Investment Programs & Governance (IP&G) Michael McCauley Senior Officer. Investment Advisory Council Meeting March 6, 2017

Transcription

1 Investment Programs & Governance (IP&G) Michael McCauley Senior Officer Investment Advisory Council Meeting March 6, 2017

2 Recent Actions Framework for U.S. Stewardship and Governance: 1 st corporate governance code of best practices developed for the U.S. equity market. Developed by Investor Stewardship Group (ISG), 16 investors with $17T AUM. Implementation date of January 1, Highlighted Proxy Voting: SBA staff voted to support the proposed acquisition of SolarCity by Tesla Motors after direct engagement with the company in mid-november. Regulatory Commentary: SBA staff submitted comments to the SEC on a proposed rule for adoption of universal proxy, which would allow dissident and management nominees in the rare instances of proxy contests to appear on the same ballot and allow investors to more efficiently choose their preferred candidates. SBA staff submitted a comment letter to the UK Corporate Governance Reform Team of the Department for Business, Energy & Industrial Strategy outlining preferred corporate governance practices in response to its Green Paper.

3 Summary of Proposed Changes 2017 SBA Proxy Voting Guidelines (1) Under Election of directors (Pages 11 & 12): When a company goes public with a dual or multi-class share structure without a sunset provision on unequal voting rights such as in the case of an IPO or spin-off, SBA may withhold votes from or vote against directors. Restricting shareowner rights or failing to sufficiently act on shareowner input - such as ignoring a shareowner proposal that received majority support of votes cast or attempting to block or limit the ability of shareowners to file precatory or binding proposals or adopt or amend bylaws. (2) Under Dual Class Stock Authorization (Page 38): SBA may also withhold votes or cast votes against the election of directors in cases where a company completes an IPO with a dual or multi-class share structure without a reasonable sunset provision on the unequal voting rights. (3) Under Adopt or Amend Stock Award or Option Plan (Page 48): Dividend payments are made or allowed to accrue on unvested or unearned awards.

4 Appendix SBA Corporate Governance Statistics

5 Key SBA Proxy Voting Figures From 10/1/2016 to 12/31/ Voting Categories % 1,113 Total Meetings % Audit/Financial Capital Management Executive Compensation Meeting Procedure SP: Compensation SP: Governance SP: Social Board Related Changes to Charter/Bylaws Mergers & Acquisition Other SP: Environment SP: Miscellaneous Meetings voted AGAINST management Meetings voted WITH management

6 SBA Proxy Voting Country Breakdown From 10/1/2016 to 12/31/2016 Voted Unvoted Mixed Take No Action Asia ex-japan Canada & United States Oceania Europe Latin America & Caribbean Midele East & North Africa Africa Japan Unknown Region

7 Dismantling of Takeover Defenses in the S&P 500 Stock Index % of S&P 500 Companies Takeover Defense/Governance Provisions 2003 Jan Poison Pill In Effect 57% 3% Classified Board 57% 11% Majority Voting None 90% Proxy Access None 52% Supermajority Vote to Remove Directors 33% 20% Shareholders Cannot Call Special Meetings 59% 37% Shareholders Cannot Act by Written Consent 74% 71% Independent Chair 9% 27% CEO Is the Only Non-Independent Director 35% 60% Source: Wachtell, Lipton, Rosen & Katz, based on SharkRepellent data; Note: universe excludes foreign S&P 500 companies, except with respect to poison pills in force; Spencer Stuart 2016 Board Index.

8 Fewer than 1% of Equity Plans Fail To Gain Investor Support 1.0% % 7 0.8% % 4 0.6% % Failure Rate of Equity Plan Proposals Number of Equity Plans Receiving <50%

9 Activist Campaigns ( ) All Campaigns All Proxy Fights Proxy Fights for Board Control Source: Wachtell, Lipton, Rosen & Katz, FactSet SharkRepellent (excludes activism against fund companies; includes governance-based campaigns and 13D filings).