Item
4 –6: Shareholder Proposal
Requesting that the Board Oversee a Racial Equity Audit
The Board of Directors unanimously recommends that you vote
AGAINST
this proposal (Item 46 on your proxy card)
The Board of Directors recommends that shareholders vote AGAINST the shareholder proposal described below. Unless contrary instructions are given, shares represented by proxies solicited by the Board will be voted against the shareholder proposal.
Service Employees International Union Pension Plans Master Trust,James McRitchie of 1800 Massachusetts Ave NW, Suite 301, Washington DC, 20036,9295 Yorkship Court, Elk Grove, CA 95758, the beneficial owner of more than $2,000 of State Street’s common stock, is entitled to vote on the proposal at the meeting, has submitted the proposal as set forth below for inclusion in the proxy statement. The Board of Directors, on behalf of State Street, disclaims any responsibility for the content of the proposal and the supporting statement. The text of the proposal and supporting statement, as furnished to us by the proponent, are as follows:
RESOLVED that shareholdersProposal 6 – Report on Stewardship Practices and Diversified Investors
RESOLVED: Shareholders request the board of State Street Corp. (“State Street”) urge the Board of Directors to overseeCorporation (Company) commission and disclose a racial equity audit analyzing State Street’sreport on:
1.
| 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, |
2.
| Whether Company stewardship practices could better account for this conflict, and |
3.
| 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 nonwhite stakeholders and communities of color. Input from civil rights organizations, employees, and clients should be considered in determining the specific matters to be analyzed. A report on the audit, prepared at reasonable cost and omitting confidential and proprietary information, should be publicly disclosed on State Street’s website.Company actions, including limitations imposed by fiduciary duty.
SUPPORTING STATEMENT
High-profile police killingsOur Company manages $4 trillion of black people - most recently George Floyd –client assets. Many clients or beneficiaries are workers saving for retirement. Most clients and savers likely have galvanizeddiversified portfolios in line with modern investing principles.
Company stewardship policies do not account for diversification. Policies ignore the movement for racial justice. That movement, together withconflict between the disproportionate impactsinterests 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 COVID-19 pandemic, have focusedoverall economy.1 This creates a conflict whenever executives must choose between maximizing their own company’s value or preserving the attentionbroader 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 media,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 and policy, makers on systemic racism, racialized violence and inequities in employment, health care, andshould address this conflict by stewarding companies away from practices that degrade the criminal justice system.
State Street CEO Ronald O’Hanley responded to these events by avowing that State Street “stand[s] with the countless thousands” who “are committed to ending the violence and bigotry that degrades our common humanity.” O’Hanley stated that “we need to begin to answer the ‘what must we do’ question by focusing on our firm and how we make it better.”(1)
Currently, State Street’s board has no black directors(2) and none of the company’s Executive Leaders are black.(3) In 2017, State Street paid $5 million in back pay to settle Department of Labor charges, based on a pay equity analysis, thatglobal commons, even when those practices profit the company paid top female and black workers less than top male and white workers.(4)
State Street has notified portfolio companies that it expects them to “articulate their risks, goals and strategy as related to racial and ethnic diversity,” including workforce diversity data, starting in 2021. The company indicated that it is “prepared to use [its] proxy voting authority to hold companies accountable for meeting [its] expectations.”(5) A 2020 report suggests that proxy voting would be a useful subject for a racial equity analysis: It noted that State Street’s proxy voting guidelines contain no explicit mention of race, referring generally to “board diversity,” and found that State Street often did not use its clout as a significant owner to advance racial justice. State Street supported all directors at 60% of companies with all-white boards and backed two directors with problematic histories regarding racial issues.
State Street is a member of the Securities Industry Financial Markets Association (“SIFMA”).(6) SIFMA lobbied most frequently in the current Congress on the Wall Street Tax Act of 2019, which would tax financial transactions.(7) Supporters argue that the revenue raised through the tax could fund measures such as student loan forgiveness and the Green New Deal,(8) which would mitigate impacts of systemic racism.(9)
We urge State Street to address the “what must we do” question by evaluating its behavior through a racial equity lens to identify how it contributes to systemic racism and could begin to help dismantle it.