Once a year, every public corporation holds a shareholder meeting. Shareholders and senior management make critical decisions shaping each company’s governance—decisions such as who will serve on the board of directors, how senior executives will be paid and what general policies the shareholders will recommend to the company’s board. The Key Votes Survey is a record of how investment managers, mutual funds and proxy voting consultants voted the shares they manage on behalf of pension funds on key issues at these meetings during the proxy season.
The AFL-CIO’s Key Votes Survey is designed to help pension fund trustees fulfill their fiduciary duty to monitor the proxy voting performance of investment managers. Good corporate governance matters to shareholders, and proxy voting is the most direct means for shareholders to exercise oversight in relation to the corporations they own.
In 1988, the U.S. Department of Labor advised pension fund trustees that under the Employee Retirement Income Security Act, the voting rights attached to company stock are “plan assets” that must be managed according to ERISA fiduciary standards. The Department of Labor requires investment managers to “maintain accurate records as to proxy voting” and permit trustees to “review the actions taken in individual proxy voting situations.”
Pension funds generally delegate the authority to vote their shares to investment managers, mutual funds or a specialized proxy voting consultant. Because proxies are a plan asset, ensuring they are voted in the interests of beneficiaries is part of a trustee’s fiduciary duty. The Key Votes Survey is intended to help trustees fulfill this duty by reviewing the voting records of these investment managers, mutual funds and proxy voting consultants.
The proposals included in the Key Votes Survey are submitted by Taft-Hartley, union and public employee pension funds, as well as employee shareholders and other investors, and are consistent with the AFL-CIO Proxy Voting Guidelines. These proposals represent a worker-owner view of value that emphasizes management accountability and good corporate governance. A score representing the percentage of support, and corresponding tier group categorization, are assigned to each firm to assist trustees in evaluating the relative proxy voting performance of competing investment managers.