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California Public Employees' Retirement System CalPERS

PRI reporting framework 2019

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You are in Direct - Listed Equity Active Ownership » (Proxy) voting and shareholder resolutions

(Proxy) voting and shareholder resolutions

LEA 12. Typical approach to (proxy) voting decisions

12.1. Indicate how you typically make your (proxy) voting decisions.

Approach

Based on

12.2. Provide an overview of how you ensure your voting policy is adhered to, giving details of your approach when exceptions to the policy are made.

  • CalPERS staff votes all internally and externally managed holdings.
  • Votes are cast with standing instructions based on CalPERS' Governance and Sustainability Principles via a technology platform.
  • Staff receives daily reporting to ensure votes are cast consistent with CalPERS Principles.
  • For non-routine votes or exceptions staff will seek input from team leads within the governance unit.  For other high-profile voting decisions staff will elevate votes to senior management through proxy voting committees.
  • CalPERS proxy voting activities are subject to internal audits by the Enterprise Risk Team.

12.3. Additional information.[Optional]

CalPERS' Principles which guide our votes can be found: https://www.calpers.ca.gov/page/investments/about-investment-office/policies 

To determine CalPERS voting decision, CalPERS uses internal analysis, company information, research provided by vendors such as MSCI, ISS, Glass Lewis, Sustainalytics, Equilar.

Since July 2015, CalPERS has publically disclosed all its proxy voting activity. Votes are typically posted 72 hours prior to an Annual General Meeting. 

Vote are disclosed at the following link: https://viewpoint.glasslewis.net/GlassLewisWebDisclosure/webdisclosure/search.aspx?glpcustuserid=CAL095&WDFundGroupID=2774


LEA 13. Percentage of voting recommendations reviewed (Not Applicable)


LEA 14. Securities lending programme (Private)


LEA 15. Informing companies of the rationale of abstaining/voting against management

15.1. Indicate the proportion of votes where you or the service providers acting on your behalf have raised concerns with companies ahead of voting.

15.3. Additional information. [Optional]

CalPERS posts proxy votes prior to a company’s Annual General Meetings on the CalPERS website. Staff also provides opportunity for discussion and sends written notification to companies for high profile votes. Ahead of the company's annual general meeting, CalPERS posts all votes for the entire portfolio votes via the CalPERS website which can be found here: https://viewpoint.glasslewis.net/GlassLewisWebDisclosure/webdisclosure/search.aspx?glpcustuserid=CAL095&WDFundGroupID=2774

General information on CalPERS' Proxy Voting can be found here: https://www.calpers.ca.gov/page/investments/governance/proxy-voting


LEA 16. Informing companies of the rationale of abstaining/voting against management

16.1. Indicate the proportion of votes participated in within the reporting year in which, you and/or the service provider(s) acting on your behalf, have communicated to companies the rationale for abstaining or voting against management recommendations.

16.3. In cases where your organisation does communicate the rationale for the abstention or the vote against management recommendations, indicate whether this rationale is made public.

16.4. Additional information. [Optional]

CalPERS puclicly discloses all its proxy voting activity


LEA 17. Percentage of (proxy) votes cast

17.1. For listed equities where you and/or your service provider have the mandate to issue (proxy) voting instructions, indicate the percentage of votes cast during the reporting year.

Votes cast (to the nearest 1%)

100 %

Specify the basis on which this percentage is calculated

17.3. Additional information. [Optional]


LEA 18. Proportion of ballot items that were for/against/abstentions

18.1. Indicate if you track the voting instructions that you and/or your service provider on your behalf have issued.

18.2. Of the voting instructions that you and/or third parties on your behalf issued, indicate the proportion of ballot items that were:

Voting instructions
Breakdown as percentage of votes cast
For (supporting) management recommendations
84 %
Against (opposing) management recommendations
15 %
Abstentions
1 %
100%

18.3. In cases where your organisation voted against management recommendations, indicate the percentage of companies you have engaged.

18.4. Additional information. [Optional]

As a practice, CalPERS does not abstain from voting unless market mechanics require it to execute the vote. For example, in certain markets you can only vote for a certain number of directors and you MUST abstain from the others or the vote will not be accepted.

CalPERS engages over 17% of our 9800 security global portfolio. Although the percentage of companies we've engaged and voted against management is unknown (not tracked) it is reasonable to conclude that it is significantly higher than in companies where we support management.

Actions taken by staff when voting against management include:

  • Written correspondence citing CalPERS' concern (before and after vote)
  • Public disclosure of proxy vote on CalPERS website
  • Follow up conversations with company (e.g. in-person or conference call)
  • Year over year monitoring of company progress.

LEA 19. Proportion of ballot items that were for/against/abstentions

19.1. Indicate whether your organisation has a formal escalation strategy following unsuccessful voting.

19.2. Indicate the escalation strategies used at your organisation following abstentions and/or votes against management.

19.3. Additional information. [Optional]


LEA 20. Shareholder resolutions

20.1. Indicate if your organisation directly or through a service provider filed or co-filed any ESG shareholder resolutions during the reporting year.

20.2. Indicate the number of ESG shareholder resolutions you filed or co-filed.

38 Total number

20.3. Indicate what percentage of these ESG shareholder resolutions resulted in the following.

Went to vote
11 %
Were withdrawn due to changes at the company and/or negotiations with the company
89 %
Were withdrawn for other reasons
0 %
Were rejected/not acknowledged by the company
0 %
Total 100%

20.4. Of the ESG shareholder resolutions that you filed or co-filed and that were put to vote (i.e. not withdrawn) how many received:

4 >50%
50-20%
<20%

20.5. Describe the ESG shareholder resolutions that you filed or co-filed and the outcomes achieved.

Majority Vote

  • CalPERS filed 37 Majority Vote proposals
  • Three proposals went to vote and both received greater than 75% support
  • 35 proposals were withdrawn due to a settlement between shareholder and the company

Proxy Access

  • CalPERS filed one Proxy Access proposal
  • Proposal passed with 77% support

20.6. Describe whether your organisation reviews ESG shareholder resolutions filed by other investors.

Yes; Staff has multiple touch points throughout the year with partner organizations and asset owners to discuss potential shareholder resolutions. Staff will also review ESG-related vote outcomes, trends and issues on an annual basis. 

  • CalPERS reviews ESG shareowner resolutions consistent with the Governance and Sustainability Principles. 
  • CalPERS reviews all ESG resolutions. 

During the reporting period, CalPERS ran shareholder solicitation campaigns for 16 ESG proposals. 

20.7. Additional information. [Optional]


LEA 21. Examples of (proxy) voting activities

21.1. Provide examples of the (proxy) voting activities that your organisation and/or service provider carried out during the reporting year.

ESG Topic
Shareholder rights
Conducted by
Objectives

To remove plurality votes and incorporate majority vote standards into company bylaws for director elections.

Scope and Process

Consistent with the CalPERS Governance and Sustainability Principles, staff votes "FOR" the adoption of majority vote practices for director elections at companies where this ballot item appears.

Outcomes
ESG Topic
Shareholder rights
Conducted by
Objectives

To improve board independence at our Japanese portfolio companies.

Scope and Process

CalPERS updated its proxy voting practice for Japan to apply a minimum threshold of one-third independence for the board of directors. Consistent with the Governance and Sustainability Principles, CalPERS votes "AGAINST" all non-independent committee members at Japanese portfolio companies. 

Outcomes
ESG Topic
Shareholder rights
Conducted by
Objectives

To incorporate proxy access into company bylaws while supporting the vacated SEC rule (3% for 3 years).

Scope and Process

Consistent with the CalPERS Governance and Sustainability Principles, staff votes “FOR” proposals giving shareholder the right to nominate directors to the board (proxy access).

Outcomes
ESG Topic
Climate Change|Sustainability reporting
Conducted by
Objectives

To require companies to report on climate risk, greenhouse gas (GHG) and/or sustainability.

Scope and Process

Consistent with the Governance and Sustainability Principles, CalPERS believes companies should provide accurate and timely disclosure of environmental risks and opportunities through climate  change/GHG/sustainability reporting. CalPERS achieves this through voting “FOR” proposals asking for such disclosures, and on selected instances, file shareholder proposals asking companies to prepare annual climate risk reports.

Outcomes
ESG Topic
Executive Remuneration
Conducted by
Objectives

To ensure portfolio companies have aligned compensation practices consistent with shareowner interests.

Scope and Process

Staff completes a comprehensive review of say-on-pay proposals and votes each item consistent with the CalPERS Governance and Sustainability Principles. Specifically, when a company has sufficient disclosure and adopted policies that are aligned with a pay for performance discipline staff will generally vote "for" a say-on-pay proposal. However, if a company allows for specific policies or practices not in shareowner best interest or fails to align compensation with performance staff will vote "against".

Outcomes
ESG Topic
Diversity
Conducted by
Objectives

To promote CalPERS' strategic goal of advancing board diversity.

Scope and Process

CalPERS voted for director elections consistent with CalPERS' principles on board quality, including independence, competence and diversity. We also supported shareowner proposals related to board diversity.

Outcomes
ESG Topic
Shareholder rights
Conducted by
Objectives

To eliminate dual-class share ownership structures and embrace the spirit of one share, one vote.

Scope and Process

CalPERS voted for the elimination of dual-class shares consistent with the Governance and Sustainability Principles. 

Outcomes
ESG Topic
Political spending / lobbying
Conducted by
Objectives

To enhance disclosure around corporate political and lobbying expenditures.

Scope and Process

CalPERS voted for the enhanced disclosure of corporate political spending and lobbying consistent with the Governance and Sustainability Principles. 

Outcomes
ESG Topic
Diversity|Labour practices and supply chain management
Conducted by
Objectives

To request company disclose a gender pay equity report. 

Scope and Process

CalPERS voted for the request of a gender pay equity report at portfolio companies.

Outcomes
ESG Topic
Deforestation
Conducted by
Objectives

To improve transparency and reporting related to supply chain impacts of deforestation

Scope and Process

CalPERS voted for the request of annual reports to investors, at reasonable expense and excluding proprietary information, providing quantitative metrics on supply chain impacts on deforestation, including progress on time bound goals for reducing such impacts.

Outcomes

21.2. Additional information. [Optional]


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