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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: |
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| In 2012, the WSIB: |
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Voted 3,506 proxies.
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Cast votes on 30,098 individual proxy proposals dealing primarily with the election of directors, ratification of auditor,
compensation plans and shareowner proposals. |
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Withheld votes from 4,239 of the 20,505 directors seeking re-election, or 14 percent of the total votes. The primary reason for
withholding its vote 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. |
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Voted against 241 of the 822 proposed executive compensation packages last year, or about 30 percent of the salary proposals. The
WSIB voted against 352 compensation committee members for paying excessive compensation and failing to align executive pay with the company's performance. |
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In 2012, of the 2,414 management proposals regarding an advisory vote on executive compensation ("Say on Pay"), the WSIB voted against
416. With proposals regarding the frequency of advisory votes on executive compensation ("Say When on Pay"), the WSIB almost always voted for a 1-year frequency. |
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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 two years ago, there have been numerous occasions when company
executives have revised their proposed compensation plans before the vote after critical reactions from shareholders.
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The WSIB believes an important tool for improving a company's performance is the annual election of directors. This issue generated the second-largest number of governance-related
proposals on the ballot in 2012. Of the 122 proposals before the WSIB, all of which it supported, 71 -or more than half- were proposed by management. According to the proxy
voting advisory service, Glass Lewis & Co., "It appears that both companies and investors have begun to widely accept a declassified board structure due to its high correlation
with shareholder value."
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. Ensuring that executive pay is tied to performance
continues to be a top governance priority for the WSIB. |
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