CalSTRS Proxy Vote at Chevron’s Annual Meeting
May 27, 2015

General Information

CalSTRS uses its Corporate Governance Principles and policies as guidelines to voting its proxies at its 7,000 portfolio companies. Not only is the voting of proxies a fiduciary duty, CalSTRS also believes that the execution of proxies is an important shareholder right and we always seek to exercise the right in a consistent fashion that is in the best interests of the beneficiaries.

CalSTRS Corporate Governance staff distinguishes itself as a thoughtful shareholder. CalSTRS staff thoroughly analyzes each proposal to ensure it conforms to CalSTRS established principles–whether it’s related to board composition, climate change, environmental risk, executive compensation or capitol allocation.

CalSTRS is committed to disclosing its Corporate Governance principles and its proxy votes. We believe by publicly disclosing our principles we can not only use the principles to advocate for better corporate governance but also provide a framework for our engagement activities.

Thirteen proposals were on the proxy at Chevron’s annual shareholder meeting May 27, 2015. CalSTRS voted its 5.7 million shares in the following manner:

Board of Directors

  • CalSTRS voted For all but one nominee–John G. Stumpf, CEO of Wells Fargo, because he also serves on the board of Target Corporation.

    • To devote the time and energy necessary to responsibly fulfill their commitment to the company and effectively represent shareholders’ interests, generally, CalSTRS believes that CEOs should not serve on more than one other public board.

Ratification of Auditor

  • CalSTRS voted For the ratification of the auditor.

Advisory Vote on Executive Compensation (Say on Pay)

  • CalSTRS voted For the Advisory Vote on Executive Compensation.

    • CalSTRS believes Chevron’s executive compensation structure appropriately balances pay with performance.

Shareholder Proposals

  • Regarding charitable contributions. Vote: Against

    • After a review of available information, CalSTRS determined Chevron has adequate procedures, disclosure and oversight concerning charitable contributions.
  • Regarding lobbying report. Vote: For
    • Following a review of Chevron’s process associated with reporting its lobbying efforts, CalSTRS concluded that the company does not adequately articulate its process or disclose payments and oversight mechanisms associated with its lobbying expenditures.
  • Regarding prohibiting political spending. Vote: Against
    • This proposal to prohibit the company from making political contributions is overly prescriptive. 
  • Regarding dividend policy. Vote: Against
    • For the last decade, CalSTRS has acknowledged the risks that climate change presents to its investment portfolio and has been working diligently to mitigate those risks. CalSTRS has engaged hundreds of companies on a variety of climate change related issues that include capital allocation policy. Since 2008, CalSTRS has filed over 40 shareholder proposals that call on companies to address environmental risk issues such as climate change.

      While CalSTRS appreciates the intent to address climate change risk that is represented in this shareholder proposal, our decision to not support the proposal centers on a lack of sufficient rationale to demonstrate that the company’s capital allocation strategy is deficient or that Chevron has acted egregiously with respect to its dividend policy.

      CalSTRS wants companies like Chevron to be diligent in their capital allocation decision analysis, and to not make allocations to projects that will fail to provide sufficient returns to shareholders, we do not believe shareholders have the expertise or information necessary to determine what the most effective capital allocation strategies are and that a shareholder dividend may not be the most appropriate course of action.

      CalSTRS seeks to prudently manage the investments within the fund in the best long-term interests of our membership, which requires us to assess the risks that climate change presents to our portfolio and to implement strategies that address these risks. We also recognize the importance of addressing both the risks and investment opportunities associated with climate change.
  • Regarding reporting and reducing greenhouse gas emissions. Vote: Against
    • CalSTRS believes the company is providing shareholders adequate information with regard to greenhouse gas emissions and is working to reduce its greenhouse gas emissions.
  • Regarding hydraulic fracturing. Vote: For
    • Chevron could provide additional disclosure on its efforts to manage and mitigate risks associated with hydraulic fracturing—particularly what the company is doing concerning the control of methane leaks.
    • The company acknowledges that natural gas is a growing part of its energy mix and that the EPA is focusing on methane leaks from fracturing operations.
  • Regarding proxy access. Vote: For
    • CalSTRS believes that a long-term investor or group of investors, owning in aggregate at least three percent of the company’s voting stock for three years, should be able to nominate a minority of the directors on the company’s proxy.
  • Regarding independent board chairman. Vote: For
    • CalSTRS supports the concept of an independent non-executive chairman who has not had a substantive employment relationship with the company over the past five years.
  • Regarding environmental expertise on the board. Vote: Against
    • After reviewing the expertise of all board members, CalSTRS determined that Chevron does provide disclosure on existing board member expertise on environmental issues and several board members have experience assessing environmental related risks and implementing risk mitigation strategies.
  • Regarding right to call a special meeting. Vote: For
    • CalSTRS believes shareholders should have the right to call a special meeting and the threshold for such a right should set at a reasonable level.