Retirement plan fiduciaries will be barred from casting corporate-shareholder proxy votes in favor of social or political positions that don’t advance the financial interests of retirement plan participants, under a new Department of Labor (DOL) final rule.
These matters are often referred to as economic, social and governance (ESG) issues.
The final proxy voting rule makes clear that fiduciaries are not required to vote every proxy and outlines six points a fiduciary must undertake when making decisions on exercising shareholder rights, like proxy voting:
- Act solely in the economic interest of the plan and its participants and beneficiaries.
- Consider any costs involved.
- Not subordinate the interests of the participants and beneficiaries to any non-pecuniary objective.
- Evaluate material facts that form the basis for any particular proxy vote.
- Maintain plan records on proxy voting activities and other exercises of shareholder rights.
- Exercise prudence and diligence in the selection and monitoring of proxy advisory firms.