MINUTES of the Board of Trustees of the State …

1 MINUTES Meeting of the Corporate Governance Committee of the Board of Trustees of the State universities retirement system 4:30 , Thursday, September 10, 2015 State universities retirement system 1901 Fox Drive, Main Conference Room Champaign, Illinois 61820 The following Trustees were present: Ms. Dorinda Miller, Chair; Ms. Lindsay Anderson, Dr. John Engstrom, Dr. Fred Giertz, Mr. Francis Idehen Jr., Mr. Paul Johnson Jr., Mr. Craig McCrohon, Dr. Steven Rock, Mr. Antonio Vasquez. Others present: Mr. W. Bryan Lewis, Executive Director; Mr. Andrew Matthews, Chief Operating Officer; Mr. Daniel Allen, Chief Investment Officer; Ms. Allison Kushner, Compliance and Governance Officer; Ms.

2 Lori Kern and Ms. Karen Hipskind, Executive Assistants; Ms. Mary Pat Burns of Burke, Burns Ms. Maureen O Brien of Marco Consulting. Corporate Governance Committee roll call attendance was taken. Trustee Ammons, absent; Trustee Idehen, present; Trustee Miller, present. APPROVAL OF MINUTES Trustee Dorinda Miller presented the MINUTES from the Corporate Governance Committee meeting of June 11, 2015. Trustee Craig McCrohon made the following motion: That the MINUTES from the June 11, 2015 Corporate Governance Committee Meeting be approved as presented. Trustee John Engstrom seconded and the motion carried with all Trustees present voting in favor. Trustee Paul R. T. Johnson, Jr.

3 Joined the meeting at 6:30 immediately after the approval of MINUTES . CHAIRPERSON S REPORT Trustee Miller thanked former Trustee, Mitch Vogel who under his leadership the Corporate Governance was developed and remarked that during today s meeting, we would be receiving education regarding the committee and what it is responsible for . No other formal chair report was given at this time. MID-YEAR UPDATE OF PROXY VOTING INITIATIVES Mr. Dan Allen provided a brief history of the Corporate Governance Committee noting that the Committee was created in 2008 and that SURS has had a proxy voting program in place since 2007 for domestic equities. Mr. Allen remarked that Marco Consulting Services has been the provider since that time.

4 Mr. Allen stated that incorporated in the materials is a copy of the Proxy Voting Policy which is in currently in effect. He reminded the Committee that this policy is brought before the Board annually for approval at the February meeting and that the policy is consistent with that of the Council of Institutional Investors. Mr. Allen then introduced Ms. Maureen O Brien, Director of Corporate Governance of Marco Consulting Group. Ms. O Brien provided an overview of Corporate Governance initiatives and the proxy voting process that they provide for SURS. She also updated the Committee on the 10 most significant Corporate Governance Developments of the 2014 proxy voting season.

5 She also discussed the SURS Executive Summary, Proxy Voting Reports and the SURS Proxy Policy Statement. Trustee Paul Johnson, Jr. and Trustee John Engstrom asked if there was something in the Proxy Policy Statement that addressed the fact that all votes are cast in a manner that is consistent with the best interest of SURS participants/members. Ms. Burns confirmed that the policy does have a provision in it that states that proxies will be cast in a manner that is consistent with providing benefits with SURS participants. Ms. Burns remarked that Marco has to make an independent determination with each vote, based on the guidelines that SURS has provided them that they are voting in the best interest of SURS.

6 Copies of Staff Memorandum entitled Marco Consulting Group 2014 Proxy Report, Marco Consulting Group Memorandum entitled Update on 10 Most Significant Development Lists, SURS Executive Summary 2014 Proxy Report, and SURS Proxy Policy Statement are incorporated as a part of these MINUTES as Exhibit 1, Exhibit 2, Exhibit 3 and Exhibit 4. INFORMATIONAL ITEMS NOT REQUIRING COMMITTEE ACTION The following items were provided for reference and are incorporated as a part of these MINUTES : 1. Exhibit 5- Staff memorandum entitled SURS Proxy Vote Summary Report dated September 10, 2015. 2. Exhibit 6- Marco Consulting Group s Proxy Vote Summary Report for Second Quarter 2015.

7 3. Exhibit 7 - Council of Institutional Investors Recordings. 4. Exhibit 8 - Fiscal Year 2016 Work Plan. PUBLIC COMMENT There were no public comments presented to the Corporate Governance Committee. Since there was no further business before the Committee, Trustee McCrohon moved that the meeting be adjourned. The motion was seconded by Trustee Engstrom and carried with all Trustees present voting in favor. Respectfully submitted, Mr. W. Bryan Lewis Secretary, Board of Trustees WBL:lk State universities retirement system of Illinois Serving Illinois Community Colleges and universities 1901 Fox Drive Champaign, IL 61820-7333 (217) 378-8800 (217) 378-9802 (FAX) Investment Department To: Corporate Governance Committee From: Allison L.

8 Kushner Date: August 24, 2015 Re: Marco Consulting Group 2014 Proxy Report At the September 10, 2015, Corporate Governance Committee meeting, Marco Consulting Group (MCG) will present its second quarter overview of the proxy voting activity and most recent corporate governance developments since the February 5, 2015 Corporate Governance Committee Meeting. MCG s Q2 2015 Proxy Report and the Update on 10 Most Significant Developments List are provided for your review following this memorandum. Exhibit 1 Chicago Boston Denver Page 1 of 1 Headquarters Office 550 West Washington Blvd., Suite 900, Chicago, IL 60661 P: 312-575-9000 F: 312-575-0085 East Coast Office 25 Braintree Hill Office Park, Suite 103, Braintree, MA 02184 P: 617-298-0967 F: 781-228-5871 Western Office 1746 Cole Blvd.

9 Suite 225, Golden, CO 80401 P: 303-645-4677 F: 312-575-0085 To: State universities retirement system of Illinois From: MCG Date: August 20, 2015 Re: Updates on 10 Most Significant Developments List UPDATES 1. Delaware Court and Oklahoma Legislature Let Companies Shift Attorney Fees in Litigation On Tuesday, May 12, the Delaware Senate legislators passed a law which forbade corporations from shifting corporate legal costs to shareholders whom filed unsuccessful lawsuits. This change went into effect on August 1, 2015. 3. Proxy Access Proposals Filed at 75 Companies Per New York City Boardroom Accountability Project A total of 120 proxy access proposal were filed for 2015 shareholder meetings.

10 Forty-one firms have adopted proxy access, many after receiving a proposal. The firms include Bank of America, Citigroup, McKesson Corporation and Prudential Financial. Paypal Holdings recently included proxy access its initial organizing documents as part of its spinoff from eBay. Twenty-seven companies saw majority votes on the proxy access proposals and many more hovered close to the 50% threshold. A recent study by the Securities and Exchange Commission highlighted in the Wall Street Journal found that when shareholders have the right to nominate their own directors, it boosts a company s overall return by half a percentage point. 4. AFL-CIO Equity Index Fund Seeks to Rid S&P 500 of Excise Tax Gross Ups Of the 33 companies contacted on the issue of excise tax gross-ups, 32 have either adopted policies to eliminate the practice or agreed to better communicate a commitment reached earlier to eliminate the practice.