A new report by Missouri State Auditor Scott Fitzpatrick has highlighted significant gaps in the proxy voting policies of Missouri’s largest public pension systems, which collectively manage over $85.2 billion. The audit found that most of these systems lack clear policies to guide corporate voting decisions that prioritize maximizing shareholder returns. The absence of specific guidelines has resulted in inconsistent voting practices, including instances where votes have canceled each other out.
The audit reviewed the proxy voting practices of eight major public retirement systems in Missouri. These systems hold substantial investments through managed accounts, which include voting shares in various companies. External investment managers typically cast these votes via proxy, based on agreements with the retirement systems or proxy voting services. However, the report noted that only two systems—the Missouri State Employees’ Retirement System (MOSERS) and the Public School and Education Employee Retirement Systems of Missouri (PSRS/PEERS)—have established policies that outline how specific issues should be voted on.
The remaining systems have more general policies, stating that votes should align with the best interests of the system and its participants, but they lack detailed guidelines for voting on specific issues. The report identified instances of proxy votes being cast both for and against the same proposal by different managers, leading to neutralized votes and inconsistent outcomes.
“For the hundreds of thousands of public employees here in Missouri who are counting on their pensions to be there in retirement, it is incredibly important that our retirement systems manage these funds in a way that will prioritize maximizing their returns, not advancing ESG initiatives,” said Auditor Fitzpatrick. “Unfortunately, we see proxy voting policies for many of these systems that lack specific guidance and oversight to ensure fiduciary duty is the top priority for their investment managers.”
The report also criticized all eight pension systems for their lack of monitoring and review of proxy votes. None of the systems reviewed have mandatory policies requiring a review of proxy votes cast on their behalf, and five of the eight do not conduct regular reviews of proxy voting reports to ensure compliance with their policies.
Auditor Fitzpatrick emphasized the need for these systems to adopt more specific proxy voting policies, similar to those used by MOSERS and PSRS/PEERS. The report recommends that all systems should implement policies to regularly review proxy voting reports to ensure adherence to their voting guidelines.
The audit reviewed the proxy voting policies of several systems, including MOSERS, PSRS/PEERS, the County Employees’ Retirement Fund (CERF), Kansas City Public School Retirement System (KC PSRS), Local Government Employees Retirement System (LAGERS), Missouri Department of Transportation and Missouri Highway Patrol Employees’ Retirement System (MPERS), Public School Retirement System of the City of St. Louis (PSRSSTL), and University of Missouri System Retirement (UM RET).
Auditor Fitzpatrick recused himself from the portions of the audit involving MOSERS, due to his previous role on the MOSERS Board of Trustees as State Treasurer.
The complete report can be accessed online for further details on the findings and recommendations for Missouri’s public retirement systems.
