June 10, 2019

Trustees and Fiduciaries,

This is the heart of shareholder season. Companies across your investment portfolio are hosting their annual general meetings. Your fund staff or your asset managers are voting their proxies.

Trustees United wants to remind you that there are shareholder resolutions at many companies addressing the issue of sexual harassment and misconduct as an investment risk.

We know that your staff and managers need to do their due diligence on each company and vote on each resolution according to the fiduciary interests of the funds.

In that context, we strongly encourage you to ask those who vote your proxies to consider the Trustees United principles as they vote on these resolutions!

Major market companies in retail, transportation, commercial real estate, hospitality, technology and other critical sectors of the economy have resolutions related to company policies and board accountability on their proxy statements regarding sexual harassment as a risk.

Companies who manage these risks proactively and based on principles like those proposed by Trustees United will be much better positioned to ensure their workplaces are safe for their workers and to protect investors from the downside impact of potential misconduct.

Companies present real risk to investors when they impose non-disclosure and forced arbitration agreements, refuse to disclose information about settlements, ignore the value of diversity and reject workers’ legitimate rights to protection and organization on the job.

You can help safeguard your plan's retirement assets by ensuring workers are protected.

FOR IMMEDIATE RELEASE – January 14, 2019

Contact: Krista Noonan/Michelle Mussuto
CalSTRS Newsroom
Newsroom@calstrs.com
Ph: (916) 414-1440

Institutional Investor Trustees Representing $635 Billion in Assets Launch Principles Addressing Sexual Harassment and Workplace Misconduct

Principles focus on promoting long-term value creation by advancing safe corporate cultures.

January 14, 2019 – A coalition of trustees from long-term institutional investors, with combined assets of more than $635 billion, has come together to create and promote the Trustees United Principles. These principles seek to ensure portfolio companies are working toward providing safe workplace cultures and environments that are free of sexual harassment, violence and misconduct. The principles also proactively focus on human capital management strategies by attempting to mitigate and reduce future risks, which is a priority for institutional investors operating with a focus on long-term value creation.

As fiduciaries, the trustees involved in this effort recognize that the recent wave of sexual harassment and misconduct incidents could leave companies open to significant operational, financial and reputational risks. If left unmonitored, these risks have the potential to manifest in many unpredictable ways.

“Speaking on behalf of the trustees, we have a fiduciary obligation to our beneficiaries to take responsible actions to engage, monitor and mitigate human capital management risks accordingly,” said Priya Mathur, CalPERS Board President. “This is a joint assertion by all of the involved signatories that investors and trustees alike have a stake in promoting meaningful progress in reducing incidents of sexual harassment, violence and misconduct by providing safe, supportive, and thriving workplaces.”

CalSTRS Board Vice-Chair Sharon Hendricks added: “From my perspective in representing the trustees for the world’s largest educator pension fund, our concern is not only about the immediate fall in company value. Less visible, but no less real, are the opportunities to create long-term value that have been missed because of the adverse impact sexual harassment and misconduct have on corporate culture and human capital management practices. These principles are meant to act as a catalyst to stimulate productive conversations and ongoing engagement. Working together, we can build and leverage solid relationships as we make progress toward mitigating risks and promoting positive change in companies across our investment portfolios and beyond.”

Signatories currently include trustees from: the California Public Employees Retirement System (CalPERS); the California State Teachers’ Retirement System (CalSTRS); the Los Angeles City Employees’ Retirement System (LACERS); and the Los Angeles County Employees’ Retirement Association (LACERA).

Institutional investors involved in this effort are diligently focused on proactive corporate governance engagement strategies that address issues like gender, racial and ethnic diversity across portfolio companies, starting with their staff and advancing to their C-Suite leadership and the composition of their board of directors. Investors are also focused on transparency and disclosure of how portfolio companies are mitigating human capital management risks in their long-term operational strategies.

The Trustees United principles include:

  • "Principle 1: Corporations must ensure a work environment free of sexual harassment and violence. Boards must support the right of employees, both individually and collectively, to safely bring forward claims of sexual harassment and violence. Company directors should publicly share due diligence processes used to respond to sexual harassment and violence complaints filed by all employees, including contingent, temporary, and subcontracted workers."
  • "Principle 2: The use of non-disclosure agreements and forced arbitration policies reinforce the silence that perpetuates harassment. Transparency in reporting sexual harassment and misconduct settlement costs to investors can help change corporate culture and limit the potential for significant exposure to financial and reputational risk."
  • "Principle 3: Companies must prioritize diversity at all levels, including the board of directors and C-suite, to take advantage of the opportunities diversity affords and to be more attuned to the risks associated with harassment, misconduct and discrimination. Diverse boards which reflect the racial and gender composition of a company’s workforce can help to create organizational cultures that prevent sexual harassment and related risks from materializing."
  • "Principle 4: Policies and agreements, such as collective bargaining agreements and responsible contractor policies, that protect workers’ rights provide mechanisms for risk mitigation by addressing power imbalances that often facilitate abuse, harassment and discrimination and by providing clear mechanisms for redress when incidents occur."

The above principles strive to compliment the following board-approved Investments and Corporate Governance principles/policies at each organization, respectively: CalPERS Governance and Sustainability Principles; CalSTRS Corporate Governance Principles; LACERA Investment Policy; and LACERS Investment Policy.

Trustees, institutional investors and asset owners that share a similar risk viewpoint surrounding human capital management concepts, including mitigating risks of sexual harassment and workplace misconduct, are invited to visit www.TrusteesUnited.com for more information on submitting their interest to become a signatory and demonstrate their support for these principles.