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In order to maximize investment returns for its beneficiaries, the Washington State Investment Board believes it is important to look not only at the way a company performs, but also the manner in which its directors carry out their corporate duties and responsibilities.

There is growing evidence that supports the theory that investing in companies with sound corporate governance programs and practices makes good economic sense and that good corporate governance fosters long-term profitability.

As one of the country's largest institutional investors, the WSIB uses the proxy voting ballot to influence greater board transparency, integrity and accountability.
Proxy Voting Report:
Proxy Voting Policy
In 2016, the WSIB:
Voted 3,110 proxies.
Cast votes on 27,284 individual proxy proposals dealing primarily with the election of directors, ratification of auditor, compensation plans and shareholder proposals.
Withheld votes from 1,663 of the 18,046 directors seeking re-election, or about 9 percent of the total votes. The primary reason for withholding its votes from incumbent directors was lack of independence on the board, related party transactions, and excessive compensation packages that suggest the board was not always fulfilling its fiduciary duties.
Voted against 129 of the 768 proposed executive compensation packages, or about 16 percent of the salary proposals. The WSIB voted against 160 compensation committee members for paying excessive compensation and failing to align executive pay with the company’s performance.
In 2016, of the 2,068 management proposals regarding an advisory vote on executive compensation (“Say on Pay”), the WSIB voted against 378, or about 18 percent of the proposals. With proposals regarding the frequency of advisory votes on executive compensation (“Say When on Pay”), the WSIB supported a 1-year frequency a majority of the time.
Even though the votes are merely advisory, most corporate governance advocates believe this type of public scrutiny makes board members reluctant to put forth an excessive pay package and risk having it voted down. Since the new requirement went into effect in 2010, there have been numerous occasions when company executives have revised their proposed compensation plans before the vote after critical reactions from shareholders.
In addition to voting against directors for failing to act in the best interest of shareholders or against excessive compensation plans, the WSIB also supports shareholder proposals that are designed to increase or protect shareholder value and/or promote and protect shareholder rights.

In 2014 the Board added a new proxy voting guideline stating the WSIB would support shareholder proposals seeking greater disclosure of a company’s practices that address environmental issues and risks. This would include disclosure of actual and potential liabilities and contingency plans that respond to potential risks posed by climate change.

The Board adopted a revised version of the WSIB’s Global Proxy Voting Guidelines that took effect in 2016, which added several new sections dealing with subjects like proxy access, specific compensation issues, reporting on greenhouse gas emissions and shareholder unfriendly bylaw amendments.

Submission of shareholder proposals remained relatively high in 2016 – with about 890 proposals submitted for meetings through June 30. The sustained high level of proposals is largely driven by the campaign for proxy access, which would allow shareholders to submit candidates for election to the Board of Directors, and a continued push for increased transparency and accountability around environmental sustainability practices.

The Securities and Exchange Commission (SEC) estimates that more than 600 billion shares are voted every year at more than 13,000 shareholder meetings. The proxy vote is a fundamental right tied to owning stock. Pursuant to guidelines from the U.S. Department of Labor, the WSIB’s fiduciary responsibility requires proxies to be voted in the best interest of fund participants and beneficiaries.

As a long-term investor, the WSIB believes the proxy ballot is the best tool for communicating its approval or displeasure with the way a company is being managed. The proxy is an asset of the WSIB and, as with all assets of the Board, must be managed prudently for the exclusive benefit of the beneficiaries.
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