The near-collapse of our economy has spurred proposals for much-needed increases in regulation of our financial markets. Shareholder activism is an even more powerful -- though greatly under-utilized-- tool to improve corporate behavior and prevent future economic troubles. As General Treasurer, Gina will exert the state's leverage as a major shareholder to address corporate misbehavior -- particularly those companies that unduly enrich insiders, or favor short-term interests at the expense of long-term returns for our state's investments.
Examples of corporate misbehavior are numerous and varied, but a common theme has been the enrichment of corporate executives by taking short-term risks that endangered long-term shareholder value. In many cases, corporate boards of directors offered only a "rubber stamp" of proposed executive pay or other board decisions and, in some cases, rewarded bad management with extraordinary exit packages. State pension funds like ours in Rhode Island are major shareholders in many of the largest companies in the world, which creates a unique ability to demand accountability and ethical behavior. Shareholder activism is an important tool that has been largely under-utilized across the country.
In her career as an investor and board member of many privately-held companies, Gina has held her leadership teams accountable for their results. She is not afraid to take a stand on issues that matter. She would bring this same value to her role as chief investment officer for the state of Rhode Island with a renewed focus on improving corporate behavior and ensuring long-term results for the state's retirement system. As General Treasurer, Gina's priorities will include:
Ensuring Accountability for Proxy Voting
Gina will develop agreements with money managers for the retirement system that put conditions on shareholder voting and avoid "rubber stamping" of corporate board decision-making. Gina also will explore investing with managers who use an "activist" model, utilizing toehold" investments that are contingent on a slate of specific proposals related to company ethics and practices. These proposals would improve shareholder returns and once the proposals are met, only then would the "toehold" investment be expanded.
Intervening Directly, When Necessary
Gina will work, in concert with other state pension funds or alone, to intervene directly in corporate shareholder elections when warranted. Specifically, she will work to influence corporations in situations where there is strong evidence indicating that reforms will increase shareholder value. This intervention will require specific actions of companies in which the state invests heavily. She will incentivize companies that adhere to specific recommendations or achieve certain performance indicators, and explore potential to request board positions for key investments in order to oversee the company and the state's investment.