NYS Office of the Comptroller DiNapoli Announces State Pension Fund's 2024 Corporate Governance Stewardship Priorities

 

On the Eve of the 2024 Shareholder Meeting Season, DiNapoli Outlines Expectations for Companies Around Corporate Responsibility

New York State Comptroller Thomas P. DiNapoli, trustee of the New York State Common Retirement Fund (Fund), today outlined the Fund’s stewardship priorities for 2024, including setting expectations related to climate risks, diversity, equity and inclusion (DEI), workforce management, and ensuring a robust governance framework to promote high levels of accountability. DiNapoli also announced the Fund has updated its proxy voting guidelines and released its 2023 Stewardship Report.

“Companies that take steps to be responsible corporate citizens are more likely to be profitable, sustainable investments for New York’s pension fund,” DiNapoli said. “The stewardship priorities and expectations we’ve established for portfolio companies, centered around our engagement and voting, aim to achieve just that. As we start the 2024 proxy season, I am confident  that our stewardship efforts will continue to protect our pension fund for the future.”

The Fund’s Corporate Governance Program actively engages with its portfolio companies to foster the development of robust governance practices and prudent management of environmental and social factors that can contribute to their long-term success and sustainability. The Fund’s engagement includes voting proxies at company meetings, filing shareholder proposals, writing letters, and speaking directly with company directors and executives.

2024 Stewardship Priorities

The release of the Fund's 2024 Stewardship Priorities continues DiNapoli’s commitment to encourage open engagement with the Fund’s public equity portfolio companies on key shareholder concerns. These include climate change, DEI, workforce management, governance, board diversity, executive compensation, and political spending disclosure. Along with releasing the Fund’s priorities, DiNapoli announced that the Fund has sent them to its top 100 public equity holdings to ensure their awareness of these priorities. .

Updated Proxy Voting Guidelines

DiNapoli also announced the Fund’s update of its proxy voting guidelines, which articulate the Fund’s view of best practices on environmental, social and governance (ESG) issues. The Fund’s proxy voting provides a direct means of influencing a company’s governance and overall risk management. This includes voting on all director nominees, advisory votes on executive compensation, and votes on shareholder proposals at annual and special meetings for each of the domestic companies in the Fund’s public equity portfolio, as well as those of select non-U.S. companies. In 2023, the Fund cast more than 30,900 votes at 3,235 public company meetings.

Key updates to the Fund’s proxy voting guidelines include:

• Climate Risk: The Fund will generally withhold support from audit committee members or directors responsible for climate risk oversight when the company fails to disclose and appropriately manage and comprehensively report climate risks. The Fund’s updated proxy guidelines incorporate criteria used to evaluate companies’ climate performance including climate transition strategies and plans, greenhouse gas emissions reduction targets, capital expenditure alignment, and Task Force on Climate-Related Financial Disclosures (TCFD) disclosure.
• Governance Issues: The guidelines include various changes to governance-related issues, including: voting against incumbent board nominees at companies that have adopted a classified board structure without a reasonable sunset; voting against proposed charter amendments seeking to extend exculpation to corporate officers; voting against, on a case-by-case basis, governance committee members when a company fails to disclose the identity of shareholder proposal proponents; and voting against proposals that seek to adopt onerous or overly restrictive advance notice requirements.
• Board Diversity: A determination that a board is not sufficiently diverse and/or insufficient efforts have been taken to address a lack of diversity, may result in the Fund withholding support from incumbent nominating committee nominees or all incumbent board nominees. The guidelines outline specific factors the Fund may consider.
• Executive Compensation: The guidelines clarify timeline expectations for long-term incentive plans and specify voting against incumbent compensation committee members where there is a lack of a comprehensive clawback policy. The Fund expects to withhold support from incumbent compensation committee members that fail to make sufficient changes to an executive compensation plan that failed in the previous year’s “say on pay” vote.

To provide transparency around the Fund’s voting, the Fund will continue to highlight key proxy votes in advance of shareholder meetings during the 2024 proxy season and will post all votes cast at the end of the year. For example, the Fund recently announced in advance of the Starbucks’ annual meeting, that the Fund would vote against incumbent Compensation and Management Development Committee members for their lack of oversight over workforce management issues and the failure to uphold the company’s corporate policies on human rights and freedom of association. The Fund’s votes can be found at: https://www.osc.ny.gov/common-retirement-fund/corporate-governance.

2024 Shareholder Proposals

During the 2024 proxy season, the Fund expects a number of its shareholder proposals to be voted on at company annual meetings. The Fund has filed a total of 27 shareholder proposals on issues associated with the Fund’s stewardship priorities. In cases where the Fund was unable to reach agreements with companies to take the requested actions, the Fund expects shareholders to vote on these proposals this spring. Among the proposals going to a vote include:  

• Political spending disclosure proposals at Charter Communications Inc., Airbnb, Inc., and DraftKings Inc. Comptroller DiNapoli recently called on Charter’s shareholders to vote in favor of the Fund’s proposal at the company’s April 23, 2024, annual meeting.
• Worker rights assessment proposal at CVS Health Corp.
• Discrimination and sexual harassment disclosure proposals at Tesla Inc., Wells Fargo and Co., and Chipotle Mexican Grill Inc.
• Greenhouse gas emissions target reduction proposals at Capital One Financial Corp. and Texas Roadhouse Inc.

2023 Stewardship Report

DiNapoli also released the Fund’s 2023 Corporate Governance Stewardship Report which highlights the Corporate Governance Program’s agenda, initiatives, and achievements for the past year.

The New York State Common Retirement Fund is one of the largest public pension funds in the United States. The Fund holds and invests the assets of the New York State and Local Retirement System on behalf of more than one million state and local government employees and retirees and their beneficiaries. It has consistently been ranked as one of the best managed and best funded plans in the nation.