Strive's Stewardship Philosophy

Part of how Strive fulfills our fiduciary obligations to our clients is through investment stewardship activities. Using a variety of tools, Strive promotes good governance principles and actions. That’s because good governance is critical to driving long-term shareholder value. Driving towards such value is key to how our dedicated corporate governance team approaches our portfolio companies. All our activities, from proxy voting, to thought leadership, to public engagement, and more, are rooted in long-term value creation.

Just as Strive upholds our fiduciary obligations to our clients, our main governance message is simple – boards and executives must uphold and embrace fiduciary obligations to their shareholders. Fiduciary duties are legal obligations that solve a mismatch of interests. Famed economist Milton Freidman described it this way:

In a free‐enterprise, private‐property system, a corporate executive is an employee of the owners of the business. He has direct responsibility to his employers. That responsibility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while conforming to the basic rules of the society, both those embodied in law and those embodied in ethical custom.”⁷

Strive believes that executives who embrace Freidman's mindset will steward capital in ways that are accretive to value.

Unfortunately, in recent years, many business owners have rejected this foundational premise. Many, including the overwhelming majority of CEOs that comprise the Business Roundtable, have shunned this capitalist foundation in favor of a stakeholder first approach.⁸

Stakeholder theory, sometimes called stakeholder capitalism, is an inversion of American capitalism. In the proper hierarchy, shareholders are king, boards and the C-suite serve the shareholders, employees work for the executives and serve customers and relevant stakeholders to generate value for the shareholders. In stakeholder theory, all stakeholders are somehow equal.

In 2019, when the Business Roundtable abandoned shareholder primacy and announced its embrace of stakeholder theory, then Johnson & Johnson CEO Alex Gorsky explained, “[i]t affirms the essential role corporations can play in improving our society when CEOs are truly committed to meeting the needs of all stakeholders.”⁹ In practice, however, since CEOs cannot possibly serve every stakeholder equally, they can choose which constituency to support at any given time.

And in today’s corporate and market landscapes the preferred one is very often ESG and DEI. Today, ESG is a subset of stakeholder theory and DEI has largely taken over the “S” plank of ESG.

These concerns all inject values and values-based philosophy into areas like business operations and capital allocation. Strive is laser-focused on driving long-term shareholder value. As such, we do not promote any preferred constituent’s values. We serve only one master, the shareholder.

This is not an easy task, but it’s the right thing to do for our clients. While leaders across Strive departments provide market commentary, thought leadership, and public advocacy, our three main governance pillars are proxy voting, public engagement, and private engagement. It all starts with getting the vote right.

Many asset managers, even some very large funds, rely on algorithms to vote for or against a given director or proposal. Many also rely on third-party proxy advisors for vote recommendations—with some institutional investors not even changing a single vote recommendation—a practice known as “robo-voting.” For example, in 2020, 114 institutional investors with more than $5 trillion in assets under management robo-voted every item on every one of their proxy ballots.¹⁰

We do not use a proxy advisor. We have a highly talented team that goes through each ballot item. As we explained in last year’s Proxy Season Review, “[w]hile this certainly is the path of most resistance, votes that rely on third parties or summary data would simply miss the mark.”¹¹

For more information on our voting, we have a public proxy voting guide that provides a more detailed overview of our shareholder voting philosophy.¹²

Got a question about one of our votes? Ask away. Think we got the vote wrong? Tell us – we love to talk about our votes and reasoning behind them. And our votes are not hard to find. We aim to post every proxy ballot on our website within 48 hours of the respective company’s annual shareholder meeting.¹³

No other asset management firm comes close to this speedy transparency.

What sets Strive’s proxy voting apart is our human approach.

Once we get the voting right, we turn to engagement. During voting season, we evaluate reams of publicly available data such as SEC filings, ESG reports, DEI reports, press releases, and public statements, but that can only tell so much of the story. For example, if a company ties 20% of its Annual Incentive Plan for its named executive officers to ESG, without stating more publicly, we may reach out and ask for clarification. If we notice that a company has substantial operations in high-risk areas such as China but discloses very little about this hazard on its 10-K, we may reach out to understand just how material this concern is for investors. If a company has a DEI program that is legally dubious, we will reach out and discuss risk mitigation and the benefits of meritocracy.

Sometimes, these engagements are public, such as our letter to Southwest Airlines questioning some of the company’s compensation policies,¹⁴ or our letter to McDonald’s questioning the legal validity of some of its DEI programs and practices.¹⁵ Other times, we reach out and have private conversations. We have been pleased by the willingness of business leaders to engage with us, even though we are still a smaller firm that is very much still a startup. Many of these engagements have led to positive outcomes for shareholders, as you will see throughout this report.