CalSTRS Comments on SEC Rules for Better Proxy Access
Proposed rules would make it easier for shareowners to nominate candidates to boards.
WEST SACRAMENTO, CA – The California State Teachers’ Retirement System (CalSTRS) supports the Securities and Exchange Commission’s proposed regulations making it easier for shareholders to make nominations to corporate boards.
The proposed SEC rule S7-10-09 addresses concerns that, given the recent market meltdown, focus on whether:
- Boards are exercising appropriate oversight.
- Board oversight is appropriately focused on shareholder interests.
- Boards need to be held more responsible for their decisions.
In its comment letter, CalSTRS calls the proposed rule a long-overdue way to provide shareholders a meaningful voice in the corporate director nomination process.
“We do not suggest that granting long-term shareholders, such as CalSTRS, access to the corporate proxy ballot will solve all the instances of excessive risk-taking in the market place, but its existence will give shareholders, at minimum, an important and necessary negotiating tool at the corporate governance table,” the letter said.
“One of the lessons of this current economic downturn is to be mindful that governance is a significant risk factor and that mechanisms for accountability, such as these, go a long way toward mitigating that risk,” said CalSTRS Chief Executive Officer Jack Ehnes. “Good corporate governance is also an important factor in maintaining the long-term value of CalSTRS portfolio companies and we intend to protect that value for the benefit of California’s educators.”
CalSTRS supports the following elements of the proposed rule:
- Requiring shareholders to own equity of at least 1 percent of large companies and 5 percent of small companies.
- Requiring shareholders to own the required number of shares for at least one year prior to the annual meeting and to pledge they will hold the shares past the annual meeting.
- Disclosing of a nominee’s qualifications and affiliations with the nominating shareholder.
- Limiting the number of shareholder nominees to no more than 25 percent of the company’s board.
The letter calls the proposed rule “the greatest advancement of shareholder rights” that finally marries shareholders’ right-to-vote for elected representatives with a means to nominate candidates.
The California State Teachers’ Retirement System holds equity shares in 3,000 publicly traded companies and with a $123.8 billion portfolio, is the second largest public pension fund in the United States. It administers retirement, disability and survivor benefits for California’s 833,000 public school educators and their families from the state’s 1,400 school districts, county offices of education and community college districts.