The California State Teachers’ Retirement System (CalSTRS) is taking a role in engaging corporate boards and management of opioid manufacturers, distributors, and pharmacy retail chains it owns in its $115.5 billion global equity portfolio, shows a new pension system report.
The report, which details the activities of the pension plan’s sustainable investment and stewardship strategies team, notes that CalSTRS will be in discussions with 10 companies in the 2019 proxy season as part of a coalition with other institutional investors called the “Investors for Opioid Accountability.”
The coalition will actively engage in shareholder resolutions at the companies aimed at helping stem the global opioid epidemic, the report said.
The report does not specifically name the companies with which CalSTRS is currently engaged.
CalSTRS, the second-largest US pension plan with $227.8 billion in assets, normally does not disclose which companies it is engaging with as part of its corporate governance efforts. It has taken a behind-the-scenes approach, arguing that quiet engagement is better than public embarrassment.
Pension plan investment committee documents, however, offer a rare inside look at CalSTRS’s engagement program with one corporation involved in opioid distribution.
The documents show that the pension system’s investment staff met with McKesson, one of the big three drug distributors in the US, last summer to discuss actions the company “has taken to address the opioid epidemic.”
The meeting also addressed compensation of the firm’s top executives relative to their actions in trying to stop opioid abuse and the company’s role in distributing the drugs, the documents show.
“McKesson has pledged $100 million to a recently formed foundation; created a Special Review Committee on the board consisting of three independent board members; released the findings and recommendations of their internal investigation; and implemented a number of oversight and compliance improvements and other company-led initiatives,” the CalSTRS material said.
CalSTRS investment officials also said that McKesson officials codified the board compensation committee’s consideration of regulatory, compliance, and legal issues relative to opioids when making executive compensation decisions.
The CalSTRS material does not mention that the company, in its own internal review last year, rejected allegations that its senior management promoted a culture that helped lead to the opioid crisis.
The pharmaceutical distributor doesn’t mention engagement with CalSTRS on its website but does state last year that it created a foundation called Foundation for Opioid Response Efforts (FORE) and contributed $100 million to the organization.
“The opioid epidemic won’t be solved by any one participant or idea,” the company said. “McKesson is partnering with others to deploy the best thinking across the country and advance meaningful solutions.”
The CalSTRS report said at the end of 2018, the pension plan, as part of The Opioid Accountability Coalition, has collaborated with other institutional investors on engagements with 17 opioid distributors, manufacturers, and retail pharmacy chains, and achieved reforms with 13 of those companies.
Since 2017, the coalition has filed 33 resolutions and reached a settlement with 28 of those companies, the report said.
The CalSTRS report said the coalition is a diverse group of global institutional investors with 54 members representing $3.5 trillion in assets under management.
The coalition was established in July 2017 to engage with companies on opioid business risks that have implications for long-term shareholders, communities, and the economy, the CalSTRS report said.
A membership list shows that the New York State Common Pension Fund is the only other public fund that is part of the coalition. Other members include unions, health care retirement trusts, various state and city controller offices, and treasurers’ offices.