Reflecting on my Experience on the Blyth Fund got me thinking about the 6,000 plus university-based student-run investment funds in the U.S. Many are moving away from pure stock-picking to consider sustainability and social issues. What if they also started looking at corporate governance and began introducing shareowner proposals on declassified boards, majority voting requirements and/or proxy access?
Chris Suzdak’s musings about his experience as a director on the Blyth Fund at Occidental College are instructive. They’ve recently added a Socially Responsible Investment Chair position, “charged with informing the other Directors about the social and environmental track records of our current holdings as well as any other companies being considered.” Suzdak also recounts how he presented on “shareholder activism” during a recent meeting and the idea “that we can use our shares’ voting rights to help shape corporate policies” by connecting “through online social networks such as the United States Proxy Exchange” putting “pressure” on boards of directors.
Law students at the Harvard Law School Shareholder Rights Project (SRP) are earning credits by providing advice and representation, on a pro bono basis, to public pension funds and charitable foundations seeking to improve corporate governance. They report that of “forty-two S&P 500 companies receiving proposals – about one-third of the S&P 500 companies that had a staggered board at the beginning of this proxy season – have already entered into agreements committing them to bring management proposals to declassify their boards.”
Of course, their coordination with Florida SBA, the Illinois State Board of Investment, the Los Angeles County Employees Retirement Association, the Massachusetts Pension Reserves Investment Management Board, the Nathan Cummings Foundation, the North Carolina State Treasurer, and the Ohio Public Employees Retirement System gives the Project extra clout, as does being housed at Harvard. However, there is no reason why many of the more than 6,000 student run funds can’t start closely examining how they vote and then take it a step further by introducing proxy proposals at companies in their portfolios. SharkRepellant reports that John Chevedden and Kenneth Steiner sponsored more than 100 proposals last year; imagine how prolific a few student funds could be.
My mentor, Bob Monks, has been pushing university endowments for years with programs like the Sustainable Endowments Institute (GreenReportCard.org). See his The Appearance of Reality: Trustees and To Harvard With Love, a letter that Bob wrote to Larry Summer, who was then president of Bob’s alma mater:
Harvard has become an “owner” of virtually all of those enterprises whose collective functioning impacts life on earth perhaps more than any other institutions. The question is the extent of Harvard’s responsibility as owner. What is Harvard doing now? Does she ensure optimum value? What should she do in the future?
I was long enthralled with the idea of universal owners and the role institutional investors, especially public pensions like CalPERS could have on corporate governance and accountability. There is no denying their importance but more lately I’ve come to believe that much boils down to the motivations and initiatives of individuals. Thinking we need a transformation among individual shareowners and individual fund participants, I’ve been more involved in channeling people to research voting guidelines and meeting dates at FundVotes, research how respected funds and advocates have voted at Proxy Democracy and MoxyVote and in persuading them to vote their proxies on Moxy Vote’s proxy voting platform
Student run funds could be another key group. If students can be convinced that corporate governance matters, they can not only have a direct impact, they can carry on what they learn in into later life as activist investors who know the importance of governance. I feel myself turning to students in ways very similar to my good friend Mark Latham at Votermedia.org. Hook them for life when they are young and they will plant the seeds of transformation.
Seal of the United States Proxy Exchange
While student funds can’t join the US Proxy Exchange (USPX) as organizations, USPX is open to individuals. Student directors of investment funds would be hard pressed to find a group more willing to advise and to work together. For $50 members join a community of investors who have filed hundreds of resolutions. Fighting the Good Fight: Overcoming Rejections and Objections with Shareholder Proposals, as Craig McGuire recently noted at theShareholderActivist.com can be tough if you are going it alone.
So, to students directing funds, consider filing your own proxy resolutions next year. For help with that, turn to the US Proxy Exchange (USPX). Together we can take the next significant step in shareowner activism.