The Florida State Board of Administration's proxy-voting decisions correlated with a 9.4% increase in cumulative returns based on original value of holdings, adding $178 million in appreciation to its assets, according to a pioneering study by the board.
Chris Cernich, managing director and head of mergers and acquisitions and proxy contest research, at Institutional Shareholder Services Inc., Rockville, Md., said of the study: “I believe it is the first of a kind, where an individual fund of any sort looked at its own holdings to see ... the effect of their own vote.”
Michael P. McCauley, FSBA senior officer, investment programs and governance, said in an interview, “We are trying to place a value on the vote. The study results validate our approach, and we believe the quantitative results provide evidence of a sound analytical framework employed by SBA staff in evaluating proxy contests,” Mr. McCauley said in a follow-up e-mail.
“The study suggests that SBA proxy-voting decisions have had significant positive economic effects on portfolio value.”
The internally produced study by the Tallahassee-based FSBA examined all proxy contests from Jan. 1, 2006, through Dec. 31, 2014, at U.S.-domiciled companies with market capitalizations exceeding $100 million.
The FSBA oversees $181.4 billion in total assets, including the Florida Retirement System's $147.5 billion defined benefit plan and $8.8 billion defined contribution plan.
“We"ve always held the belief voting is important and it can impact value,” Mr. McCauley said in the interview. “It's just very hard to quantify that and ... draw the link.”
“The results of the study aren't necessarily causal,” he said. “But there is ... a clear correlation between our voting decisions and the subsequent impact on company performance” and FSBA holdings of the companies subject to proxy contests. It kind of validates our process and decision-making.”
Other major asset owners haven't done such a study of proxy-voting impact on their valuation.
New York Retirement Systems, whose combined assets total $163.4 billion, hasn't done a study of the impact of its proxy-voting decisions on its holdings and has no plans to do so, said Michael Garland, assistant comptroller for corporate governance and responsible investment.
In an e-mail, Mr. Garland wrote: “Our corporate governance initiatives are focused on finding ways to improve the long-term sustainable value of our portfolio companies. We track academic and empirical research that measures the impact of proxy voting and corporate engagement on a broad range of environmental, human capital and corporate governance practices. These studies help to inform both our voting guidelines and shareowner initiatives.”
Mr. Garland serves in the bureau of asset management in the office of Scott M. Stringer, New York City comptroller, who oversees the New York City Retirement Systems.