The Missouri State Employees' Retirement System (MOSERS) Board of Trustees voted to remove proxy voting powers from investment managers this week, a move Treasurer Scott Fitzpatrick said would protect shareholder interests.
Proxy voting allows company shareholders to weigh in on issues regarding public companies and to vote in board member elections. This power was been allowed to the asset management firms that hold stock in businesses on MOSERS' behalf, according to the Treasurer's Office. Those firms were expected to use their votes to maximize the value for the retirement system.
The board voted Thursday to remove that proxy power from asset managers and committed to drafting a new proxy voting policy that will need to be approved by the full board in the future.
Fitzpatrick, who serves on the MOSERS Board of Trustees and the Investment and Audit committees, pointed to BlackRock Inc., a multinational investment firm that holds a majority of MOSERS' U.S. equity exposure. The firm, which is also a large shareholder in Exxon Mobile, recently used its proxy votes to back three climate activists for a spot on Exxon's board, according to reporting from Reuters.
Fitzpatrick, a Republican, said those new members would likely advocate for Exxon to decrease its oil and gas production, and noted the potential financial impact to the gas juggernaut and the public as average gas prices in Missouri soar to above $4.50 a gallon. He said he viewed actions such as this, paired with policies focused on climate change and clean energy policies, as economically harmful political actions that worked against the interest of MOSERS shareholders rather than efforts to increase value for the fund.
"They're putting pressure on banks to not lend money to energy projects if they involve fossil fuels; that drives up the cost of energy, and is not in the best interest of the shareholders are representing," Fitzpatrick said in an interview with the News Tribune. "What it comes down to is they're exercising their voice on behalf of MOSERS and on behalf of other pension plans, in Missouri and across the country, as well as on behalf of retail investors in a way that a majority of the people whose money they're managing probably don't agree with. I view that as a breach of their fiduciary duty to put the financial interests and their customers first and not to answer political agenda using other people's money."
Fitzpatrick said he broached the subject Thursday during a meeting of the board, after which members considered whether to abstain from voting while an official proxy vote policy is established or to allow these firms to continue to vote on their behalf. Ultimately, members voiced their support for the former.
"Firms have shown that they will put other things in front of those financial interests. And, to me, we cannot allow that to happen," Fitzpatrick said. "We have to develop a proxy voting policy. And the reality of the situation is that, obviously, you want to vote on all these issues. But my view of it is that it would be better to have our shareholders abstain in some of these votes than allow our votes to be used, and voted and cocked to the contrary of the interests of the people under the plan."
The board is set to immediately begin working on the new policy, he said.
A spokesman for BlackRock did not immediately respond to a request for comment.
The board is made up of lawmakers, financial professionals, gubernatorial appointees and the commissioner of the Office of Administration alongside the state treasurer.
MOSERS handles retirement, long-term disability insurance and life insurance for the state's workforce.
MOSERS had nearly 46,000 active members and 67,808 inactive members in 2020, according to the latest annual report.
The state is also Jefferson City's largest employer, with around 14,000 state employees calling the area home per data from the Jefferson City Area Chamber of Commerce.