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Feb 12, 2015

CalSTRS adds fuel to fight for proxy access with promise of support

Fund to back ‘any shareholder proposal’ with a ‘three-and-three structure’

Pension fund CalSTRS has approved new internal corporate governance principles that indicate it will step up its support for proxy access proposals this season, adding to growing pressure on companies that oppose proxy access.

The CalSTRS investment committee both clarified and strengthened the organization’s stance on proxy access, saying it supports giving the right to nominate candidates on the company’s proxy to shareholders that have owned at least 3 percent of a company’s shares for at least three years.

While the rule favoring the so-called three-and-three guideline makes CalSTRS’ support for proxy access slightly more limited in scope, it allows the organization to give blanket support to proxy access within the specified conditions, CalSTRS says in a press release, which ‘sets the stage for an active proxy season in 2015.’

‘CalSTRS will, in the coming proxy season, support any shareholder proposal that includes a three-and-three group structure,’ says Anne Sheehan, CalSTRS’ director of corporate governance, in the press release. ‘Our intention is to oppose any proxy access proposal with a structure more onerous than three-and-three ownership by a group of shareholders.’

CalSTRS says it will also encourage shareholders to withhold their votes from any company directors who either exclude a three-and-three shareholder proposal from the proxy statement or head off a three-and-three proposal with a proposal that establishes more limiting conditions.

Earlier this month, proxy adviser Glass Lewis said in a statement that it would review proxy access proposals on a case-by-case basis in the upcoming proxy season and that ‘significant, long-term shareholders should have the ability to nominate their own representatives to the board.’ It said about 100 US companies face shareholder proposals this year that allow proxy access for ‘certain large, long-standing shareholders’.

Last month, the Wall Street Journal reported that Glass Lewis was prepared to recommend shareholders vote against company-backed board candidates that counter proxy access proposals with a ‘diluted alternative’ of their own.