Investor fiduciaries have known for decades that proxy voting must be managed in accordance with fiduciary duties. Both the Department of Labor and Securities and Exchange Commission have issued guidance in the past few years reconfirming proxy votes are rights that must be exercised as part of the investment management process consistent with the interests of pension plan members or fund investors. Even when named fiduciaries delegate proxy voting responsibilities, fiduciaries have an ongoing responsibility to monitor voting practices.
However, as noted by the DOL in a December 2016 interpretive bulletin, domestic and international trends and market developments are changing the facts and circumstances that must be considered when voting proxies. The pace of change has only accelerated since 2016.
Proxy voting and company engagement practices are moving from a mere compliance issue to an integral component of investment and risk management. The old "set it and forget it" approach, which relies on off-the-shelf proxy voting processes, has become a risky practice. Fiduciaries are well advised to re-evaluate how their legal obligations relate to use of proxy voting in this changing environment.