[Official Guidance]
96 pages. "The Department has tried to convey in its sub-regulatory guidance that fiduciaries need not vote all proxies. A fiduciary's duty is only to vote those proxies that are prudently determined to have an economic impact on the plan after the costs of research and voting are taken into account. Nevertheless, a misunderstanding that fiduciaries must research and vote all proxies continues to persist, causing some plans to expend their assets unnecessarily on matters not economically relevant to the plan.... [T]his problem has been exacerbated by the fact that since 1988 the amount and types of shareholder proposals have increased substantially. Therefore, the Department has decided to propose rule amendments that expressly state that fiduciaries must not vote in circumstances where plan assets would be expended on shareholder engagement activities that do not have an
economic impact on the plan, whether by themselves or after the costs of engagement are taken into account....
"The proposed provisions confirm that when making their voting decisions, fiduciaries must perform reasonable investigations ... [F]iduciaries must be prepared to articulate the anticipated economic benefit of proxy-vote decisions in the event they decide to vote....
"[T]he Department recognizes that fiduciaries may reasonably delegate their proxy voting authority to investment managers. In such cases, ERISA requires fiduciaries to monitor proxy voting decisions made by their investment managers to ensure such entities are voting, or refraining from voting, in a manner that maximizes investment returns and does not sacrifice economic benefits for non-pecuniary objectives ... [C]onsistent with the duty to monitor, fiduciaries should require
documentation of the rationale for proxy-voting decisions so that fiduciaries can periodically monitor proxy-voting decisions made by third parties. A plan fiduciary must also assess and monitor an investment manager's use of any proxy advisory firm ...
"[T]he Department has proposed potential options for fiduciaries that are intended to reduce the need for fiduciaries to consider proxy votes that are unlikely to have an economic impact on the plan ... These various options (labeled 'permitted practices' in the proposed rule) will thus help fiduciaries more cost-effectively comply with the obligations under paragraphs (e)(3)(i) and (ii).... [T]he Department proposes to assist plan fiduciaries by providing in paragraph (e)(3)(iii) that it is permissible to adopt general proxy voting policies or parameters for exercising voting rights that are prudently designed to serve the plan's economic interest. Paragraphs (e)(3)(iii)(A), (B), and (C) provide examples of such policies....
"In addition to the solicitation of public comments on the particular proposed permitted practices, the Department requests comment on whether the proposed permitted practices should contain additional examples regarding when advance proxy voting directions may be exercised pursuant to specific parameters designed to serve the plan's economic interest and, if so, what situations those examples should cover."
Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL]