CalSTRS revises corporate governance principles

January 19th, 2024

The California State Teachers’ Retirement System (CalSTRS) has adapted its corporate governance principles to include company’s workforce as an issue for engagement.

The new report outlining CalSTRS corporate governance principles includes four employee metrics companies should report to investors: workforce headcount, cost, stability including turnover and diversity data.

The pension board also added that a company board’s role in setting human capital management standards should include incentives and compensation, retention and development, fair labour practices and pay equality.

It said that an effective board consists of directors with a diverse mix of skills, experience, expertise and perspectives. In line with these beliefs, the report provides guidelines on board composition, board structure and roles and responsibilities.

The report establishes a framework for CalSTRS’ proxy voting activities.

The pensions board said that in addition to proxy voting’s importance as a fiduciary duty, it also believes that proxy voting is an important shareholder right that should be exercised consistently in the best interests of its beneficiaries.

The report said: “Transparency and disclosure are the underlying tenets of all the CalSTRS Corporate Governance Principles and therefore we think it is important to describe the process for engaging the companies in which CalSTRS invests.”

On the same day the report was published the pensions board held a panel discussion on diversity, equity and inclusion (DEI). At the panel, William Prezant, chair of CalSTRS investment committee, asked Brian Bartow, CalSTRS’ general counsel, to draft a memo on how consideration of DEI aligns with the board’s fiduciary duty, Pensions and Investments reports.

Prezant said: “We live in a society today that is fairly divisive. When we talk about these issues there is one side of the world that says, ‘Oh my God, this is woke.’”

Last Updated: 19 January 2024