State Fiduciaries, Check Your Proxy Votes:
Did your state’s pension fund or endowment vote with Visa’s management — alongside 92% of shareholders — on a recent controversial proposal? If you’re not sure, it’s time to find out. This past proxy season, Oklahoma’s Tobacco Settlement Endowment Trust (TSET), led by State Treasurer Todd Russ, filed a shareholder resolution at Visa. The proposal asked Visa’s board to report on how it monitors and prevents illicit content abuse on its payment network (an emerging risk with legal and reputational implications). In an environment where conservative-sponsored proposals typically get minimal support (roughly 2% on average), Oklahoma’s measure earned about 8% of the vote – a modest slice, but above the SEC’s 5% threshold to be eligible for resubmission. In plain terms, that 8% yes reflected a breakthrough for this kind of initiative, while the remaining 92% of shares voted “no” (largely following management’s lead). If your fund wasn’t actively involved, there’s a very good chance it ended up in that 92% by default, effectively opposing a proposal aimed at strengthening risk oversight. Meanwhile, a similar Mastercard proposal from TSET is in the pipeline for an upcoming vote, giving fiduciaries a second chance to pay attention.
What Happened and Why It Matters:
Oklahoma’s approach flips the script on how public investors address politicized corporate behavior. Instead of divesting or just complaining, TSET used its shareholder rights to put an issue on the ballot – in this case, urging Visa (and soon Mastercard) to stay vigilant and neutral on a sensitive operational risk. Visa’s board opposed the recommendation, insisting current policies were sufficient. Most institutional investors sided with management, and the proposal did not pass. However, the fact it garnered notable support by first-year standards sends a clear signal: a faction of investors, albeit a minority, wants companies to focus on core business and avoid exposures that could hurt shareholder value. For fiduciaries at state funds, especially in red states, the Visa vote is a blunt reminder that proxy votes are not just paperwork – they’re an expression of your fund’s oversight. If you’re delegating votes to outside managers or proxy advisors without guidance, you may inadvertently be endorsing positions that clash with your fund’s mandate of maximizing beneficiaries’ returns and minimizing undue risk. In short, passivity in proxy voting can translate into missed opportunities to protect your stakeholders’ interests.
Leadership Actions for Public Fund Fiduciaries:
It’s time for state financial officers and trustees to reclaim the driver’s seat on proxy voting and corporate engagement. Here are three steps to consider now:
- Audit Your 2025 Votes: Review how your fund’s shares were voted on key 2025 proposals, starting with Visa. Were your votes consistent with your fiduciary principles and long-term financial goals? Any surprises or misalignments (like unintentionally voting against a risk-reducing proposal)? Identifying these is the first step.
- Reassert Your Voting Authority: If you find that your proxies defaulted to policies contrary to your intent, take back control. Update or switch to proxy voting guidelines that put fiduciary-first principles front and center – emphasizing shareholder value, prudent risk management, and political neutrality over any ESG-driven or management-deferential biases. You might also consider engaging a specialized proxy voting subadvisor service that aligns with your fund’s objectives. Such experts can execute votes according to a framework you approve, ensuring you’re not rubber-stamping corporate management or external agendas by accident. The goal is to have every vote your fund casts truly reflect what you believe will best protect and grow your beneficiaries’ assets.
- Proactive Engagement (Lead, Don’t Lag): Don’t hesitate to set the agenda. If there are material risks or governance issues that aren’t being addressed, file your own shareholder proposals or press companies directly. Oklahoma’s TSET took the initiative to raise issues it felt were overlooked – other state funds can do the same. By sponsoring proposals or simply speaking up to corporate boards, you exercise ownership and influence. This doesn’t mean picking unnecessary fights; it means ensuring companies understand that a significant investor – your fund – expects them to focus on profitability and steer clear of avoidable controversies. Even the act of raising a concern can prompt constructive dialogue or incremental changes, as companies often prefer to address issues privately before they escalate to public votes. In any case, leading on engagement shows your beneficiaries that you’re actively safeguarding their interests, rather than passively letting others dictate the terms.
The Bottom Line & Call to Action:
The Oklahoma TSET engagements at Visa (and soon Mastercard) spotlight a crucial truth: if you’re not actively managing your proxy votes, you may be undermining your own mission. No one cares more about your pensioners’ and beneficiaries’ financial security than you do, so it’s vital to align every tool at your disposal – including proxy voting – with that mission. The 8% support at Visa was a small step forward in nudging a company toward better risk oversight. With more informed participation from state fiduciaries, that support can grow, and companies will be more inclined to avoid divisive or risky side ventures in the first place. By auditing your votes, strengthening your voting policies, and taking a leadership role in shareholder engagement, you help de-politicize corporate governance and refocus companies on what really matters: delivering stable, long-term returns.
For those ready to act, consider conducting a proxy voting audit and updating your engagement strategy as priority items. Prospr Aligned stands ready to assist in this effort – from reviewing your fund’s past votes and policies to helping craft a forward-looking plan that aligns with your fiduciary responsibilities. In today’s complex environment, proactive stewardship isn’t just advisable; it’s part of the duty. The good news is, by stepping up now, you can ensure your fund’s voice is heard loud and clear in the boardroom, championing prudent management and value creation for those you serve.