“Proxy Access” Nearly A Market Standard For Diversity, Competency, And Value

January 12, 2017

More than 300 U.S. companies – including nearly half of the S&P 500 – have enacted rules which give large, long-term investors the ability to nominate directors to companies’ boards.

Nominating directors to companies’ boards allows investors to ensure these boards are diverse, climate-competent, and able to create long-term value…

Nominating directors to companies’ boards allows investors from Harlem to Hollywood to ensure these boards are diverse, climate-competent, and able to create long-term value, according to the New York City Pension Funds’ 2016 Post-Season Report released today by New York City Comptroller Scott M. Stringer. The report also highlights other shareowner efforts over the last year, including work on disclosure of political spending.

“Just two years ago, we launched a nationwide campaign to change the rules of the road for director elections. We emphasized diversity, accountability, and transparency in companies – and there’s no doubt it’s resonating across the marketplace. Companies are taking action because of the work we started just a couple years ago,” New York City Comptroller Scott M. Stringer said. “Incorporating a multitude of perspectives and listening to diverse viewpoints is critical for businesses in the 21st century. It’s clear we’re moving in the right direction, but there’s more to do.”

The New York City Pension Funds’ “Post-Season Report” provides an overview of shareowner initiatives by the New York City Pension Funds in 2016.

Highlights include:

The Boardroom Accountability Project
Proxy Access is the ability of large, long-term investors to nominate board directors on a company’s ballot. In 2010, the SEC enacted a universal proxy access rule, which was subsequently challenged in court and overturned on technical grounds. In response, Comptroller Stringer and the New York City Pension Funds launched the Boardroom Accountability Project in 2014 to bring this right to the U.S. market, company by company. Firms were targeted if they had little or no board diversity, excessive CEO pay, or substantial exposure to risks related to climate change, such as a reliance on carbon-intensive business practices.

  • In 2014, only six U.S. companies had meaningful proxy access. Today, more than 322 companies do – an increase of 5,226 percent.
  • Ninety-six companies targeted by the New York City Pension Funds have enacted proxy access – roughly 30 percent of those that have proxy access today. Seeing the changing landscape, hundreds of other companies have implemented proxy access on their own or in response to engagement from other investors.
  • In 2015, when the New York City Pension Funds filed proxy access proposals with 75 companies, just eight percent of them agreed to implement the proposal before a shareowner vote. In 2016, 72 percent of 72 target companies enacted proxy access before votes were cast.
  • The 18 proposals that did go to a vote in 2016 received an average 58 percent support. Thirteen of them received majority support.
  • At least 17 companies that were targeted for inadequate board diversity over the last two years – including AbbVie, Cabot Oil & Gas, Ebay, Fidelity National Financial, Priceline, and Union Pacific – have added at least one female and/or minority director.

Political Spending Disclosure
Over the last year, the New York City Pension Funds and Comptroller Stringer have encouraged numerous energy companies to increase transparency around political spending and enact policies that give their boards of directors oversight over this practice. These moves enable investors to determine whether corporate political spending actually aligns with the long-term interests of the company and investors.

  • In response to a first-time proposal, Eversource Energy adopted a policy that ensures board oversight and disclosure of political spending. The proposal was withdrawn.
  • Three companies – Consolidated Edison, PNM Resources, and PPL Corporation – agreed to enhance their public disclosures before proposals were filed.
  • Two additional companies, Cabot Oil & Gas and DTE Energy, agreed to improve their disclosures after strong votes from investors on the pension funds’ proposals.

The 2016 Post-Season Report also includes information on a number of other initiatives, including efforts to enhance disclosure of workplace diversity data at Capital One, claw back incentive pay from executives at Wells Fargo, institute governance reforms at Mylan, and encourage ExxonMobil to release information on climate change risks.

To read a full copy of the report, click here.

Comptroller Stringer serves as the investment advisor to, and custodian and a trustee of, the New York City Pension Funds. The New York City Pension Funds are composed of the New York City Employees’ Retirement System, Teachers’ Retirement System, New York City Police Pension Fund, New York City Fire Department Pension Fund and the Board of Education Retirement System.

In addition to Comptroller Stringer, the New York City Pension Funds’ trustees are:

New York City Employees’ Retirement System: Mayor Bill de Blasio’s Representative, John Adler (Chair); New York City Public Advocate Letitia James; Borough Presidents: Gale Brewer (Manhattan), Melinda Katz (Queens), Eric Adams (Brooklyn), James Oddo (Staten Island), and Ruben Diaz, Jr. (Bronx); Henry Garrido , Executive Director, District Council 37, AFSCME; John Samuelsen, President Transport Workers Union Local 100; Gregory Floyd, President, International Brotherhood of Teamsters, Local 237.

Teachers’ Retirement System: Mayor Bill de Blasio’s Appointee, John Adler; Chancellor’s Representative, Raymond Orlando, New York City Department of Education; and Debra Penny, Thomas Brown and David Kazansky, all of the United Federation of Teachers.

New York City Police Pension Fund: Mayor Bill de Blasio’s Representative, John Adler; New York City Finance Commissioner Jacques Jiha; New York City Police Commissioner James P. O’Neill (Chair); Patrick Lynch, Patrolmen’s Benevolent Association; Michael Palladino, Detectives Endowment Association; Edward D. Mullins, Sergeants Benevolent Association; Louis Turco, Lieutenants Benevolent Association; and, Roy T. Richter, Captains Endowment Association.

New York City Fire Department Pension Fund: Mayor Bill de Blasio’s Representative, John Adler; New York City Fire Commissioner Daniel A. Nigro (Chair); New York City Finance Commissioner Jacques Jiha; James Slevin, President, Gerard Fitzgerald, Vice President, Edward Brown, Treasurer, and John Kelly, Brooklyn Representative and Chair, Uniformed Firefighters Association of Greater New York; John Farina, Captains’ Rep.; Paul Ferro, Chiefs’ Rep., and Jack Kielty, Lieutenants’ Rep., Uniformed Fire Officers Association; and, Thomas Phelan, Marine Engineers Association.

Board of Education Retirement System:  Schools Chancellor Carmen Fariña; Mayoral: Issac Carmignami, T. Elzora Cleveland, Vanessa Leung, Gary Linnen, Lori Podvesker, Stephanie Soto, Benjamin Shuldiner, Miguelina Zorilla-Aristy; Michael Kraft (Manhattan BP), Debra Dillingham (Queens BP), Geneal Chacon (Bronx BP) and Peter Calandrella (Staten Island BP); and employee members John Maderich of the IUOE Local 891 and Donald Nesbit of District Council 37, Local 372.

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