State Street Global Advisors (SSGA) released its annual updated Proxy Voting and Engagement Guidelines for North America (US & Canada) and other regions, which are designed to work in tandem with its updated Global Proxy Voting and Engagement Principles. Its updated Global Proxy Voting and Engagement Guidelines for Environmental and Social Issues provides additional color on SSGA’s approach to engagement and voting (typically via shareholder proposals) on sustainability issues.
As was the case last year, SSGA also released a Summary of Material Changes, which highlights these significant proxy voting principle changes for the US for 2021:
Racial and ethnic diversity disclosure
- In 2021, SSGA will vote against the Nom/Gov Committee Chair at S&P 500 companies that don’t disclose, at minimum, their board’s gender, racial and ethnic composition.
- In 2022, SSGA will vote against the Compensation Committee Chair at S&P 500 companies that don’t disclose their EEO-1 survey responses.
- In 2022, SSGA will vote against the Nom/Gov Committee Chair at S&P 500 companies that don’t have at least one director from an underrepresented community on their boards.
R-Factor
Beginning 2022, SSGA will take voting action against independent directors at companies in the S&P 500 that are underperformers based on their R-Factor scores and have not shown positive momentum in the previous two years. We have previously reported on the R-Factor here and here.
Overboarding
Service on a mutual fund board or the board of a UK investment trust will no longer be considered when evaluating directors for excessive commitments.
Compensation
- SSGA will vote against the Compensation Committee Chair if the level of dissent against a company’s pay report and/or policy is consistently high and SSGA has determined that a vote against a pay-related proposal is warranted in the third consecutive year.
- SSGA may vote against the Compensation Committee members if it has serious concerns about pay practices and/or if the company has not been responsive to shareholder pressure to review its approach.
Key takeaways from the updated Engagement Protocol, which aims to inform companies about SSGA's engagement objectives and preferred terms of engagement, include:
- Factors SSGA considers in developing its target list of companies for engagement each year, and its preferred forms of engagement
- Information companies should include in their engagement request emails
- Preferences for engaging directly with independent directors separate and apart from engagements with management - on different topics, at different intervals, and at different times of the year
- Types of scenarios that are likely to result in SSGA accepting or rejecting engagement requests from companies
- SSGA welcomes and reviews written notifications from companies of changes to their governance practices, but only responds to those letters when it is looking for additional clarity or seeking to address specific changes.
The Engagement Protocol also includes guidance for SSGA's interactions with activist investors and shareholder proposal proponents.
See our recent report: “State Street 2021 Proxy Voting Agenda: Diversity & Climate” and additional information & resources on our Institutional Investors page.