In Boardroom Fights, Pension Funds Side With Their Peers

Analysis of pension fund voting habits shows they are more likely to support other pensions — and vote against the recommendations of proxy advisory firms.

(Illustration by II)

(Illustration by II)

A public pension fund that files a shareholder resolution is likely to find support from its fellow pensions, according to a new study of retirement funds’ proxy voting habits.

An analysis of votes cast by public pensions and mutual funds between 2009 and 2015 showed that pension funds were more inclined to side with other shareholders — especially proposals filed by other public pensions.

Pension funds were 36.2 percent more likely than mutual funds to vote in favor of shareholder proposals, and 7.1 percent less likely to vote for management proposals, according to finance and accounting professors Ying Duan, Yawen Jiao, and Kinsun Tam.

“They are most supportive of shareholder proposals submitted by other public pension funds, followed by those submitted by labor unions,” the authors added.

The study included 48 U.S. public funds, ranging from vocal activists like the California Public Employees’ Retirement System to “smaller funds that rarely receive any publicity for firm engagement or filing shareholder proposals,” but actively participate in proxy votes all the same.

Beyond being more prone to support other shareholders, pension funds were also likelier to vote against recommendations made by proxy advisory firms. According to the study, only two of the 48 funds — the Orange County Employees Retirement System an Oregon Public Employees Retirement System — always followed the guidance issued by their proxy firms.

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“While CalPERS often draws media attention for its independent proxy voting decisions deviating from proxy advisories’ recommendations, 31 out of the remaining 47 funds in our sample have even lower rates of voting consistently with the recommendations of ISS,” the authors wrote.

Given their large ownership stakes in public companies, pension funds were “important to the voting outcomes of both management and shareholder proposals.” According to the study, shareholder proposals were 5.9 percent likelier to pass with pension fund support — and 8.7 percent likelier to pass if the vote was close.

For management proposals, meanwhile, the likelihood of passing went up 1 percent with pension fund backing, or 7.2 percent for narrower contests.