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On Friday, State Street Global Advisors released an updated Proxy Voting and Engagement Policy that reflects several significant shifts in approach going into the 2025 proxy season. Similar to recent changes made by Blackrock and Vanguard in their voting policies, State Street has moved away from specific targets regarding board diversity, which, as this Reuters article notes, marks a significant shift for the asset manager that launched the “Fearless Girl” campaign in 2017.

Given the SEC Staff’s recent CDI which has significantly impacted shareholder engagement by large asset managers, State Street prefaces its updated policy with the statement:

When engaging with and voting proxies with respect to the portfolio companies in which we invest our clients’ assets, we do so on behalf of and in the best interests of the client accounts we manage and do not seek to change or influence control of any such portfolio companies. The State Street Global Advisors Global Proxy Voting and Engagement Policy (the “Policy”) contains certain policies that State Street Global Advisors will only apply in jurisdictions where permitted by local law and regulations. State Street Global Advisors will not apply any policies contained herein in any jurisdictions where State Street Global Advisors believes that implementing or following such policies would be deemed to constitute seeking to change or influence control of a portfolio company.

In last year’s policy, State Street had stated the firm expected boards of companies in major indexes to be 30% female, while S&P 500 companies were also expected to have at least one racial or ethnic minority director. In the newly-updated policy, these targets are no longer included, and instead State Street notes:

We believe effective board oversight of a company’s long-term business strategy necessitates a diversity of backgrounds, experiences, and perspectives, which may include a range of characteristics such as skills, gender, race, ethnicity, and age. By having a critical mass of diverse perspectives, boards could experience the benefits that may lead to innovative ideas and foster more robust conversations about a company’s strategy.

We recognize that many factors may influence board composition, including board size, geographic location, and local regulations, among others. Further, we believe that a robust nominating and governance process is essential to achieving a board composition that is designed to facilitate effective, independent oversight of a company’s long-term strategy. We believe nominating committees are best placed to determining the most effective board composition and we encourage companies to ensure that there are sufficient levels of diverse experiences and perspectives represented in the boardroom.

These changes to State Street’s policy track the changes made by the other two members of “The Big Three.” BlackRock’s updated proxy voting guidelines for 2025 no longer recommend that boards seek to have at least 30% of their directors be diverse, or indicate the prospect of an adverse voting action if a company does not adequately explain its approach to board diversity, noting instead that the investor may vote against members of the nominating committee of an S&P 500 company whose board “does not have a mix of professional and personal characteristics that is comparable to market norms.” Vanguard also softened its approach to board diversity for the 2025 proxy season, noting now that boards should be “fit for purpose by reflecting sufficient diversity of skills, experience, perspective, and personal characteristics (such as gender, age, race, and ethnicity) resulting in cognitive diversity.” Vanguard indicates that its funds may vote against a nominating committee chair if a company’s board composition and related disclosure is not consistent with market-specific governance frameworks or market norms. The proxy advisory firms also pivoted on their approach to diversity in the wake of the Trump Administration’s Executive Orders on diversity, with ISS announcing that it will no longer consider the gender, racial or ethnic diversity of a company’s board of directors when making vote recommendations with respect to the election or re-election of directors at U.S. companies, and with Glass Lewis expected to announce its revised approach today.

In a document titled “Introduction to the 2025 Proxy Season,” State Street’s Global Head of Asset Stewardship describes the firm’s move away from addressing specific voting outcomes in its voting policy:

We regularly review and refine our approach to ensure it supports effective stewardship while adapting to evolving market needs. Rather than incorporating specific potential voting outcomes including those on director elections, this year our Policy sets forth what we believe are best practices for good governance at portfolio companies and includes our viewpoints regarding what we believe can protect and promote the long-term economic value of our clients’ investments.

Some other significant changes to State Street’s policy for 2025 include:

1. With respect to director time commitments, rather than applying numerical limits on an individual director’s board memberships, State Street now considers “whether companies provide disclosures on how their nominating committees evaluate and monitor individual directors’ time commitments as a whole.”

2. A change in approach on annual director elections and board independence, consistent with State Street’s belief that these reflect good governance practices.

3. On the topic of ESG disclosures, State Street looks to companies “to provide disclosure on sustainability-related risks and opportunities that they deem material to their businesses in line with applicable local regulatory requirements and any voluntary standards and frameworks adopted by the company.”

With the release of State Street’s updated Proxy Voting and Engagement Policy, we now have a clear picture of how different this proxy season is going to be as compared to years past. This is going to get interesting folks, so strap in!

– Dave Lynn