State Street presses companies for details on multiple directorships
By Ross Kerber
BOSTON, March 28 (Reuters) - State Street is spelling out criteria its portfolio companies must use to explain their directors' service on multiple boards, the asset manager's top stewardship executive said in an interview.
Director service on too many boards, known as "overboarding" has drawn scrutiny from many investors and helped drive down the share of board members of Russell 3000 index companies who serve on more than one board to 17.2% at the end of 2023 from 19% in 2018, according to researcher Equilar.
With $4.1 trillion under management as of Dec. 31, State Street is an influential investor whose proxy votes shape the corporate governance policies of many large companies.
Among S&P 500 companies whose shares it holds, State Street now expects company boards to specify how they evaluate their directors' time commitments and their limits for how many different boards directors may serve on.
Companies that do not comply risk votes against the chair of their nominating committee, State Street said.
The expectation is part of a new proxy voting approach the Boston-based asset manager announced last year, when it said it would stop using numeric limits on the number of boards where directors serve.
Ben Colton, State Street's global head of asset stewardship, said the new details were meant to help boards to make their own judgments.
"We're basically trusting the nominations and governance committees," Colton said in an interview on Wednesday.
Colton said State Street's other governance guidelines were largely unchanged. Among top index fund managers, State Street has continued to vote for the highest share of shareholder resolutions related to environmental, social and governance (ESG) concerns, according to a recent report by Morningstar.
Like executives at other companies, Colton said State Street's overall support for ESG resolutions has declined as they have become more prescriptive and as companies disclose more details.
Sign up here for the Reuters Sustainable Finance newsletter. (Reporting by Ross Kerber; Editing by Jamie Freed)
