In fiscal year 2013-14, the total number of proposals and meetings voted was more than 10 percent higher compared to 2012-13, although the number of domestic proposals and meetings voted decreased by approximately six percent during this time period.
There was a significant increase, approximately 29 percent, in the foreign proxies voted that was primarily due to CalSTRS’ hiring of new external non-U.S. managers, particularly the emerging markets.
For domestic proxies, there was a decline in certain traditional governance issues, such as board declassification, while there was increased activity in other governance issues at the companies. For example, proposals regarding the right to act by written consent or call a special meeting increased this past fiscal year.
Staff also observed a decrease in social and compensation-related proposals while there was an increase in environmental proposals as shareholders appeared to have a renewed interest in fossil fuel and sustainability risks.
Although staff voted fewer social proposals, there continued to be an increase in political-related proposals as certain shareholder activists remained focused in their efforts on political spending activities, likely a result of the Supreme Court decision in Citizens United v. Federal Election Commission.
The decrease in the compensation-related proposals may be attributed to the mandatory Say-on-Pay as more companies engaged in shareholder outreach programs to improve their compensation practices. Staff has been more inclined to support a company’s Say-on-Pay when the company is open to having a dialogue regarding some potential improvements that can be made to its executive compensation plan.
Overall, staff believes the market, as a whole, is showing improved governance, although some companies remain outliers by retaining large pay packages or archaic governance practices. Staff continues to monitor the portfolio and vote all proxies in accordance with the CalSTRS Corporate Governance Guidelines approved by the board.