As
part of the SBA’s mission to invest, manage, and safeguard the assets of its
various mandates, the SBA plays a vital role in supporting initiatives to
ensure that public companies meet high standards of independent and ethical
corporate governance. The SBA acts as a strong advocate on behalf of FRS
members and beneficiaries, retirees, and other clients to strengthen shareowner
rights and promote leading corporate governance practices at U.S. and
international companies in which the SBA holds stock.
The
SBA’s governance philosophy encourages companies to adhere to responsible,
transparent practices that correspond with increasing shareowner value and to
appropriately consider the input of their shareowners. The SBA’s corporate
governance activities are focused on enhancing share value and ensuring that
public companies are accountable to their shareowners with independent boards
of directors, transparent disclosures, accurate financial reporting, and
ethical business practices designed to protect the SBA’s investments.
During
fiscal year 2021-22, SBA staff cast votes at 10,319 companies worldwide, voting
on ballot items including director elections, audit firm ratification,
executive compensation plans, mergers & acquisitions, and a variety of
other management and shareowner proposals. These votes involved 99,759 distinct
voting items—voting 80.5% “For’’ and 16.7% “Against”, with the remaining 2.8%
involving abstentions. Of all votes cast, 16.8 percent were “Against” the
management-recommended-vote. SBA proxy voting was conducted across 75
countries, with the top five countries comprised of the United States (3,030
votes), China (1,508), Japan (857), India (624), and South Korea (352). The SBA
actively engages portfolio companies throughout the year, addressing corporate
governance concerns and seeking opportunities to improve alignment with the
interests of our beneficiaries. Highlights from the 2022 proxy season included
the continued focus and critical voting on the level and form of executive
compensation, “over-boarded” directors continued to receive investor
opposition, and a year-over-year decline in shareowner support for some types
of environmental and social topic proposals.
In
addition to proxy voting, the SBA actively engages companies it invests in
throughout the year, at times maintaining a year-round dialogue and analysis of
corporate governance issues and other reforms. Engagement by investors
can be a very effective way to advocate for positive changes and improve
reporting by the companies in which the SBA invests. Improved corporate
disclosures are a key objective of SBA engagement, as transparent and improved
comparability can help all shareowners make better investment decisions. The
SBA’s corporate engagement activity addresses corporate governance concerns and
seeks opportunities to improve alignment with the interests of our
beneficiaries. The SBA’s Corporate Governance unit prepares a separate annual
report detailing its activities and additional reports on corporate governance
topics covering a wide range of shareowner issues. Historical
information, including prior reports, can be found within the governance
section of the SBA’s website, available at
www.sbafla.com.