Stewardship Activity Report: Q1 2018
This report highlights the impact of our Fearless Girl campaign in 2017, our focus on board accountability in Europe, new voting guidelines related to corporate governance best practices and management compensation votes, our approach to engaging with civilian firearm manufacturers, and our comment letter responding to a recent UK FRC consultation.
Fearless Girl’s Impact: One Year of Action
International Women’s Day on March 8, 2018, marked the one-year anniversary of State Street’s Fearless Girl campaign that began with us placing a statue of a girl near Wall Street in order to bring attention to the lack of women on corporate boards. We issued a call to action to over 700 companies in the US, UK and Australia to add at least one woman to their board, failing which, we would take voting action against directors on the board.
Board Accountability in Europe
In a recent paper, we affirmed our belief that board accountability is fundamental to strong corporate governance. Furthermore, annual director elections provide increased accountability and encourage board members to be more responsive to shareholder interests thereby improving board quality. Without annual elections, no matter how dissatisfied shareholders are, they may have to wait several years to hold board members accountable.
Changes for the Upcoming 2018 Proxy Season
SSGA Introduces Screens to Monitor Compliance with Corporate Governance Principles
In a March 2018 letter to S&P 500 boards, SSGA’s Chief Investment Officer, Richard Lacaille, called on board chairs and lead directors at S&P 500 companies to report their compliance with the governance principles put forth by the Investor Stewardship Group (ISG). The six corporate governance principles3, which are based on the commonalities of the public proxy voting guidelines of the founding ISG members, including SSGA, went into effect in January 2018. The principles establish common investor expectations regarding the corporate governance structures and practices of companies publicly listed in the US.
Transparency in Pay Evaluation: Adoption of Abstain as a Vote Option on Management Pay Resolutions
Beginning with the 2018 proxy season, SSGA will exercise 'Abstain' as a vote option, in addition to the use of ‘For’ and ‘Against’ vote options, on management compensation resolutions. Going forward we will use an ‘Abstain’ vote, in situations where we cannot provide unqualified support for compensation proposals or where companies have responded to some but not all of our concerns on pay. This change will apply to all markets SSGA invests in globally where ‘Abstain’ is a valid vote option.
SSGA’s Engagement Approach to Civilian Firearm Companies
In February 2018, SSGA announced we will be engaging with publicly listed civilian weapons manufacturers and distributors to seek greater transparency from them on the ways that they support the safe and responsible use of their products and we will also seek to ensure that any shareholder resources used to influence legislation and regulations, or fund other advocacy efforts is consistent with the company’s public views.
SSGA Response to the Financial Reporting Council’s (FRC) Consultation on the ‘Proposed Revisions to the UK Corporate Governance Code’
The FRC issued its long-awaited consultation on the UK Corporate Governance Code to seek investor feedback. In February 2018 SSGA submitted its response to the FRC. The full response is available here.