CalSTRS Supports SEC Proxy Access Ruling
Increasing shareholder voice is vital to building long-term value.
WEST SACRAMENTO, CA – The California State Teachers’ Retirement System (CalSTRS) today applauded the Securities and Exchange Commission’s (SEC) ruling to provide greater shareholder access to the corporate proxy ballot.
In a 3 to 2 decision, the SEC commissioners today broke years of deadlock by allowing shareholders with at least a 3 percent stake in a company’s stock, held for three years, to nominate directors on a company’s proxy ballot. The issue has been a longstanding priority for CalSTRS.
“This ruling is most welcome at CalSTRS, which as a fiduciary pledged to preserve our members’ financial security, must maximize the value of its investments for the long haul,” said CalSTRS Chief Executive Officer, Jack Ehnes. “One of the lessons of this current economic downturn is to be mindful that governance is a significant risk factor and that greater accountability, which this ruling affords, will go a long way toward mitigating that risk.”
The SEC ruling gives shareholders greater options in voicing opposition to unresponsive corporate boards. It allows like-minded institutional shareholders to team up to bring nominations to a company’s proxy ballot. The process was prohibitively expensive prior to the ruling.
“While we applaud SEC Chair Mary Shapiro for the leadership and vision that resulted in this ruling, we understand that proxy access is to be used sparingly and only after other means of dialog and negotiations have been exhausted,” Ehnes said.
CalSTRS will continue to focus on engagement with corporate boards and management as its primary tool with which to achieve desired change in the governance of its 7,000 portfolio companies. For instance, during the 2010 proxy season, CalSTRS withdrew 21 of the 28 shareholder proposals it filed after successfully engaging companies to make corporate governance changes.
CalSTRS officials believe the ruling also lays the groundwork for developing greater board independence from, and oversight of, management that in turn, creates long-term value.
The California State Teachers’ Retirement System, with a portfolio valued at $134.3 billion, is the second largest public pension fund in the United States. It administers retirement, disability and survivor benefits for California’s 848,000 public school educators and their families from the state’s 1,400 school districts, county offices of education and community college districts.