State Street Corporation | Asset management policies and diversified investors

Status
7.74% votes in favour
AGM date
Previous AGM date
Proposal number
6
Resolution details
Company ticker
ZYA
Lead filer
CorpGov.net
Resolution ask
Report on or disclose
ESG theme
  • Governance
ESG sub-theme
  • Anti-corruption
Type of vote
Shareholder proposal
Filer type
Shareholder
Company sector
Financials
Company HQ country
United States
Resolved clause
Resolved: Shareholders request the board of State Street Corporation (Company) commission and disclose a report on:
- Conflict of interest between executives of portfolio corporations and Company clients, whose investments could benefit from reductions in the social and environmental costs those corporations externalize,
- Whether Company stewardship practices could better account for this conflict, and
- Actions the Company could take to address this conflict including:
a. Assessing systemic impacts on diversified portfolios; b. Soliciting input from clients; c. Initiatives to modify executive incentives; and d. Adopting voting policies that account for portfolio impacts of externalized costs.

The report should account for legal limitations on Company actions, including limitations imposed by fiduciary duty.
Supporting statement
Supporting Statement:
Our Company manages $4 trillion of client assets. Many clients or beneficiaries are workers saving for retirement. Most clients and savers likely have diversified portfolios in line with modern investing principles.
Company stewardship policies do not account for diversification. Policies ignore the conflict between the interests of corporate executives and diversified investors. Executives are incentivized to maximize the financial returns of their own company. Diversified investors are best served by preserving healthy social and environmental systems that support all their investments because diversified portfolio returns directly correlate to the value of the overall economy.1 This creates a conflict whenever executives must choose between maximizing their own company’s value or preserving the broader economy.
These conflicts frequently arise because companies can increase their profits through social and environmental practices that burden the economy, such as emitting too much carbon, poorly managing data, and violating human rights instead of offering good-paying jobs. While these decisions may increase a company’s cash flow, they burden the economy, threatening the diversified portfolios of ordinary workers, institutional investors, and other savers the Company serves.
Company stewardship activities, such as engaging with portfolio companies, voting proxies, and advocating for public policy, should address this conflict by stewarding companies away from practices that degrade the global commons, even when those practices profit the company in question.
Instead, the Company appears to follow a “share primacy” model and only stewards portfolio companies to improve social and environmental practices if doing so directly improves their financial performance.2 As a result, the Company is not protecting its clients from corporate practices that threaten both their investment portfolios and critical environmental and social systems.
The requested report would help determine whether and how clients would benefit from more systems-oriented stewardship.
1 https://www.unepfi.org/fileadmin/documents/universal_ownership_full.pdf; https://archive.fortune.com/magazines/fortune/fortune_archive/2001/12/10/314691/index.htm (total market capitalization to GDP “is probably the best single measure of where valuations stand at any given moment”) (quoting Warren Buffet)
2 https://www.ssga.com/library-content/pdfs/ic/global-Proxy-Voting-and-engagement-guidelines-es-issues.pdf

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