergence of MSIC and the release of this report come at a time when investor support for shareholder proposals is growing” because the “business case behind them is clear and convincing.” The signatories requested that the companies explain their views on MSIC’s public attempts to discredit investor engagement and shareholder proposals.

Over 80 institutional investors, including state and city pension funds, investor trade associations, investment firms and mutual funds, foundations and religious investors added their organization’s names in support of the letter.

Investors are actively engaging companies in their portfolios as concerns over climate risk grow. Most recently, investors representing approximately $30 trillion urged some 150 companies to reduce their greenhouse gas emissions, disclose their assessment of climate risks, and explain what actions they plan in response to climate risk.

Investors like BlackRock, Vanguard and State Street have made it clear that they want the companies in which they own shares to address climate risk.

“It is extremely bad timing for NAM and by implication the members of its board to be attacking investors addressing climate change at a moment when we desperately need to work together,” said Smith.

Historical Perspective

Since I am older than most of my readers, I offer the following historical perspective. The investor letter sent to the Executive Committee and Board NAM is correct in assuming that shareholder rights are under attack because their proposals are winning. The current fight on climate change and social issues reminds me of an older one on proxy access. In 1977 the SEC held a number of hearings to address corporate scandals. At that time, the Business Roundtable (BRT) recommended amendments to Rule 14a-8 that would allow access proposals, noting such amendments

… would do no more than allow the establishment of machinery to enable shareholders to exercise rights acknowledged to exist under state law.

The right to pursue proxy access at any given company was uncontroversial. In 1980 Unicare Services included a proposal to allow any three shareowners to nominate and place candidates on the proxy. Shareowners at Mobil proposed a “reasonable number,” while those at Union Oil proposed a threshold of “500 or more shareholders” to place nominees on corporate proxies.

One company argued that placing a minimum threshold on access would discriminate “in favor of large stockholders and to the detriment of small stockholders,” violating equal treatment principles. CalPERS participated in the movement, submitting a proposal in 1988 but withdrawing it when Texaco agreed to include their nominee.

Early attempts to win proxy access through shareowner resolutions met with the same fate as most resolutions in those days – they failed. But the tides of change turned. A 1987 proposal by Lewis Gilbert to allow shareowners to ratify the choice of auditors won a majority vote at Chock Full of O’Nuts Corporation and in 1988 Richard Foley’s proposal to redeem a poison pill won a majority vote at the Santa Fe Southern Pacific Corporation.

In 1990, without public discussion or a rule change, the SEC began issuing a series of no-action letters on proxy access proposals. The SEC’s about-face was prompted by fear that “private ordering,” through shareowner proposals was about to begin in earnest. It took more than 20 years of struggle to win back the right to file proxy access proposals.

Conclusion

Let’s hope the current attack on shareholder rights by NAM and the fake Main Street Investors Coalition does not set investor rights back by another 20 years.

    
 
 

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NCR Recent Governance Developments

NCR Recent Governance Developments: Typical Statement

In a section of NCR Recent Governance Developments, the first paragraph was not unusual. They touted their shareholder engagement and the fact that the Board adopted a proxy access bylaw. As is typical, they fail to mention they did so because we filed a shareholder proposal on that topic. Continue Reading →

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CalSTRS Best Place to Work: Survey Could Cinch Fourth Honor

CalSTRS was named a Best Place to Work in Money Management for 2017 by Pensions & Investments magazine. This year’s honor is the third CalSTRS has garnered—the only public pension plan to do so. They could cinch a fourth such honor by surveying member values.

Pensions & Investments, a global news source for money management, created the survey and award program, which is dedicated to identifying and recognizing the best employers in the money management industry. Continue Reading →

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California Diversity Forum 2017: Part 2

CalPERS and CalSTRS sponsored the California Diversity Forum in Sacramento (“America’s Most Diverse City”) on Wednesday, May 12, 2017, bringing together investment and corporate executives to discuss how to better capitalize on the abilities of the diverse modern workforce. Diversity is both morally right and profitable. Narrowing the global gender gap would add $12 trillion in annual gross domestic product to global growth (McKinsey Global Institute).

What follows are my cryptic notes from the Diversity Forum. Sometimes they are just phrases I captured that may not mean so much out of context. Maybe it will be just enough to mark your calendar for next year’s Forum. More coverage at Part 1 and on Twitter at #CADiversityForum. I loved the fact that for once, I didn’t have to travel thousands of mile. Nice to have such an event in my own hometown.

Diversity Forum: The Corporate Perspective

Yee, Parcella, Chiames, Hymes

Betty Yee, Babriela Parcella, Paul Chiames, and Victor Hymes

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California Diversity Forum 2017: Part 1

CalPERS and CalSTRS sponsored a diversity forum in Sacramento on Wednesday, May 12, 2017.  The goal of the Diversity Forum was to bring together investment and corporate executives to discuss how to better capitalize on the abilities of the diverse modern workforce. While I think diversity should be adopted simply because it is morally right, often economics speaks volumes in the finance community. The McKinsey Global Institute estimates that narrowing the global gender gap could add US $12 trillion in annual gross domestic product to global growth.


The Forum focused on:

  • Recent research
  • Developing and implementing positive, solutions-oriented initiatives and real world best practices
  • Insight and experience of industry leaders

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Global Stewardship at Work: CalSTRS

Global Stewardship at Work report Issued by CalSTRS

Global Stewardship at Work report Issued by CalSTRS

The Global Stewardship at Work report, its 2015—16 sustainability report. was released by the California State Teachers’ Retirement System (CalSTRS). This is the third year the system published the report, which is based on the Global Reporting Initiative G4 Guidelines.

In 2015, CalSTRS became the first U.S. public pension plan to issue a sustainability report that met the GRI guidelines. And this year, CalSTRS continues to report sustainability-focused disclosures that adhere to the GRI performance metrics. The Global Stewardship at Work report also features detailed reporting of material topics that were prioritized based on feedback from stakeholder surveys, including responses from CalSTRS members, employees, special interest groups, and industry/business partners. Continue Reading →

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Directors Forum 2017 & Trump – Part 1

Linda Sweeney - Eec Director - Directors Forum 2016

Linda Sweeney – Exec Director – Directors Forum 2016

Directors Forum 2017 in San Diego was billed as Directors, Management, & Shareholders in Dialogue. Sure, all well and good, but I went there also hoping to learn more about President Donald J. Trump. He is the subject of a huge portion of tweets, Facebook posts and much of the news, so I expected Trump to also be the center of attention at Directors Forum 2017.

Directors Forum 2017 - iJoan B. Kroc Institute for Peace Justice

Directors Forum 2017 – Joan B. Kroc Institute for Peace Justice

I know what those in my immediate circles in Sacramento are saying. Clinton got 58% of the vote to Trump’s 34%. My news silos are much the same. At Directors Forum 2017 were directors and managers from companies, large and medium (the focus is rarely on small companies, although the Forum does better than most). Investors representing trillions of dollars in assets were in the room and on stage. What was the speculation on Trump and his impact on what we do? Continue Reading →

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Investor Stewardship Group: 1 Share, 1 Vote

Investor Stewardship Group logoInvestor Stewardship Group Launches Stewardship Framework for 2018

The Investor Stewardship Group (link), a collective of some of the largest U.S.-based institutional investors and global asset managers, along with several of their international counterparts, announced the launch of the Framework for U.S. Stewardship and Governance, a historic, sustained initiative to establish a framework of basic standards of investment stewardship and corporate governance for U.S. institutional investor and boardroom conduct.one share one vote

My own impression is that this group has been carefully constructed, probably stemming from many discussions at ICGN and CII. They have certainly started with an impressive group. Although most of the principles are relatively ‘safe,’ I am delighted to see their position that “shareholders should be entitled to voting rights in proportion to their economic interest.” That one recommendation alone is huge. I hope they continue to build on their initial consensus items.

Internet Roadblock

Of course, the internet changes everything. Companies used to go public to raise money for factories, staff, etc. Now, they raise funds from private equity funds and scale all the way because they can build out through the internet with coding and algorithms. They go public only when founders and initial supporters want to cash out a portion of their investment. Continue Reading →

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Climate Competency Needed in Boardrooms

Rich Ferlauto on Climate Competency

Rich Ferlauto on Climate Competency

Large institutional investors, concerned about portfolio risks stemming from the effects of global warming, are calling for climate-competent boards and directors as part of their fiduciary responsibility to preserve and enhance the long-term value of their investment assets.

Despite the anticipated rollback of climate related governmental policies such as the Environmental Protection Agency’s Clean Power Plan and limits on methane emissions by the Trump administration, investors still need to understand the risks that climate change poses to their portfolios. Unequivocal disclosures and boards equipped to manage and govern climate risk will be more important than ever. Now, however, it appears investors will not able to rely on federal regulatory standards or policy interventions to manage climate risk related to greenhouse gas emissions and the emphasis on fossil fuel production. They will be left to their devices to understand the very real financial impacts that climate issues could have on their portfolios. Continue Reading →

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3D Moves to Equilar – Diversity Benefits

3D Joins Equilar Diversity Network

3D Joins Equilar Diversity Network

3D Moves to Equilar. The California State Teachers’ Retirement System (CalSTRS) and the California Public Employees’ Retirement System (CalPERS) today announced the Diverse Director DataSource (3D) will now be available through the Equilar Diversity Network.

The new partnership marks an exciting milestone for the 3D, a database the two pension funds jointly developed in 2011. 3D was designed to make it easy for companies to find untapped talent to serve as directors on corporate boards. 3D joins the suite of searchable sources on Equilar, further simplifying companies’ and candidates’ ability to build and be a part of diverse corporate boards. MSCI ESG Research previously hosted the database.

Launching 3D on Equilar’s Diversity Network showcases the depth and availability of qualified, diverse directors. The Diversity Network is designed to connect candidates from various diversity organizations with boards. Continue Reading →

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CalSTRS Seeks ESG Focused PE Managers

esg focused pe managersWEST SACRAMENTO, CA – The California State Teachers’ Retirement System is searching for public equity investment managers with an environmental, social and governance focus. There are up to six new ESG manager spots available for consideration.

This is a great opportunity for ESG focused PE Managers. You will be working with one of the most progressive funds in the entire world. CalSTRS even announces their proxy votes in advance of annual meetings so that others can follow their lead. See job opportunitiesContinue Reading →

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Rein In Hedge Funds: Will Pension Funds Join Effort?

Rein In Hedge Funds

Rein In Hedge Funds – Wausau Paper Closure

Senators seek to rein in hedge funds through legislation by narrowing the window in which hedge funds must file 13D disclosures with the SEC once they have taken a 5% stake in a company. Right now that window is 10 days. The bill would reduce that to two days.

The bill also seeks to block activist “wolf packs” — that is, activist investors who collectively hold more than 5% of a company but who individually hold less and therefore do not need to disclose their stakes. Will public pension funds join this effort? Continue Reading →

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Reeds Delivered a Corrected Proxy for Christmas

Reeds Delivered a Corrected Proxy for Christmas

Reeds Delivered a Corrected Proxy for Christmas

There it was under my tree, Reeds delivered a corrected proxy for Christmas!

Santa has finally been good to Reeds (REED) shareholders.

I’m tacking notification of the corrected proxy as a sign that Founder/CEO, Christopher Reed might be at the start of a new attitude toward  SEC rules and corporate gReed's Mugovernance, I changed my vote. I voted for Mr. Reed, the auditors, my own proposal to require a majority vote to elect directors and against the rest of the board and the “incentive” stock option plan. The incentive plan lack specificity.

Of course, my proxy didn’t magically appear under my Christmas tree. Reeds Inc. had to pay to have the link to their revised proxy sent out by Broadridge to brokers and banks all over the country. After being reminded several times, Reeds finally did the right thing. Unfortunately, their reluctance and delay necessitated postponing their annual meeting for more than a week but, despite the additional cost to company and shareholders (including me), it is good to see our company now following the law. Continue Reading →

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Medtronic PLC: How I Voted – Proxy Score 44

MedtronicMedtronic PLC ($MDT) manufactures and sells device-based medical therapies worldwide. Medtronic is one of the stocks in my portfolio. Their annual meeting is on December 11, 2015. ProxyDemocracy.org had collected the votes of two funds when I checked.  I voted with the Board’s recommendations 44% of the time. View Proxy Statement.

Read Warnings below. What follows are my recommendations on how to vote the proxy in order to enhance corporate governance and long-term value.  Continue Reading →

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WD-40 Company (WDFC): How I Voted – Proxy Score 100

WDFCWDFC develops and sells maintenance products, and homecare and cleaning products. WDFC is one of the stocks in my portfolio. Their annual meeting is on December 8, 2015. ProxyDemocracy.org had collected the vote of one fund when I checked.  I voted with the Board’s recommendations 100% of the time. View Proxy Statement.

Read Warnings below. What follows are my recommendations on how to vote the proxy in order to enhance corporate governance and long-term value.  Continue Reading →

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Microsoft Corporation (MSFT): How I Voted – Proxy Score 62

Microsoft CorporationMicrosoft Corporation (MFST), a technology company, develops, licenses, and iiWisdomsupports software products, services, and devices worldwide. Microsoft is one of the stocks in my portfolio. Their annual meeting is on December 2, 2015. ProxyDemocracy.org had collected the votes of five funds when I checked.  I voted with the Board’s recommendations 62% of the time. View Proxy StatementiiWisdom provides a nice interactive viewing platform that makes Microsoft’s proxy a little easier to read. I recommend it.

Read Warnings below. What follows are my recommendations on how to vote the proxy in order to enhance corporate governance and long-term value.  Continue Reading →

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Proxy Access Lite: Victories at Whole Foods, H&R Block

Proxy Access Road Building (photo by Erik Johansson)

Proxy Access Road Building (photo by Erik Johansson)

In response to proxy access proposals filed this year, both Whole Foods Market (WFM) and H&R Block (HRB) have adopted proxy access. While I had filed standard proposals seeking the ability of shareholders with 3% of shares held for 3 years to be able to nominate up to 25% of the board, both companies adopted bylaws allowing nominations only up to 20% and limiting nominating groups to 20, whereas my proposals had no such restrictions on the number of participants in nominating groups. Continue Reading →

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Facebook: Proxy Score 0

FacebookFacebook Inc (NASD:FB) operates as an online retailer in North America and internationally. It is one of the stocks in my portfolio. Their annual meeting is coming up on 6/10/2015. ProxyDemocracy.org had the vote of three fund families when I checked and voted on 6/8/2015. I added the votes of CalSTRS in the table below. Like ALL the pre-disclosing funds, I voted with management 0% of the time. I assigned Facebook a proxy score of 0. Continue Reading →

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Kite Pharma: Proxy Score 50

Kite PharmaKite Pharma Inc (NASD:KITE), a clinical-stage biopharmaceutical company, focused on the development and commercialization of novel cancer immunotherapy products and is one of the stocks in my portfolio. Their annual meeting is coming up on 6/8/2015. ProxyDemocracy.org had the vote of one fund when I checked and voted on 6/1/2015.  However, I also picked up the votes of CalSTRS. I voted with management 50% of the time and assigned Kite Pharma, Inc. a proxy score of 50. Continue Reading →

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Apple: The Case for Proxy Access

apple

Update: Preliminary voting results indicate that our proxy access proposal got 39% of the vote. Yes, the proposal could have been worded to more closely conform to the Rule 14a-11 standards. Hopefully, Apple got the message and will propose a “best practices” revision of their articles and bylaws as needed for the 2016 annual meeting. If not, we’ll be back at that meeting with our own proxy access proposal.

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Push for Increased Gender Diversity in the Boardroom

thirty percent coalitionThe Thirty Percent Coalition’s Institutional Investors continued their active “Adopt a Company” campaign following a series of letters sent to approximately 160 companies in the S&P 500 and Russell 1000 with no women on their boards. The third letter writing campaign to increase gender diversity in the boardroom in the fall of 2014 was supported by representatives of investors representing $3 trillion in assets under management, signed by pensions, state officials, mutual funds, investment managers, foundations, religious institutions, and women’s organizations across the US.  Continue Reading →

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Investors Back Global Tax Reform and Transparency

g20Australia

Global Tax Reform and Transparency Urged

LAPFFIn a global first, a group of institutional asset owners and managers are jointly calling for comprehensive transparency and disclosure to be adopted as core principles in reform of the international taxation system to be put before the G20 Leaders Summit in Brisbane this weekend.

The group including the £150B UK Local Authority Pension Fund Forum (LAPFF), Quebec fund Batirente, Royal London Asset Management (RLAM), Paris based OFI Asset Management & Triodos Investment Management from the Netherlands have issued a  statement supporting the initial stage of the OECD BEPS Action Plan and urging a general improvement in corporate governance, transparency and disclosure  standards around taxation issues.  Continue Reading →

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H&R Block (HRB): Proxy Vote Score 54

hrb-logoH&R Block $HRB, which provides tax preparation and related services to the general publicis one of the stocks in my portfolio. Their next annual meeting is September 11, 2014. ProxyDemocracy.org had collected the votes of two funds when I checked and voted on 9/7/2014. I also checked the votes of OTPP and CalSTRS. All advance disclosers that I know of except CBIS voted in favor of all items. I voted with the Board’s recommendations 54% of the time and assigned them a proxy score of 54. View Proxy Statement. Read Warnings below. What follows are my recommendations on how to vote the H&R Block proxy in order to enhance corporate governance and long-term value.

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Savings Plus: Transparent Proxy Voting Needed

I’ve previously written two posts on California’s Savings Plus program and how one major contractor, Northern Trust has voted. (Part I & Part II) Below, I compare the votes of Northern Trust on proxy proposals with those recommended by the AFL-CIO. A similar exercise could be performed at any deferred compensation plan. 

Shareholders have voting rights, usually one vote per share, to decide who will serve on the board and to advise on pay and other issues. Funds, such as CalPERS and the CalHR Savings Plus program, have a legal duty to ensure shares are voted in the best interest of program participants. Continue Reading →

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California’s Savings Plus: Better Proxy Voting Disclosure Needed Part II

CalHR Savings Plus

This is the second of a two part series. Part I discussed proxy voting at Savings Plus, as compared with at CalPERS. 

CalHR’s Current RFP for Savings Plus

CalHR recently released a Request for Proposal (RFP 700-14-01) seeking bids for investment management services for Savings Plus. Unfortunately, the RFP fails to require Savings Plus participants be informed of proxy voting policies or decisions.   Continue Reading →

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Announcing Proxy Votes Improves Corporate Governance

democracy

Shareowners Upholding Industry

Yesterday, I posted a recent letter to the editor of Pensions & Investments praising their editorial, Winning Over Proxy Voters, which argues that institutional investors have a fiduciary duty to announce their proxy votes in advance of annual meetings, if doing so is likely to influence voters. If institutional investors heed their call, it will speed the development of open client director voting (CDV) and more intelligent proxy votes.

As corporate power grows and the power of government falls, mechanisms to govern corporations become more important. As government power falls, their power to regulate corporations falls as well. Further, as the influence of corporations over governments increases (e.g. lobbying) the will of governments to regulate corporations also falls.  – CHR for Social Responsibility

Historically, most retail shareowners toss their proxies. During the first year under the “notice and access” method for Internet delivery of proxy materials, less than 6% made use of their proxy votes. Those that do vote own disproportionately more shares (about 25-30% of total retail shares). The voting rate hasn’t improved much, if at all. This contrasts with almost all institutional investors voting, since they have a fiduciary duty to do so. Unfortunately, it isn’t time/cost efficient to read through the entire proxy to vote a few retail shares intelligently. Continue Reading →

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Letter to P&I Re Fiduciary Duty Editorial

P&I-proxy-voters-cartoon Below is an email I sent to Pensions & Investments (P&I) editorial chief Barry Burr praising their editorial enhancing fiduciary duty and opining on how it may speed the arrival of the time when retail investors will vote their values with the simple push of a button or two on their cell phones. I will follow this tomorrow with some additional remarks regarding the advent of open client directed voting, assisted by this expanded fiduciary duty.

Dear Editor:

Thank you for your important editorial, Winning Over Proxy Voters, which argues that institutional investors have a fiduciary duty to announce their proxy votes in advance of annual meetings, if doing so is likely to influence voters.

Votes are assets. Announcing votes in advance of meetings puts the value of those assets to their full use; announcing votes after the meeting does not. Continue Reading →

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