When an investor owns a share in a public company, that investor has certain rights. One right is the ability to vote on specific matters related to how the company is run. Examples of items that can be voted on include electing board members of the company, approving compensation plans of company executives, and approving company mergers. This process is known as proxy voting.

Once a year, companies hold annual general meetings, or AGMs. It is during these AGMs that investors can exercise their proxy voting right. Every year, CalSTRS executes over 100,000 votes at 10,000 company AGMs.

Proxy voting is one of the few ways investors can have a direct say in how a company is run. It provides investors with a “seat at the table” in deciding important company matters.

At CalSTRS, we treat proxy votes with the same care, diligence, and prudence as any other asset of the fund. We believe that our proxy votes can be used to ensure that companies are run in a manner that promotes sustainable business practices and long-term value creation, supporting our mission of securing the financial future of California’s educators.

While AGMs occur throughout the year, nearly two-thirds of U.S. AGMs take place from the beginning of April until the end of June. This condensed period of heightened proxy voting is known as proxy season.

During proxy season, it is common for CalSTRS to vote proxies at over 100 company AGMs a day.

In addition to voting on items put up for a vote by the company, investors can also put items up for a vote, commonly referred to as a shareholder proposal. Shareholder proposals can vary greatly in what they are asking for.

Examples of shareholder proposals include those that ask companies to make changes to its governance practices or to disclose risks the company faces from climate change. On occasion, we will file shareholder proposals where we believe a company should take specific action, with the intention of improving the long-term financial performance of the company.

Our proxy voting is guided by CalSTRS Corporate Governance Principles. The principles establish a framework for CalSTRS’ proxy voting activities. These principles are based on best practices in the marketplace that support long-term value creation and mitigate risks to the portfolio. However, these guidelines should not be regarded as mandatory and are not designed as a substitute for analysis and judgment, which should be exercised as circumstances dictate.

When deciding how to vote, in addition to staff reviewing materials directly from the company, staff also reviews information from other external sources. One such example is research conducted by third-party vendors, known as proxy advisors. Due to the large volume and complexity of votes, proxy advisors play an important role, providing neutral analysis meant to supplement staff’s own analysis.

All of our proxy voting decisions are available at CalSTRS proxy voting disclosure website. Proxy voting decisions are typically posted within a couple days of when CalSTRS casts its vote.