Question of the day
Tuesday, Mar 14, 2023 - Posted by Rich Miller
* From the synopsis of SB2152. The Senate extended its committee passage deadline to March 24th after it wasn’t approved by the Executive Committee before last Friday’s deadline…
Amends the State Universities, Downstate Teachers, and Board of Investment Articles of the Illinois Pension Code. Provides that the State Treasurer shall manage the System’s or Investment Board’s domestic and international proxy voting activity and execute required ballots on behalf of the System or Investment Board.
An amendment would repeal the law on January 1, 2027, near the end of Treasurer Michael Frerichs’ current term.
* From the State Universities Retirement System…
SURS Board Votes to Oppose SB 2152
Legislation would transfer proxy voting authority to state treasurer, compromising the ability of SURS board to protect assets from undue political influence and to fulfill fiduciary obligations to SURS membership
Champaign, IL – The State Universities Retirement System (SURS) today voted unanimously to oppose Senate Bill 2152, legislation that would transfer all proxy voting authority for SURS assets from the SURS Board of Trustees to the state treasurer.
“Funds in the SURS trust come from employee contributions, employer contributions, state contributions and investment income, noted SURS Chair John Atkinson. “Once funds are deposited into that trust, they belong to SURS members. The SURS Board of Trustees has a legal responsibility to vote proxies due to their role as fiduciaries for SURS members. The state treasurer does not serve on the SURS board and is not a fiduciary to SURS members.”
Proxy voting allows fiduciaries to analyze risk and sets principles for the way asset managers vote on their behalf at shareholder meetings. Those decisions protect the long-term value of the assets.
“Under this legislation, SURS does not have control over how the state treasurer votes SURS proxies,” added Atkinson. “We cannot tell the treasurer how to vote and we cannot hold them accountable for how they vote. It gives one statewide elected official unilateral control over the long-term value of SURS assets.”
SURS has a proxy voting policy in accordance with fiduciary duties and utilizes a provider, Glass Lewis, to execute proxy votes in accordance with that policy.
Reports of proxy votes are provided to the SURS board on a quarterly basis, posted on SURS website on a summary-level, and are available on a detailed-level under FOIA.
* I reached out to Treasurer Frerichs’ office for comment…
Voting corporate proxies sounds like the dry stuff of legal filings. But proxy voting is about ensuring that corporations create long-term value for the working families whose pensions depend on wise investments. It is too important to be left in the hands of Wall Street insiders.
Every working day, the Illinois Treasurer’s Office works with other institutional investors – union pension funds, diverse fund managers, and treasurers from other states – to hold corporate boards and managers accountable. Actions speak louder than words. The actions that my office has taken and the proxy votes we have cast are all listed on our website.
The legislation I proposed is about changing how the State of Illinois – including the state’s pension systems – vote their proxies and engage with the corporations in which we invest. At the end of the day, this bill fights for worker security and can bring about efficiency and transparency. I am an optimist, and that is why I know this is the start of a conversation, not an end.
We are off to a good start. I look forward to sharing ideas, improving transparency, and continuing our collective fight to make it easier to pay the rent, send our children to school, and secure a dignified retirement.
Frerichs has joined efforts to force Facebook to separate its CEO and board chair positions, voted against two directors at Duke Energy “for corporate governance failures related to climate change” and has joined efforts to pressure companies to “disclose the race, ethnicity and gender of their corporate board directors.” More here.
* The Question: Do you support Treasurer Frerichs’ move? Take the poll and then explain your answer in comments, please.
- Chicagonk - Tuesday, Mar 14, 23 @ 9:35 am:
No because treasurers are politicians and aren’t as concerned with investment returns as they are on scoring political points. Just look at Texas and their campaign against DEI and ESG.
- Rational Illini - Tuesday, Mar 14, 23 @ 9:41 am:
SURS has not demonstrated the rates of returns that the current Treasurer has with his management. But agree that could be political risk with future treasurers, so sunset is good.
- OneMan - Tuesday, Mar 14, 23 @ 9:50 am:
I voted no. I see it becoming a campaign tool down the road to make political points vs what is in the best interest of the funds. Could see the day when a Treasurer votes a specific way and then campaign funds start showing up from a hedge fund that benefited from the vote.
- TheInvisibleMan - Tuesday, Mar 14, 23 @ 9:50 am:
Yes.
There’s either political risk, or private for-profit risk. Either way there is risk, but one has much more accountability than the other.
I’m much less swayed by an objection of political risk, because if the people vote to be self-destructive and elect someone who has no ability to perform the job, then that has consequences. Politicians aren’t magical beings that pass through a mystical portal. They are simply a reflection of the population electing them. Being upset at the reflection in the mirror is futile, and avoids/distracts from the underlying issues of the society who did the electing.
That’s why informed voting is so important.
Yes. Consequences and all.
- RNUG - Tuesday, Mar 14, 23 @ 9:58 am:
Voted NO because the fiduciary duty is to maximize returns while minimizing risk, period. All things being equal, social justice / political goals should be secondary issues.
And the same applies to the SURS board / trustees.
This just looks like a power grab.
I will agree that SURS could probably use some investment guidance to achieve better returns. If they are not already doing so, maybe include the Treasurer on a consulting basis on investment decisions?
- Annonin' - Tuesday, Mar 14, 23 @ 10:03 am:
We voted “yes” because the Treasurer has hit a homer on other policy efforts. Proxy voting by all the public pension funds should help spur a faster trip into the zone that will show whether some corporate responsibility in our lives makes things better. Why drag it out?
- Former ILSIP - Tuesday, Mar 14, 23 @ 10:04 am:
With the amendment ending it conveniently if someone else is elected, no. This is being used as a brazen political ploy that many here decry in other states. Leave the amendment off and I could consider supporting it.
- Retired SURS Employee - Tuesday, Mar 14, 23 @ 10:07 am:
Strong No. As the former General Counsel for SURS, I fully support the position taken by the SURS Board of Trustees. The pension plan trustees must be allowed to exercise their fiduciary obligations to their members. The state treasurer does not have a fiduciary relationship to the members of SURS.
- Donnie Elgin - Tuesday, Mar 14, 23 @ 10:13 am:
Voted NO - Proxy voting and the interests of the thousands covered by these pensions is best left to the SUR’s board and the consultant that they hire. The consultant has a published policy on what to take into account when voting on proxies - it covers stock performance, executive compensation, diversity, and much more. This bill is 100 party politics giving just this treasure these duties.
https://www.glasslewis.com/voting-policies-current/
- PublicServant - Tuesday, Mar 14, 23 @ 10:18 am:
No. Retired SURS Employee is exactly right. A fiduciary duty is preferable to the potential politically motivated whims of the treasurer.
- Hello there - Tuesday, Mar 14, 23 @ 10:32 am:
Why would he pick this legislative fight? The unions are opposed to the bill–the people he claims to be worried about here.
- duck duck goose - Tuesday, Mar 14, 23 @ 10:33 am:
I didn’t vote because I have no idea or opinion. But I noticed that most of the opposition seems to be that the SURS board has a fiduciary duty while the treasurer does not. I don’t think that’s true. If the decision-making authority moves to the treasurer, wouldn’t the fiduciary duty follow with that authority?
- Dan Johnson - Tuesday, Mar 14, 23 @ 10:37 am:
Fiduciary responsibility includes long term calculations that the pension boards and their managers often exclude. It’s a fantasy to pretend that risk from climate change or low pay or hostility to labor unions from management or lack of initiative for diversity are not directly related to returns on investment. That’s the false narrative peddled by the status quo.
The Treasurer is advancing a more rigorous fiduciary standard that encompasses those other real risks.
It’s a matter of public debate and the pension boards like most of the status quo of Wall Street have been very slow to protect their investments and taxpayers who have to backstop their decisions with a far too narrow view of fiduciary responsibility.
- PublicServant - Tuesday, Mar 14, 23 @ 10:51 am:
Ostensibly, Governor Rauner had a fiduciary responsibility to act in the best interests of Illinois…we all know how that worked out. Keep it with the SURS board.
- Perrid - Tuesday, Mar 14, 23 @ 10:52 am:
I’m ambivalent. I don’t know if I trust SURS’ board anymore than the Treasurer, inherently, but I’m not too keen on the government trying to “indirectly” proscribe speech. I support all of the things mentioned that Frerichs is pushing, transparency around management and a concentration on climate change, but I’m… uneasy… with this kind of pressure from the government. I voted “no”, but it’s close to a toss up.
- thunderspirit - Tuesday, Mar 14, 23 @ 10:57 am:
No, for the same reasons as RNUG and Retired SURS Employee gave.
- benniefly2 - Tuesday, Mar 14, 23 @ 11:03 am:
“An amendment would repeal the law on January 1, 2027, near the end of Treasurer Michael Frerichs’ current term.”
And that is all I need to see. Even the leg knows it is a bad idea if they are throwing in the old ‘*only applicable if my party holds the office’ bit.
- Lurker - Tuesday, Mar 14, 23 @ 11:04 am:
I voted yes because he is tall and I just read an article that taller people are smarter.
- CLEAREYES - Tuesday, Mar 14, 23 @ 11:18 am:
Voted No - We’ve seen what happens when you inject politics into pensions…Blago, anyone? This is a power grab to further a political career. Plain and simple. Consolidating 100% of the voting power into the hands of one elected official? What could possibly go wrong…
- Jibba - Tuesday, Mar 14, 23 @ 11:43 am:
One never knows who the treasurer will be in time, and what their opinions will be about all these social issues. Could change with every term. No thanks.
- Huh? - Tuesday, Mar 14, 23 @ 11:46 am:
Voted no. Don’t see how voting for a board of directors, executive salary, or auditors has anything to do with a fiduciary duty to ensure the fiscal health of the trust fund. Unless SURS can cobble together a majority proxy, the vote is a pro forma action.
Voting a proxy has nothing to do with selecting investments.
- JS Mill - Tuesday, Mar 14, 23 @ 12:00 pm:
Voted No, here is why:
=Voted NO because the fiduciary duty is to maximize returns while minimizing risk, period. All things being equal, social justice / political goals should be secondary issues.
And the same applies to the SURS board / trustees.=
- Paris 2 - Tuesday, Mar 14, 23 @ 2:29 pm:
Absolutely NO.
No disrespect to our current Treasurer.
I would never vote to put that in the hands of
any politician.
- Huh? - Tuesday, Mar 14, 23 @ 3:18 pm:
Sheba and I just voted our proxy for Dow Chemical. This is what we voted for:
Election of 12 company directors;
Advisory resolution to approve executive compensation;
Ratification of appointment of company independent registered public accounting firm; and
Two share holder proposals.
That is what voting a proxy is for a stock holder. So unless SURS can cobble together a stock holder majority, there isn’t a lot that they can do to compel an investment to do anything.
- Huh? - Tuesday, Mar 14, 23 @ 3:26 pm:
Seriously, just how much time does the SURS board put into reading the proxy materials for all of the investments they have under their control? It is likely they delegate that to the staff and take a vote based on a staff recommendation.
Frerichs’ would probably do the same.