Institutional investor coalition announces corporate governance framework

Initial members of the stewardship group control $17 trillion in assets

A group of asset owners and money managers representing $17 trillion in assets released Tuesday a framework of guiding principles for U.S. corporate governance and investment stewardship.

Investor Stewardship Group members want principles for U.S.-listed companies to include giving shareholders voting rights “in proportion to their economic interest”; being “responsive to shareholders and (being) proactive in order to understand their perspectives”; and developing “management incentive structures that are aligned with the long-term strategy of the company.”

Under the shareholder voting rights principle, ISG adds: “Companies should adopt a one-share, one-vote standard” and “boards of companies that already have dual or multiple class share structures are expected to review these structures on a regular basis or as company circumstances change, and establish mechanisms to end or phase out controlling structures at the appropriate time, while minimizing costs to shareholders.”

The principles for institutional asset owners and money managers include disclosing how potential conflicts of interest in their proxy voting and engagement activities are managed; being responsible for proxy-voting decisions and monitoring third-party advisers; and demonstrating how corporate governance factors are evaluated in their investment decision-making.

“In markets around the world, there are well-established governance and stewardship codes. The Investor Stewardship Group's goal is to codify the fundamentals of good corporate governance and establish baseline expectations for U.S. corporations and their institutional shareholders,” said Anne Sheehan, director of corporate governance at the $196.4 billion California State Teachers' Retirement System, West Sacramento, in a news release. “The group brings all types of investors together and enables us to speak with one voice on these fundamental issues.”

Along with CalSTRS, Investor Stewardship Group members are the $300 billion GIC, Singapore; $178.7 billion Florida State Board of Administration, Tallahassee; and $111.8 billion Washington State Investment Board, Olympia; and money managers BlackRock (BLK), Vanguard Group, Legal & General Investment Management America, MFS Investment Management, MN; PGGM, RBC Global Asset Management, State Street Global Advisors, TIAA Investments, T. Rowe Price Associates (TROW), ValueAct Capital and Wellington Management.

A copy of the framework is available on the Investor Stewardship Group's website.

The framework is expected to be reviewed periodically and does not replace any federal or state laws or regulations, or listing rules for companies or institutional investors. It goes into effect for signatories on Jan. 1, 2018.