CalSTRS Adopts Policy on Corporate Political Contributions Disclosure

News release Ricardo Duran

WEST SACRAMENTO, CA – The California State Teachers’ Retirement System (CalSTRS) adopted a policy calling for portfolio companies to annually report their expenditures on political contributions.

The policy, adopted at the Investment Committee meeting on November 3, formalizes longstanding CalSTRS corporate governance practice and emphasizes the importance of board accountability. The policy calls for corporate boards of directors to require management to provide information regarding political expenditures annually and to make that information “readily accessible to shareholders.” The policy bases the requirement on corporate directors’ fiduciary and oversight duties to both comply with all federal and state laws and to protect the best interest of shareholders.

“Transparency in this area has been a longstanding concern for CalSTRS and remains a key part of our ongoing efforts to elicit more disclosure and accountability from the boards of our portfolio companies,” said CalSTRS Investment Committee Chair Harry Keiley. “Interest and support for these practices also has been steadily growing. For instance, from 2009 to 2010, shareholder proposals in this area more than doubled to 89. Shareholder support for such proposals has also grown, from about nine percent in 2004 to 30 percent in 2010. Given that we’re a long-term shareholder, CalSTRS wants to make sure political contributions will not have a deleterious effect on the long-term value of our portfolio companies.”

The January 2010 U.S. Supreme Court decision in Citizens United v. Federal Election Commission has also heightened interest in such disclosures. The decision protected corporate and union political contributions as political speech under the First Amendment.

“This policy will help ensure corporations’ political contributions serve the interests of companies and shareholders,” said State Treasurer Bill Lockyer, who in May asked the CalSTRS board to adopt the policy. “The U.S. Supreme Court took the reins off corporate campaign spending in the Citizens United case. In doing so, the justices stressed the importance of transparency to investors, but shifted to shareholders the burden of enforcing disclosure and accountability. I’m pleased CalSTRS has decided to accept that responsibility.”

The California State Teachers’ Retirement System, with a portfolio valued at $139.2 billion as of September 30, 2011, is the largest teacher pension fund and second largest public pension fund in the United States. CalSTRS administers a hybrid retirement system, consisting of a traditional defined benefit, cash balance and defined contribution plan, as well as disability and survivor benefits. CalSTRS serves California’s 852,000 public school educators and their families from the state’s 1,600 school districts, county offices of education and community college districts.