Via proxy votes and direct engagement, Oregon public funds are pressuring companies like Wells Fargo to be more accountable to shareholders
Oregon State Treasurer Tobias Read announced that Oregon trust funds cast proxy ballots in opposition to six Wells Fargo & Co. board members at the corporation’s annual shareholder meeting last month.
The votes are part of Oregon’s comprehensive efforts to enhance long-term shareholder value by improving corporate responsibility and governance practices. Through its public trust fund investments, Oregon is a large institutional investor that manages a global common stock portfolio in excess of $30 billion on behalf of pension and other state fund beneficiaries.
“As investors, we have the right and responsibility to ensure that companies are doing business the right way, on behalf of shareholders and for the long-term best interests of the companies themselves,” Treasurer Read said. “Shareholders choose board members to help protect their investments and the lack of oversight by the Wells Fargo board hurt investors and the public.”
Wells Fargo is under intense scrutiny after bank employees opened millions of fraudulent customer accounts to boost fees and increase company profits.
The Wells Fargo votes are one example of Oregon’s leadership on corporate governance. The Oregon Public Employees Retirement Fund (OPERF) casts thousands of proxy votes annually on board elections and shareholder resolutions.
Treasury collaborates with other significant shareholders to enhance long-term corporate profitability by improving financial reporting transparency and shareholder voting rights. Creating more diverse and balanced boards of directors and connecting executive pay to actual performance are two other important areas of emphasis for Oregon’s corporate governance initiative.
Treasurer Read is the custodian of state funds and a member of the Oregon Investment Council, which sets investment policies for Treasury-managed assets including OPERF. Core beliefs adopted by the Council note that proxy voting rights have economic value to shareholders and also that the quality of corporate governance efforts can affect long-term share value.
In other corporate governance steps this year, Treasury has advocated for improved shareholder protections with the U.S. Securities and Exchange Commission and the U.S. Department of Labor and has joined an institutional investor coalition urging more responsive leadership at Netflix and Snap, Inc.
After the fraudulent account abuses were disclosed in 2016, Oregon and other large shareholders urged Wells Fargo to separate the roles of board chair and CEO. Having the same person serve in both capacities reduces corporate accountability. At the request of Oregon and its shareholder peers, the company clawed back bonuses from executives who profited from the fake account scandal.
A recent independent review found that corporate board members facilitated a “decentralized structure” that enabled the scandal and should have been more attuned to protect the bank and investors from these unscrupulous executive actions.
As of December 31, 2016 the Oregon Treasury managed a portfolio worth $92.5 billion, which included the $70.5 billion Oregon Public Employees Retirement Fund. Roughly 73 cents of every dollar of contractual Oregon PERS benefits come from investment returns.
The Oregon State Treasury protects public assets, saves money, and helps Oregonians to invest in themselves and their families through empowerment programs like the Oregon 529 Savings Network and OregonSaves. Treasury oversees public investment, banking, and debt management services. State investment policies are set by the Oregon Investment Council. Treasury also promotes public outreach and education to help Oregonians learn strategies to save money and make smart financial choices.
