SSGA’s approach towards proxy voting and issuer engagement is premised on the belief that companies that adopt robust and progressive governance and sustainability practices should be better positioned to generate long-term value and manage risk.
As near perpetual holders of the constituents of the world’s primary indices, the informed exercise of voting rights coupled with targeted and value-driven engagement is the most effective mechanism of creating value for our clients.
All voting and engagement activities are centralized within the Asset Stewardship Team irrespective of investment strategy or geographic region. By consolidating and harmonizing our voting decisions and engagement, we leverage the full power of our institutional discretionary holdings and exert greater influence with management and boards.
In conducting our voting and engagement activities, SSGA evaluates the various factors that play into the corporate governance framework of a country, including macroeconomic conditions, political environment, quality of regulatory oversight, enforcement of shareholder rights and the effectiveness of the judiciary. SSGA complements its company specific dialogue with targeted engagement with regulators and government agencies to address systemic market-wide concerns.
We have a dedicated team of corporate governance and ESG (environmental, social, and governance) professionals, who help us carry out our duties as a responsible investor. These duties include developing and managing SSGA’s proxy voting and engagement guidelines, engaging with companies, analyzing corporate governance issues on a case-by-case basis at the company level, and exercising our voting rights, all to maximize shareholder value.
The activities of the Asset Stewardship Team are directly overseen by SSGA’s Investment Committee (IC). The IC is responsible for approving the annual stewardship strategy, engagement priorities and proxy voting guidelines, and monitoring the delivery of objectives. Furthermore, the SSGA Global Proxy Review Committee (SSGA PRC), a dedicated sub-committee of the IC, provides day-to-day oversight of the Asset Stewardship Team, including approving departures from voting guidelines and management of conflicts of interest.
The Asset Stewardship Team is supported by several specialists within SSGA in executing their stewardship responsibilities. These include members of SSGA’s proxy operations team who are responsible for managing fund set up, vote execution, vote reconciliation, share recall and class action lawsuits, and members of SSGA’s client reporting and compliance teams.
SSGA’s engagement activities are driven exclusively by the goal of maximizing and protecting the long-term value of our clients’ assets. As a long-term shareholder with substantial holdings, SSGA believes it is important to establish a relationship and have a direct communication channel with independent directors in our investee companies. Therefore, as part of our engagement process, we prefer to meet with the independent chairperson/ lead independent director and/or representative of key board committees. We believe such meetings help us assess the quality and effectiveness of the board, the extent of oversight of management, and to understand the board’s perspectives on key issues such as strategy, risk, capital allocation, and compensation. It also allows us to escalate matters to the board’s attention if management has been unresponsive to issues discussed during prior engagements.
SSGA also seeks to meet with management at reasonable intervals to receive updates on long-term strategy, execution, financial and operational performance, and significant matters that may affect the future prospects of the company. However, discussions pertaining to interim financial results or other short-term considerations will not be considered a priority.
Where appropriate, SSGA also participates in collaborative engagement activities with multiple shareholders to communicate with company representatives about common concerns.
In conducting our engagement, SSGA also evaluates the various factors that play into the corporate governance framework of a country, including but not limited to, the macroeconomic conditions and broader political system in a country, quality of regulatory oversight, enforcement of property and shareholder rights and the independence of the judiciary. SSGA understands that regulatory requirements and investor expectations relating to governance practices and engagement activities differ from country-to-country. As a result, SSGA engages with issuers, regulators, or both, depending on the market. Also, SSGA is a member of various investor associations that seek to address broader corporate governance related policy at the country level as well as issuer specific concerns at a company level.
To help mitigate company-specific risk, the team may collaborate with members of SSGA active investment teams to engage with companies on corporate governance issues and address any specific concerns, or to get more information regarding shareholder items that are to be voted on at upcoming shareholder meetings. Outside of proxy voting season, SSGA conducts issuer specific engagement with companies covering various corporate governance and sustainability related risks.
SSGA’s believes in-person meetings help us in establishing mutual understanding and trust with the boards and management teams of our investee companies. However, once we have developed such relationships, SSGA’s preferred method for update meetings is via conference calls as we believe this is cost effective for our clients and investee companies.