Corporate Governance

As an independent asset management firm, we are committed to encouraging good corporate governance practices at the companies in which we invest. We seek to impact governance in several ways, including through proxy voting and listening to companies held in the portfolios we manage. We also seek to improve internal processes through research on governance matters and participation in industry surveys and events.

For questions about our corporate governance activities or policies, visit the links below or contact us at corporategovernance@dimensional.com.

Policies

  • Proxy voting policies, procedures, and guidelines

    A copy of our proxy voting guidelines.

    U.S. Proxy Voting Concise Guidelines

    Effective for Meetings on or after February 1, 2018 

    The proxy voting process as described in this Policy and the Guidelines seeks to ensure that proxy votes are cast in the best interests of the Advisors’ clients, as understood by the Advisors at the time of the vote. In order to provide greater analysis on certain shareholder meetings, the Advisors have elected to receive research reports for meetings from Institutional Shareholder Services, Inc., a third party service provider, as well as certain third party proxy service providers, such as Glass Lewis, in the following circumstances: (1) where the Advisor’s clients have a significant aggregate holding in the issuer and the meeting agenda contains proxies concerning: Anti-takeover Defenses or Voting Related Issues, Mergers and Acquisitions or Reorganizations or Restructurings, Capital Structure Issues, Compensation Issues or a proxy contest; or (2) where the Advisor in its discretion, has deemed that additional research is warranted.

    Board of Directors:

    Voting on Director Nominees in Uncontested Elections

    Generally vote for director nominees, except under the following circumstances:

    1. Accountability

    Vote AGAINST1 or WITHHOLD from the entire board of directors (except new nominees2, who should be considered CASE BYCASE) for the following: 

    Problematic Takeover Defenses 

    Classified Board Structure: 

    1.1. The board is classified, and a continuing director responsible for a problematic governance issue at the board/committee level that would warrant a withhold/against vote recommendation is not up for election. All appropriate nominees (except new) may be held accountable. 

    Director Performance Evaluation: 

    1.2. The board lacks accountability and oversight, coupled with sustained poor performance relative to peers- and/or industry groups. Take into consideration the company’s total shareholder return and financial/operational performance over short- to long-term time horizons. Problematic provisions include but are not limited to:

    • A classified board structure;
    • A supermajority vote requirement;
    • Either a plurality vote standard in uncontested director elections or a majority vote standard with no plurality carveout for contested elections;
    • The inability of shareholders to call special meetings;
    • The inability of shareholders to act by written consent;
    • A multi-class capital structure; and/or
    • A non-shareholderapproved poison pill.

    Poison Pills3: 

    1.3. The company’s poison pill has a “dead
    hand” or “modified deadhand” feature. Vote AGAINST or WITHHOLD from nominees every year until this feature is removed; 

    1.4. The board adopts a poison pill with a term of more than 12 months (“long
    term pill”), or renews any existing pill, including any “shortterm” pill (12 months or less), without shareholder approval. A commitment or policy that puts a newly adopted pill to a binding shareholder vote may potentially offset an adverse vote recommendation. Review such companies with classified boards every year, and such companies with annually elected boards at least once every three years, and vote AGAINST or WITHHOLD votes from all nominees if the company still maintains a nonshareholderapproved poison pill; or 

    1.5. The board makes a material adverse change to an existing poison pill without shareholder approval.

    Vote CASEBYCASE on all nominees if: 

    1.6. The board adopts a poison pill with a term of 12 months or less (“short
    term pill”) without shareholder approval, taking into account the following factors:

    • The date of the pill‘s adoption relative to the date of the next meeting of shareholders—i.e. whether the company had time to put the pill on ballot for shareholder ratification given the circumstances;
    • The issuer’s rationale;
    • The issuer’s governance structure and practices; and
    • The issuer’s track record of accountability to shareholders.

    Restricting Binding Shareholder Proposals:

    Generally vote against or withhold from members of the governance committee if:

    1.7. The company's charter imposes undue restrictions on shareholders' ability to amend the bylaws. Such restrictions include, but are not limited to: outright prohibition on the submission of binding shareholder proposals, or share ownership requirements or time holding requirements in excess of SEC Rule 14a-8. Vote against on an ongoing basis.

    Problematic AuditRelated Practices 

    Generally vote AGAINST or WITHHOLD from the members of the Audit Committee if: 

    1.8. The non-audit fees paid to the auditor are excessive (see discussion under “Auditor Ratification”);

    1.9. The company receives an adverse opinion on the company’s financial statements from its auditor; or 

    1.10. There is persuasive evidence that the Audit Committee entered into an inappropriate indemnification agreement with its auditor that limits the ability of the company, or its shareholders, to pursue legitimate legal recourse against the audit firm. 

    Vote CASE
    BYCASE on members of the Audit Committee and potentially the full board if: 

    1.11. Poor accounting practices are identified that rise to a level of serious concern, such as: fraud; misapplication of GAAP; and material weaknesses identified in Section 404 disclosures. Examine the severity, breadth, chronological sequence and duration, as well as the company’s efforts at remediation or corrective actions, in determining whether WITHHOLD/AGAINST votes are warranted. 

    Problematic Compensation Practices/Pay for Performance Misalignment 

    In the absence of an Advisory Vote on Executive Compensation ballot item or in egregious situations, vote AGAINST or WITHHOLD from the members of the Compensation Committee and (potentially the full board) if: 

    1.12. There is a significant misalignment between CEO pay and company performance (pay for performance); 

    1.13. The company maintains significant problematic pay practices; 

    1.14. The board exhibits a significant level of poor communication and responsiveness to shareholders;

    1.15. The company fails to include a Say on Pay ballot item when required under SEC provisions, or under the company’s declared frequency of say on pay; or 

    1.16. The company fails to include a Frequency of Say on Pay ballot item when required under SEC provisions. 

    Vote CASE
    BYCASE on Compensation Committee members (or, in exceptional cases, the full board) and the Management SayonPay proposal if: 

    1.17. The company's previous say
    onpay proposal received the support of less than 70 percent of votes cast, taking into account:

    • The company's response, including:
    • Whether the issues raised are recurring or isolated;
    • The company's ownership structure; and
    • Whether the support level was less than 50 percent, which would warrant the highest degree of responsiveness.

    Unilateral Bylaw/Charter Amendments 

    1.18. Generally vote against or withhold from directors individually, committee members, or the entire board (except new nominees, who should be considered case-by-case) if the board amends the company's bylaws or charter without shareholder approval in a manner that materially diminishes shareholders' rights or that could adversely impact shareholders, considering the following factors, as applicable:

    • The board's rationale for adopting the bylaw/charter amendment without shareholder ratification;
    • Disclosure by the company of any significant engagement with shareholders regarding the amendment;
    • The level of impairment of shareholders' rights caused by the board's unilateral amendment to the bylaws/charter;
    • The board's track record with regard to unilateral board action on bylaw/charter amendments or other entrenchment provisions;
    • The company's ownership structure;
    • The company's existing governance provisions;
    • The timing of the board's amendment to the bylaws/charter in connection with a significant business development; and
    • Other factors, as deemed appropriate, that may be relevant to determine the impact of the amendment on shareholders.

    Unless the adverse amendment is reversed or submitted to a binding shareholder vote, in subsequent
    years vote case
    bycase on director nominees. Generally vote against (except new nominees, who
    should be considered case
    bycase) if the directors:

    • Classified the board;
    • Adopted supermajority vote requirements to amend the bylaws or charter; or
    • Eliminated shareholders' ability to amend bylaws.

    1.19. For newly public companies, generally vote against or withhold from directors individually, committee members, or the entire board (except new nominees, who should be considered casebycase) if, prior to or in connection with the company's public offering, the company or its board adopted bylaw or charter provisions materially adverse to shareholder rights4, considering the following factors:

    The level of impairment of shareholders' rights caused by the provision;

    • The disclosed rationale for adopting the provision;
    • The ability to change the governance structure in the future (e.g., limitations on shareholders’ right to amend the bylaws or charter, or supermajority vote requirements to amend the bylaws or charter);
    • The ability of shareholders to hold directors accountable through annual director elections, or whether the company has a classified board structure; and,
    • A public commitment to put the provision to a shareholder vote within three years of the date of the initial public offering.

    Unless the adverse provision is reversed or submitted to a vote of public shareholders, vote casebycase
    on director nominees in subsequent years.

    Governance Failures 

    Under extraordinary circumstances, vote AGAINST or WITHHOLD from directors individually, committee members, or the entire board, due to: 

    1.20. Material failures of governance, stewardship, risk oversight5
    , or fiduciary responsibilities at the company; 

    1.21. Failure to replace management as appropriate; or 

    1.22. Egregious actions related to a director’s service on other boards that raise substantial doubt about his or her ability to effectively oversee management and serve the best interests of shareholders at any company. 

    2. Responsiveness


    Vote CASE-BY-CASE on individual directors, committee members, or the entire board of directors (as appropriate) if: 

    2.1. The board failed to act on a shareholder proposal that received the support of a majority of the shares cast in the previous year. Factors that will be considered are:

    • Disclosed outreach efforts by the board to shareholders in the wake of the vote;
    • Rationale provided in the proxy statement for the level of implementation;
    • The subject matter of the proposal;
    • The level of support for and opposition to the resolution in past meetings;
    • Actions taken by the board in response to the majority vote and its engagement with shareholders;
    • The continuation of the underlying issue as a voting item on the ballot (as either shareholder or management proposals); and
    • Other factors as appropriate.

    2.2. The board failed to act on takeover offers where the majority of shares are tendered; 

    2.3. At the previous board election, any director received more than 50 percent withhold/against votes of the shares cast and the company has failed to address the issue(s) that caused the high withhold/against vote; 

    2.4. The board implements an advisory vote on executive compensation on a less frequent basis than the frequency that received the majority of votes cast at the most recent shareholder meeting at which shareholders voted on the say-on-pay frequency; or vote.

    2.5. The board implements an advisory vote on executive compensation on a less frequent basis than the frequency that received a plurality, but not a majority, of the votes cast at the most recent shareholder meeting at which shareholders voted on the say
    onpay frequency, taking into account:

    • The board's rationale for selecting a frequency that is different from the frequency that received a plurality;
    • The company's ownership structure and vote results;
    • ISS' analysis of whether there are compensation concerns or a history of problematic compensation practices; and
    • The previous year's support level on the company's sayonpay proposal.

    3. Composition

    Attendance at Board and Committee Meetings:

    3.1. Generally vote AGAINST or WITHHOLD from directors (except new nominees, who should be considered CASEBY CASE6) who attend less than 75 percent of the aggregate of their board and committee meetings for the period for which they served, unless an acceptable reason for absences is disclosed in the proxy or another SEC filing. Acceptable reasons for director absences are generally limited to the following:

    • Medical issues/illness;
    • Family emergencies; and
    • Missing only one meeting (when the total of all meetings is three or fewer).

    3.2. If the proxy disclosure is unclear and insufficient to determine whether a director attended at least 75 percent of the aggregate of his/her board and committee meetings during his/her period of service, vote AGAINST or WITHHOLD from the director(s) in question. 

    Overboarded Directors: 

    Vote CASE-BY-CASE, considering relevant factors on individual directors who: (e.g., attendance or other board seats). 

    4. Independence

    Vote AGAINST or WITHHOLD from Inside Directors and Affiliated Outside Directors when:

    4.1.   The inside or affiliated outside director serves on any of the three key committees: audit, compensation, or nominating;

    4.2.   The company lacks an audit, compensation, or nominating committee so that the full board functions as that committee;

    4.3.   The company lacks a formal nominating committee, even if the board attests that the independent directors fulfill the functions of such a committee; or

    4.4.   Independent directors make up less than a majority of the directors.

    Independent Chair (Separate Chair/CEO)

    Generally vote with management on shareholder proposals requiring that the chairman’s position be filled by an independent director.

    Proxy Access

    Generally vote for management and shareholder proposals for proxy access with the following provisions:

    • Ownership threshold: maximum requirement not more than three percent (3%) of the voting power;
    • Aggregation: minimal or no limits on the number of shareholders permitted to form a nominating group;
    • Cap: cap on nominees of generally twenty-five percent (25%) of the board.

    Review for reasonableness any other restrictions on the right of proxy access.

    Generally vote against proposals that are more restrictive than these guidelines.

    Proxy Contests—Voting for Director Nominees in Contested Elections

    Vote CASEBYCASE on the election of directors in contested elections, considering the following factors:

    • Longterm financial performance of the company relative to its industry;
    • Management’s track record;
    • Background to the contested election;
    • Nominee qualifications and any compensatory arrangements;
    • Strategic plan of dissident slate and quality of the critique against management;
    • Likelihood that the proposed goals and objectives can be achieved (both slates); and
    • Stock ownership positions.

    In the case of candidates nominated pursuant to proxy access, vote CASEBYCASE considering the same factors listed above -- or additional factors which may be relevant, including those that are specific to the company, to the nominee(s) and/or to the nature of the election (such as whether or not there are more candidates than board seats). 

    Shareholder Rights & Defenses9

    Litigation Rights (including Exclusive Venue and Fee-Shifting Bylaw Provisions)10

    Bylaw provisions impacting shareholders' ability to bring suit against the company may include exclusive venue provisions, which provide that the state of incorporation shall be the sole venue for certain types of litigation, and fee-shifting provisions that require a shareholder who sues a company unsuccessfully to pay all litigation expenses of the defendant corporation. 

    Vote case-by-case on bylaws which impact shareholders' litigation rights, taking into account factors such as:

    • The company's stated rationale for adopting such a provision;
    • Disclosure of past harm from shareholder lawsuits in which plaintiffs were unsuccessful or shareholder lawsuits outside the jurisdiction of incorporation;
    • The breadth of application of the bylaw, including the types of lawsuits to which it would apply and the definition of key terms; and
    • Governance features such as shareholders' ability to repeal the provision at a later date (including the vote standard applied when shareholders attempt to amend the bylaws) and their ability to hold directors accountable through annual director elections and a majority vote standard in uncontested elections

    Generally vote AGAINST bylaws that mandate fee-shifting whenever plaintiffs are not completely successful on the merits (i.e., in cases where the plaintiffs are partially successful). 

    Unilateral adoption by the board of bylaw provisions which affect shareholders' litigation rights will be evaluated under Unilateral Bylaw/Charter Amendments.

    Poison Pills Management Proposals to Ratify Poison Pill

    Vote CASEBYCASE on management proposals on poison pill ratification, focusing on the features of the shareholder rights plan. Rights plans should contain the following attributes:

    • No lower than a 20% trigger, flipin or flipover;
    • A term of no more than three years;
    • No deadhand, slowhand, nohand or similar feature that limits the ability of a future board to redeem the pill;
    • Shareholder redemption feature (qualifying offer clause); if the board refuses to redeem the pill 90 days after a qualifying offer is announced, 10 percent of the shares may call a special meeting or seek a written consent to vote on rescinding the pill.

    In addition, the rationale for adopting the pill should be thoroughly explained by the company. In examining the request for the pill, take into consideration the company’s existing governance structure, including: board independence, existing takeover defenses, and any problematic governance concerns. 

    Poison Pills Management Proposals to Ratify a Pill to Preserve Net Operating Losses (NOLs)


    Vote AGAINST proposals to adopt a poison pill for the stated purpose of protecting a company's net operating losses (NOL) if the term of the pill would exceed the shorter of three years and the exhaustion of the NOL. 

    Vote CASE
    BYCASE on management proposals for poison pill ratification, considering the following factors, if the term of the pill would be the shorter of three years (or less) and the exhaustion of the NOL:

    • The ownership threshold to transfer (NOL pills generally have a trigger slightly below 5 percent);
    • The value of the NOLs;
    • Shareholder protection mechanisms (sunset provision, or commitment to cause expiration of the pill upon exhaustion or expiration of NOLs);
    • The company's existing governance structure including: board independence, existing takeover defenses, track record of responsiveness to shareholders, and any other problematic governance concerns; and
    • Any other factors that may be applicable.

    Shareholder Ability to Act by Written Consent


    Generally vote AGAINST management and shareholder proposals to restrict or prohibit shareholders' ability to act by written consent. 

    Generally vote FOR management and shareholder proposals that provide shareholders with the ability to act by written consent, taking into account the following factors:

    • Shareholders' current right to act by written consent;
    • The consent threshold;
    • The inclusion of exclusionary or prohibitive language;
    • Investor ownership structure; and
    • Shareholder support of, and management's response to, previous shareholder proposals.

    Vote CASEBYCASE on shareholder proposals if, in addition to the considerations above, the company has the following governance and antitakeover provisions:

    • An unfettered11 right for shareholders to call special meetings at a 25 percent threshold;
    • A majority vote standard in uncontested director elections;
    • No nonshareholderapproved pill; and
    • An annually elected board.

    Capital/Restructuring12

    Common Stock Authorization


    Vote FOR proposals to increase the number of authorized common shares where the primary purpose of the increase is to issue shares in connection with a transaction on the same ballot that warrants support. 

    Vote AGAINST proposals at companies with more than one class of common stock to increase the number of authorized shares of the class of common stock that has superior voting rights. 

    Vote AGAINST proposals to increase the number of authorized common shares if a vote for a reverse stock split on the same ballot is warranted despite the fact that the authorized shares would not be reduced proportionally. 

    Vote CASE
    BYCASE on all other proposals to increase the number of shares of common stock authorized for issuance. Take into account companyspecific factors that include, at a minimum, the following:

    • Past Board Performance:
      •  The company's use of authorized shares during the last three years
    • The Current Request:
      • Disclosure in the proxy statement of the specific purposes of the proposed increase;
      • Disclosure in the proxy statement of specific and severe risks to shareholders of not approving
        the request; and
      • The dilutive impact of the request as determined by an allowable increase calculated by ISS
        (typically 100 percent of existing authorized shares) that reflects the company's need for shares
        and total shareholder returns. 

    Apply the relevant allowable increase below in determining vote on requests to increase common stock that are for general corporate purposes (or to the general corporate purposes portion of a request that also includes a specific need):

    1. Most companies: 100 percent of existing authorized shares.
    2. Companies with less than 50 percent of existing authorized shares either outstanding or reserved for issuance: 50 percent of existing authorized shares.
    3. Companies with one and threeyear total shareholder returns (TSRs) in the bottom 10 percent of the U.S. market as of the end of the calendar quarter that is closest to their most recent fiscal year end: 50 percent of existing authorized shares.
    4. Companies at which both conditions (2 and 3) above are both present: 25 percent of existing authorized shares.

    If there is an acquisition, private placement, or similar transaction on the ballot (not including equity incentive plans) that is receiving a FOR vote, the allowable increase will be the greater of (i) twice the amount needed to support the transactions on the ballot, and (ii) the allowable increase as calculated above.

    Dual Class Structure


    Generally vote AGAINST proposals to create a new class of common stock unless:

    • The company discloses a compelling rationale for the dualclass capital structure, such as:
    • The new class is intended for financing purposes with minimal or no dilution to current shareholders in both the short term and long term; and
    • The new class is not designed to preserve or increase the voting power of an insider or significant shareholder.

    Preferred Stock Authorization


    Vote FOR proposals to increase the number of authorized preferred shares where the primary purpose of the increase is to issue shares in connection with a transaction on the same ballot that warrants support. 

    Vote AGAINST proposals at companies with more than one class or series of preferred stock to increase the number of authorized shares of the class or series of preferred stock that has superior voting rights. 

    Vote CASE
    BYCASE on all other proposals to increase the number of shares of preferred stock authorized for issuance. Take into account companyspecific factors that include, at a minimum, the following:

    • Past Board Performance:
    • The Current Request:

    Mergers and Acquisitions


    Vote CASE
    BYCASE on mergers and acquisitions. Review and evaluate the merits and drawbacks of the proposed transaction, balancing various and sometimes countervailing factors including:

    • Valuation  Is the value to be received by the target shareholders (or paid by the acquirer) reasonable? While the fairness opinion may provide an initial starting point for assessing valuation reasonableness, emphasis is placed on the offer premium, market reaction and strategic rationale.
    • Market reaction  How has the market responded to the proposed deal? A negative market reaction should cause closer scrutiny of a deal.
    • Strategic rationale  Does the deal make sense strategically? From where is the value derived? Cost and revenue synergies should not be overly aggressive or optimistic, but reasonably achievable. Management should also have a favorable track record of successful integration of historical acquisitions.
    • Negotiations and process  Were the terms of the transaction negotiated at arm'slength? Was the process fair and equitable? A fair process helps to ensure the best price for shareholders. Significant negotiation "wins" can also signify the deal makers' competency. The comprehensiveness of the sales process (e.g., full auction, partial auction, no auction) can also affect shareholder value.
    • Conflicts of interest  Are insiders benefiting from the transaction disproportionately and inappropriately as compared to noninsider shareholders? As the result of potential conflicts, the directors and officers of the company may be more likely to vote to approve a merger than if they did not hold these interests. Consider whether these interests may have influenced these directors and officers to support or recommend the merger. 
    • Governance  Will the combined company have a better or worse governance profile than the current governance profiles of the respective parties to the transaction? If the governance profile is to change for the worse, the burden is on the company to prove that other issues (such as valuation) outweigh any deterioration in governance.

    Compensation13

    Executive Pay Evaluation


    Underlying all evaluations are five global principles that most investors expect corporations to adhere to in designing and administering executive and director compensation programs:

    1. Maintain appropriate payforperformance alignment, with emphasis on longterm shareholder value: This principle encompasses overall executive pay practices, which must be designed to attract, retain, and appropriately motivate the key employees who drive shareholder value creation over the long term. It will take into consideration, among other factors, the link between pay and performance; the mix between fixed and variable pay; performance goals; and equitybased plan costs;
    2. Avoid arrangements that risk “pay for failure”: This principle addresses the appropriateness of long or indefinite contracts, excessive severance packages, and guaranteed compensation;
    3. Maintain an independent and effective compensation committee: This principle promotes oversight of executive pay programs by directors with appropriate skills, knowledge, experience, and a sound process for compensation decisionmaking (e.g., including access to independent expertise and advice when needed);
    4. Provide shareholders with clear, comprehensive compensation disclosures: This principle underscores the importance of informative and timely disclosures that enable shareholders to evaluate executive pay practices fully and fairly;
    5. Avoid inappropriate pay to nonexecutive directors: This principle recognizes the interests of shareholders in ensuring that compensation to outside directors does not compromise their independence and ability to make appropriate judgments in overseeing managers’ pay and performance. At the market level, it may incorporate a variety of generally accepted best practices.

    Advisory Votes on Executive Compensation—Management Proposals (Management SayonPay)


    Vote CASE
    BYCASE on ballot items related to executive pay and practices, as well as certain aspects of outside director compensation. 

    Vote AGAINST Advisory Votes on Executive Compensation (Management Say
    onPay—MSOP) if:

    • There is a significant misalignment between CEO pay and company performance (pay for performance);
    • The company maintains significant problematic pay practices;
    • The board exhibits a significant level of poor communication and responsiveness to shareholders.

    Vote AGAINST or WITHHOLD from the members of the Compensation Committee and potentially the full board if:

    • There is no MSOP on the ballot, and an AGAINST vote on an MSOP is warranted due to a pay for performance misalignment, problematic pay practices, or the lack of adequate responsiveness on compensation issues raised previously, or a combination thereof;
    • The board fails to respond adequately to a previous MSOP proposal that received less than 70 percent support of votes cast;
    • The company has recently practiced or approved problematic pay practices, including option repricing or option backdating; or
    • The situation is egregious.

    Primary Evaluation Factors for Executive Pay 

    Pay
    forPerformance Evaluation 

    In casting a vote on executive compensation proposals, an Advisor may consider the following:

    1. Peer Group14 Alignment:
      • The degree of alignment between the company's annualized TSR rank and the CEO's annualized total pay rank within a peer group, each measured over different time horizons.
      • The multiple of the CEO's total pay relative to the peer group median.
    2. Absolute Alignment - the absolute alignment between the trend in CEO pay and company TSR over the prior five fiscal years - i.e., the difference between the trend in annual pay changes and the trend in annualized TSR during the period.

    If the above analysis demonstrates significant unsatisfactory long-term pay-for-performance alignment or, in the case of companies outside the Russell indices, misaligned pay and performance are otherwise suggested, the following qualitative factors, as relevant to evaluating how various pay elements may work to encourage or to undermine long-term value creation and alignment with shareholder interests, may be considered:

    • The ratio of performance to timebased equity awards;
    • The overall ratio of performancebased compensation;
    • The completeness of disclosure and rigor of performance goals;
    • The company's peer group benchmarking practices;
    • Actual results of financial/operational metrics, such as growth in revenue, profit, cash flow, etc., both absolute and relative to peers;
    • Special circumstances related to, for example, a new CEO in the prior FY or anomalous equity grant practices (e.g., biannual awards);
    • Realizable pay compared to grant pay; and
    • Any other factors deemed relevant.


    Problematic Pay Practices 

    The focus is on executive compensation practices that contravene the global pay principles, including:

    • Problematic practices related to nonperformancebased compensation elements;
    • Incentives that may motivate excessive risktaking; and
    • Options Backdating.


    Problematic Pay Practices related to Non
    PerformanceBased Compensation Elements 

    Pay elements that are not directly based on performance are generally evaluated CASE
    BYCASE considering the context of a company's overall pay program and demonstrated payforperformance philosophy. The list below highlights the problematic practices that carry significant weight in this overall consideration and may result in adverse vote recommendations:

    • Repricing or replacing of underwater stock options/SARS without prior shareholder approval (including cash buyouts and voluntary surrender of underwater options);
    • Excessive perquisites or tax grossups, including any grossup related to a secular trust or restricted stock vesting;
    • New or extended agreements that provide for:
    • Insufficient executive compensation disclosure by externally-managed issuers (EMIs) such that a reasonable assessment of pay programs and practices applicable to the EMI's executives is not possible.


    Incentives that may Motivate Excessive Risk
    Taking

    • Multiyear guaranteed bonuses;
    • A single or common performance metric used for short and longterm plans;
    • Metrics and incentives that are misaligned with shareholders’ interests and publicly disclosed business objectives;
    • Lucrative severance packages;
    • High pay opportunities relative to industry peers;
    • Disproportionate supplemental pensions; or
    • Mega annual equity grants that provide unlimited upside with no downside risk.

    Factors that potentially mitigate the impact of risky incentives include rigorous clawback provisions and robust stock ownership/holding guidelines. 

    Options Backdating 

    The following factors should be examined CASE
    BYCASE to allow for distinctions to be made between “sloppy” plan administration versus deliberate action or fraud:

    • Reason and motive for the options backdating issue, such as inadvertent vs. deliberate grant date changes;
    • Duration of options backdating;
    • Size of restatement due to options backdating;
    • Corrective actions taken by the board or compensation committee, such as canceling or repricing backdated options, the recouping of option gains on backdated grants; and
    • Adoption of a grant policy that prohibits backdating, and creates a fixed grant schedule or window period for equity grants in the future.


    Compensation Committee Communications and Responsiveness 

    Consider the following factors CASE
    BYCASE when evaluating ballot items related to executive pay on the board’s responsiveness to investor input and engagement on compensation issues:

    • Failure to respond to majoritysupported shareholder proposals on executive pay topics; or
    • Failure to adequately respond to the company's previous sayonpay proposal that received the support of less than 70 percent of votes cast, taking into account:

    Frequency of Advisory Vote on Executive Compensation ("Say When on Pay")


    Vote FOR triennial advisory votes on compensation. 

    Voting on Golden Parachutes in an Acquisition, Merger, Consolidation, or Proposed Sale


    Vote CASE
    BYCASE on say on Golden Parachute proposals, including consideration of existing changeincontrol arrangements maintained with named executive officers rather than focusing primarily on new or extended arrangements. 

    Features that may result in an AGAINST recommendation include one or more of the following, depending on the number, magnitude, and/or timing of issue(s):

    • Single or modifiedsingletrigger cash severance;
    • Singletrigger acceleration of unvested equity awards;
    • Excessive cash severance (>3x base salary and bonus);
    • Excise tax grossups triggered and payable (as opposed to a provision to provide excise tax grossups);
    • Excessive golden parachute payments (on an absolute basis or as a percentage of transaction equity value); or
    • Recent amendments that incorporate any problematic features (such as those above) or recent actions (such as extraordinary equity grants) that may make packages so attractive as to influence merger agreements that may not be in the best interests of shareholders; or
    • The company's assertion that a proposed transaction is conditioned on shareholder approval of the golden parachute advisory vote.

    Recent amendment(s) that incorporate problematic features will tend to carry more weight on the overall analysis. However, the presence of multiple legacy problematic features will also be closely scrutinized. 

    In cases where the golden parachute vote is incorporated into a company's advisory vote on compensation (management say
    onpay), the sayonpay proposal will be evaluated in accordance with these guidelines, which may give higher weight to that component of the overall evaluation.

    Equity-Based and Other Incentive Plans15

    Vote case-by-case on certain equity-based compensation plans16 depending on a combination of certain plan features and equity grant practices, where positive factors may counterbalance negative factors, and vice versa, as evaluated under these three pillars:

    Plan Cost: The total estimated cost of the company’s equity plans relative to industry/market cap peers, measured by the company's estimated Shareholder Value Transfer (SVT) in relation to peers and considering both:

    • SVT based on new shares requested plus shares remaining for future grants, plus outstanding unvested/unexercised grants; and
    • SVT based only on new shares requested plus shares remaining for future grants.

    Plan Features:

    • Automatic or discretionary single-triggered award vesting upon a change in control (CIC);
    • Discretionary vesting authority;
    • Liberal share recycling on various award types;
    • Lack of minimum vesting period for grants made under the plan;
    • Dividends payable prior to award vesting.

    Grant Practices:

    • The company’s three year burn rate relative to its industry/market cap peers;
    • Vesting requirements in most recent CEO equity grants (3-year look-back);
    • The estimated duration of the plan (based on the sum of shares remaining available and the new shares requested, divided by the average annual shares granted in the prior three years);
    • The proportion of the CEO's most recent equity grants/awards subject to performance conditions;
    • Whether the company maintains a claw-back policy;
    • Whether the company has established post exercise/vesting share-holding requirements.

    Generally vote against the plan proposal if the combination of above factors indicates that the plan is not, overall, in shareholders' interests, or if any of the following egregious factors apply:

    • Awards may vest in connection with a liberal change-of-control definition;
    • The plan would permit repricing or cash buyout of underwater options without shareholder approval (either by expressly permitting it – for NYSE and Nasdaq listed companies -- or by not prohibiting it when the company has a history of repricing – for non-listed companies);
    • The plan is a vehicle for problematic pay practices or a significant pay-for-performance disconnect under certain circumstances; or
    • Any other plan features are determined to have a significant negative impact on shareholder interests.

    Social/Environmental Issues


    Global Approach 

    Generally vote FOR the management’s recommendation on shareholder proposals involving social/environmental issues. When evaluating social and environmental shareholder proposals, an Advisor considers the most important factor to be whether adoption of the proposal is likely to enhance or protect shareholder value.
    An Advisor will communicate directly with a company when it believes a social/environmental issue may have material economic ramifications for the shareholders. If a company is unresponsive to the concerns raised, an Advisor will reinforce the board accountability by voting against or withholding from directors individually, committee members, or the entire board. 17

    Environmentally Screened Portfolios

    With respect to environmentally screened portfolios, an Advisor will generally vote on shareholder proposals involving environmental issues in accordance with the following guidelines:

    Generally vote CASEBYCASE, taking into consideration whether implementation of the proposal is likely to enhance or protect shareholder value, and in addition the following will also be considered:

    • If the issues presented in the proposal are more appropriately or effectively dealt with through legislation or government regulation;
    • If the company has already responded in an appropriate and sufficient manner to the issue(s) raised in the proposal;
    • Whether the proposal's request is unduly burdensome (scope, or timeframe) or overly prescriptive;
    • The company's approach compared with any industry standard practices for addressing the issue(s) raised by the proposal;
    • If the proposal requests increased disclosure or greater transparency, whether or not reasonable and sufficient information is currently available to shareholders from the company or from other publicly available sources; and
    • If the proposal requests increased disclosure or greater transparency, whether or not implementation would reveal proprietary or confidential information that could place the company at a competitive disadvantage.

    Generally vote for resolutions requesting that a company disclose information on the risks related to climate change on its operations and investments, such as financial, physical, or regulatory risks, considering:

    • Whether the company already provides current, publiclyavailable information on the impact that climate change may have on the company as well as associated company policies and procedures to address related risks and/or opportunities;
    • The company’s level of disclosure is at least comparable to that of industry peers; and
    • There are no significant controversies, fines, penalties, or litigation associated with the company’s environmental performance.

    Generally vote for proposals requesting a report on greenhouse gas (GHG) emissions from company operations and/or products and operations, unless:

    • The company already discloses current, publiclyavailable information on the impacts that GHG emissions may have on the company as well as associated company policies and procedures to address related risks and/or opportunities;
    • The company's level of disclosure is comparable to that of industry peers; and
    • There are no significant, controversies, fines, penalties, or litigation associated with the company's GHG emissions.

    Vote casebycase on proposals that call for the adoption of GHG reduction goals from products and
    operations, taking into account:

    • Whether the company provides disclosure of yearoveryear GHG emissions performance data;
    • Whether company disclosure lags behind industry peers;
    • The company's actual GHG emissions performance;
    • The company's current GHG emission policies, oversight mechanisms, and related initiatives; and
    • Whether the company has been the subject of recent, significant violations, fines, litigation, or controversy related to GHG emissions.

     

    Foreign Private Issuers Listed on U.S. Exchanges


    Vote AGAINST (or WITHHOLD from) non
    independent director nominees at companies which fail to meet the following criteria: a majorityindependent board, and the presence of an audit, a compensation, and a nomination committee, each of which is entirely composed of independent directors. 

    Where the design and disclosure levels of equity compensation plans are comparable to those seen at U.S. companies, U.S. compensation policy will be used to evaluate the compensation plan proposals. Otherwise, they, and all other voting items, will be evaluated using the relevant market proxy voting guidelines. 

    Political Issues

    Overall Approach

    Generally vote FOR the management’s recommendation on shareholder proposals involving political issues.  When evaluating political shareholder proposals, an Advisor considers the most important factor to be whether adoption of the proposal is likely to enhance or protect shareholder value.

    Routine/Micellaneous

    Auditor Ratification

    Vote FOR proposals to ratify auditors unless any of the following apply:

    • An auditor has a financial interest in or association with the company, and is therefore not independent;
    • There is reason to believe that the independent auditor has rendered an opinion that is neither accurate nor indicative of the company’s financial position;
    • Poor accounting practices are identified that rise to a serious level of concern, such as: fraud; misapplication of GAAP, or material weaknesses identified in Section 404 disclosures; or
    • Fees for nonaudit services (“other” fees) are excessive.

    Non‐audit fees are excessive if:

    • Non‐audit (“other”) fees > audit fees + audit‐related fees + tax compliance/preparation fees.

    International Proxy Voting Summary Guidelines18

    Effective for Meetings on or after February 1, 2018 

    The proxy voting process as described in this Policy and the Guidelines seeks to ensure that proxy votes are cast in the best interests of the Advisors’ clients, as understood by the Advisors at the time of the vote. In order to provide greater analysis on certain shareholder meetings, the Advisors have elected to receive research reports for meetings from Institutional Shareholder Services, Inc., a third party service provider, as well as certain other third party proxy service providers, such as Glass Lewis, in the following circumstances: (1) where the Advisor’s clients have a significant aggregate holding in the issuer and the meeting agenda contains proxies concerning: Anti-takeover Defenses or Voting Related Issues, Mergers and Acquisitions or Reorganizations or Restructurings, Capital Structure Issues, Compensation Issues or a proxy contest; or (2) where the Advisor in its discretion, has deemed that additional research is warranted.  

     

    1. General Policies

     Financial Results/Director and Auditor Reports


    Vote FOR approval of financial statements and director and auditor reports, unless:

    • There are concerns about the accounts presented or audit procedures used; or
    • The company is not responsive to shareholder questions about specific items that should be publicly disclosed.

    Appointment of Auditors and Auditor Compensation


    Vote FOR proposals to ratify auditors and proposals authorizing the board to fix auditor fees, unless:

    • There are serious concerns about the accounts presented or the audit procedures used;
    • The auditors are being changed without explanation; or
    • Nonauditrelated fees are substantial or are routinely in excess of standard annual auditrelated fees.

    Vote AGAINST the appointment of external auditors if they have previously served the company in an executive capacity or can otherwise be considered affiliated with the company. 

    Appointment of Internal Statutory Auditors


    Vote FOR the appointment or (re)election of statutory auditors, unless:

    • There are serious concerns about the statutory reports presented or the audit procedures used;
    • Questions exist concerning any of the statutory auditors being appointed; or
    • The auditors have previously served the company in an executive capacity or can otherwise be considered affiliated with the company.

    Allocation of Income


    Vote FOR approval of the allocation of income, unless:

    • The dividend payout ratio has been consistently below 30 percent without adequate explanation; or
    • The payout is excessive given the company's financial position.

    Stock (Scrip) Dividend Alternative


    Vote FOR most stock (scrip) dividend proposals. 

    Vote AGAINST proposals that do not allow for a cash option unless management demonstrates that the cash option is harmful to shareholder value. 

    Amendments to Articles of Association


    Vote amendments to the articles of association on a CASE
    BYCASE basis. 

    Change in Company Fiscal Term


    Vote FOR resolutions to change a company's fiscal term unless a company's motivation for the change is to postpone its AGM. 

    Lower Disclosure Threshold for Stock Ownership


    Vote AGAINST resolutions to lower the stock ownership disclosure threshold below 5 percent unless specific reasons exist to implement a lower threshold. 

    Amend Quorum Requirements


    Vote proposals to amend quorum requirements for shareholder meetings on a CASE
    BYCASE basis. 

    Transact Other Business


    Vote AGAINST other business when it appears as a voting item. 

    2. Board of Directors

    Non-Contested Director Elections


    Vote FOR management nominees in the election of directors, unless:

    • Adequate disclosure has not been provided in a timely manner;
    • There are clear concerns over questionable finances or restatements;19
    • There have been questionable transactions with conflicts of interest;
    • There are any records of abuses against minority shareholder interests; or
    • The board fails to meet minimum corporate governance standards.

    Vote AGAINST the election or reelection of any and all director nominees when the names of the nominees are not available at the time the ISS analysis is written and therefore no research is provided on the nominee.

    Vote FOR individual nominees unless there are specific concerns about the individual, such as criminal wrongdoing or breach of fiduciary responsibilities. 

    Vote AGAINST individual directors if repeated absences at board meetings have not been explained (in countries where this information is disclosed). 

    Vote FOR employee and/or labor representatives if they sit on either the audit or compensation committee and are required by law to be on those committees. Vote AGAINST employee and/or labor representatives if they sit on either the audit or compensation committee, if they are not required to be on those committees. 

    Vote on a CASE
    BYCASE basis for contested elections of directors, e.g. the election of shareholder nominees or the dismissal of incumbent directors, determining which directors are best suited to add value for shareholders.20

    Classification of Directors International Policy


    Executive Director

    • Employee or executive of the company;
    • Any director who is classified as a nonexecutive, but receives salary, fees, bonus, and/or other benefits that are in line with the highestpaid executives of the company.


    Non
    Independent NonExecutive Director (NED)

    • Any director who is attested by the board to be a nonindependent NED;
    • Any director specifically designated as a representative of a significant shareholder of the company;
    • Any director who is also an employee or executive of a significant shareholder of the company;
    • Beneficial owner (direct or indirect) of at least 10% of the company's stock, either in economic terms or in voting rights (this may be aggregated if voting power is distributed among more than one member of a defined group, e.g., members of a family that beneficially own less than 10% individually, but collectively own more than 10%), unless market best practice dictates a lower ownership and/or disclosure threshold (and in other special marketspecific circumstances);
    • Government representative;
    • Currently provides (or a relative[1] provides) professional services[2] to the company, to an affiliate of the company, or to an individual officer of the company or of one of its affiliates in excess of $10,000 per year;
    • Represents customer, supplier, creditor, banker, or other entity with which the company maintains a transactional/commercial relationship (unless the company discloses information to apply a materiality test[3]);
    • Any director who has conflicting or crossdirectorships with executive directors or the chairman of the company;
    • Relative[1] of a current or former executive of the company or its affiliates;
    • A new appointee elected other than by a formal process through the General Meeting (such as a contractual appointment by a substantial shareholder);
    • Founder/cofounder/member of founding family but not currently an employee;
    • Former executive (5 year cooling off period);
    • Years of service will NOT be a determining factor unless it is recommended best practice in a market:
      • 9 years (from the date of election) in the United Kingdom and Ireland;
      • 12 years in European markets;
      • 7 years in Russia.

    Independent NED

    • Not classified as non-independent (see above);
    • No material[4] connection, either directly or indirectly, to the company other than a board seat.

    Employee Representative

    • Represents employees or employee shareholders of the company (classified as “employee representative” but considered a non‐independent NED).


    Footnotes: 

    [1] “Relative” follows the SEV’s proposed definition of “immediate family members” which covers spouses, parents, children, step
    parents, stepchildren, siblings, inlaws, and any person (other than a tenant or employee) sharing the household of any director, nominee for director, executive officer, or significant shareholder of the company. 

    [2] Professional services can be characterized as advisory in nature and generally include the following: investment banking/financial advisory services; commercial banking (beyond deposit services); investment services; insurance services; accounting/audit services; consulting services; marketing services; and legal services. The case of participation in a banking syndicate by a non
    lead bank should be considered a transaction (and hence subject to the associated materiality test) rather than a professional relationship. 

    [3] If the company makes or receives annual payments exceeding the greater of $200,000 or 5 percent of the recipient's gross revenues. (The recipient is the party receiving the financial proceeds from the transaction.) 

    [4] For purposes of ISS' director independence classification, “material” will be defined as a standard of relationship (financial, personal or otherwise) that a reasonable person might conclude could potentially influence one's objectivity in the boardroom in a manner that would have a meaningful impact on an individual's ability to satisfy requisite fiduciary standards on behalf of shareholders. 

    Contested Director Elections21


    For shareholder nominees, the persuasive burden is on the nominee or the proposing shareholder to prove that they are better suited to serve on the board than management's nominees. Serious consideration of shareholder nominees will be given only if there are clear and compelling reasons for the nominee to join the board. These nominees must also demonstrate a clear ability to contribute positively to board deliberations; some nominees may have hidden or narrow agendas and may unnecessarily contribute to divisiveness among directors. 

    The major decision factors are:

    • Company performance relative to its peers;
    • Strategy of the incumbents versus the dissidents;
    • Independence of directors/nominees;
    • Experience and skills of board candidates;
    • Governance profile of the company;
    • Evidence of management entrenchment;
    • Responsiveness to shareholders;
    • Whether a takeover offer has been rebuffed.


    When analyzing a contested election of directors, an Advisor will generally focus on two central questions: (1) Have the proponents proved that board change is warranted? And if so, (2) Are the proponent board nominees likely to effect positive change (i.e., maximize long
    term shareholder value)? 

    Voting on Directors for Egregious Actions

    Under extraordinary circumstances, vote AGAINST or WITHOLD from directors individually, on a committee, or the entire board, due to:

    • Material failures of governance, stewardship, risk oversight, or fiduciary responsibilities at the company;
    • Failure to replace management as appropriate; or
    • Egregious actions related to the director(s)’ service on other boards that raise substantial doubt about his or her ability to effectively oversee management and serve the best interests of shareholders at any company.22

    Discharge of Board and Management


    Vote for the discharge of directors, including members of the management board and/or supervisory board, unless there is reliable information about significant and compelling concerns that the board is not fulfilling its fiduciary duties warranted on a CASE-BY-CASE basis by:

    • A lack of oversight or actions by board members which invoke shareholder distrust related to malfeasance or poor supervision, such as operating in private or company interest rather than in shareholder interest
    • Any legal issues (e.g. civil/criminal) aiming to hold the board responsible for breach of trust in the past or related to currently alleged action yet to be confirmed (and not only in the fiscal year in question) such as price fixing, insider trading, bribery, fraud, and other illegal actions
    • Other egregious governance issues where shareholders will bring legal action against the company or its directors


    For markets which do not routinely request discharge resolutions (e.g. common law countries or markets where discharge is not mandatory), analysts may voice concern in other appropriate agenda items, such as approval of the annual accounts or other relevant resolutions, to enable shareholders to express discontent with the board. 

    Director, Officer, and Auditor Indemnification and Liability Provisions


    Vote proposals seeking indemnification and liability protection for directors and officers on a CASE
    BYCASE basis. 

    Vote AGAINST proposals to indemnify external auditors. 

    Board Structure


    Vote FOR routine proposals to fix board size. 

    Vote AGAINST the introduction of classified boards and mandatory retirement ages for directors. 

    Vote AGAINST proposals to alter board structure or size in the context of a fight for control of the company or the board. 

    3. Capital Structure23

    Share Issuance Requests


    General Issuances 

    Vote FOR issuance authorities with pre-emptive rights to a maximum of 100 percent over currently issued capital and as long as the share issuance authorities’ periods are clearly disclosed (or implied by the application of a legal maximum duration) and in line with market-specific practices and/or recommended guidelines. 

    Vote FOR issuance authorities without pre-emptive rights to a maximum of 20 percent (or a lower limit if local market best practice recommendations provide) of currently issued capital as long as the share issuance authorities’ periods are clearly disclosed (or implied by the application of a legal maximum duration) and in line with market-specific practices and/or recommended guidelines.


    Specific Issuances 

    Vote on a CASE
    BYCASE basis on all requests, with or without preemptive rights. 

    Increases in Authorized Capital


    Vote FOR non
    specific proposals to increase authorized capital up to 100 percent over the current authorization unless the increase would leave the company with less than 30 percent of its new authorization outstanding. 

    Vote FOR specific proposals to increase authorized capital to any amount, unless:

    • The specific purpose of the increase (such as a sharebased acquisition or merger) does not meet ISS guidelines for the purpose being proposed; or
    • The increase would leave the company with less than 30 percent of its new authorization outstanding after adjusting for all proposed issuances.


    Vote AGAINST proposals to adopt unlimited capital authorizations. 

    Reduction of Capital


    Vote FOR proposals to reduce capital for routine accounting purposes unless the terms are unfavorable to shareholders. 

    Vote proposals to reduce capital in connection with corporate restructuring on a CASE
    BYCASE basis. 

    Capital Structures


    Vote FOR resolutions that seek to maintain or convert to a one
    share, onevote capital structure. 

    Vote AGAINST requests for the creation or continuation of dual
    class capital structures or the creation of new or additional super voting shares. 

    Preferred Stock


    Vote FOR the creation of a new class of preferred stock or for issuances of preferred stock up to 50 percent of issued capital unless the terms of the preferred stock would adversely affect the rights of existing shareholders. 

    Vote FOR the creation/issuance of convertible preferred stock as long as the maximum number of common shares that could be issued upon conversion meets the guidelines on equity issuance requests. 

    Vote AGAINST the creation of a new class of preference shares that would carry superior voting rights to the common shares. 

    Vote AGAINST the creation of blank check preferred stock unless the board clearly states that the authorization will not be used to thwart a takeover bid. 

    Vote proposals to increase blank check preferred authorizations on a CASE
    BYCASE basis. 

    Debt Issuance Requests


    Vote non
    convertible debt issuance requests on a CASEBYCASE basis, with or without preemptive rights. 

    Vote FOR the creation/issuance of convertible debt instruments as long as the maximum number of common shares that could be issued upon conversion meets the guidelines on equity issuance requests. 

    Vote FOR proposals to restructure existing debt arrangements unless the terms of the restructuring would adversely affect the rights of shareholders. 

    Pledging of Assets for Debt


    Vote proposals to approve the pledging of assets for debt on a CASE
    BYCASE basis. 

    Increase in Borrowing Powers


    Vote proposals to approve increases in a company's borrowing powers on a CASE
    BYCASE basis. 

    Share Repurchase Plans


    Generally vote FOR share repurchase programs/market authorities, provided that the proposal meets the following parameters:

    • Maximum Volume: 10 percent for market repurchase within any single authority and 10 percent of outstanding shares to be kept in treasury (“on the shelf”); and
    • Duration does not exceed 18 months.

    Vote AGAINST any proposal where:

    • The repurchase can be used for takeover defenses;
    • There is clear evidence of abuse;
    • There is no safeguard against selective buybacks; and/or
    • Pricing provisions and safeguards are deemed to be unreasonable in light of market practice.

    Share repurchase plans in excess of 10 percent volume in exceptional circumstances, such as oneoff company specific events (e.g. capital restructuring), will be assessed CASEBYCASE based on merits, which should be clearly disclosed in the annual report, provided that following conditions are met:

    • The overall balance of the proposed plan seems to be clearly in shareholders’ interests;
    • The plan still respects the 10 percent maximum of shares to be kept in treasury.

    Reissuance of Repurchased Shares


    Vote FOR requests to reissue any repurchased shares unless there is clear evidence of abuse of this authority in the past. 

    Capitalization of Reserves for Bonus Issues/Increase in Par Value


    Vote FOR requests to capitalize reserves for bonus issues of shares or to increase par value. 

    4. Compensation24

    Compensation Plans


    Vote compensation plans on a CASE
    BYCASE basis consistent with the following principles:

    • Provide shareholders with clear, comprehensive compensation disclosures;
    • Maintain appropriate payforperformance alignment with emphasis on longterm shareholder value;
    • Avoid arrangements that risk “pay for failure;”
    • Maintain an independent and effective compensation committee;
    • Avoid inappropriate pay to non-executive directors.

    Director Compensation


    Vote FOR proposals to award cash fees to non
    executive directors unless the amounts are excessive relative to other companies in the country or industry. 

    Vote non
    executive director compensation proposals that include both cash and sharebased components on a CASEBY CASE basis. 

    Vote proposals that bundle compensation for both non
    executive and executive directors into a single resolution on a CASE BYCASE basis. 

    Vote AGAINST proposals to introduce retirement benefits for non
    executive directors. 

    5. Other Items

    Reorganizations/Restructurings


    Vote reorganizations and restructurings on a CASE
    BYCASE basis. 

    Mergers and Acquisitions


    Vote CASE
    BYCASE on mergers and acquisitions taking into account the following: 

    Vote CASE-BY-CASE on mergers and acquisistions. Review and evaluate the merits and drawbacks of the proposed transaction, balancing various and sometimes countervailing factors including:

    • Valuation Is the value to be received by the target shareholders (or paid by the acquirer) reasonable? An Advisor places emphasis on the offer premium, market reaction, and strategic rationale.
    • Market reaction How has the market responded to the proposed deal?
    • Strategic rationale Does the deal make sense strategically? From where is the value derived? Cost and revenue synergies should not be overly aggressive or optimistic, but reasonably achievable. Management should also have a favorable track record of successful integration of historical acquisitions.
    • Conflicts of interest Are insiders benefiting from the transaction disproportionately and inappropriately as compared to noninsider shareholders or have special interests influenced directors and officers to support or recommend the merger?
    • Governance Will the combined company have a better or worse governance profile than the current governance profiles of the respective parties to the transaction? If the governance profile is to change for the worse, the burden is on the company to prove that other issues (such as valuation) outweigh any deterioration in governance.


    Vote AGAINST if the companies do not provide sufficient information upon request to allow shareholders to make an informed voting decision. 

    Mandatory Takeover Bid Waivers


    Vote proposals to waive mandatory takeover bid requirements on a CASE
    BYCASE basis. 

    Reincorporation Proposals


    Vote reincorporation proposals on a CASE
    BYCASE basis. 

    Expansion of Business Activities


    Vote FOR resolutions to expand business activities unless the new business takes the company into risky areas. 

    RelatedParty Transactions


    Vote related
    party transactions on a CASEBYCASE basis. 

    Antitakeover Mechanisms


    Vote AGAINST all antitakeover proposals unless they are structured in such a way that they give shareholders the ultimate decision on any proposal or offer. 

    Shareholder Proposals


    Vote all shareholder proposals on a CASE
    BYCASE basis. 

    Vote FOR proposals that would improve the company's corporate governance or business profile at a reasonable cost. 

    Vote AGAINST proposals that limit the company's business activities or capabilities or result in significant costs being incurred with little or no benefit. 

    Corporate Social Responsibility (CSR) Issues


    Generally vote FOR the management’s recommendation on shareholder proposals involving CSR Issues. When evaluating social and environmental shareholder proposals, an Advisor considers the most important factor to be whether adoption of the proposal is likely to enhance or protect shareholder value.
    An Advisor will communicate directly with a company when it believes a CSR issue may have economic ramifications for the shareholders. If a company is unresponsive to the concerns raised, an Advisor will reinforce the board accountability by voting against or withholding from directors individually, committee members, or the entire board.

    Environmentally Screened Portfolios

    With respect to environmentally screened portfolios, the Advisor will generally vote on shareholder proposals involving environmental issues in accordance with the following guidelines: 

    Generally vote CASEBYCASE, taking into consideration whether implementation of the proposal is likely to
    enhance or protect shareholder value, and in addition the following will also be considered:

    • If the issues presented in the proposal are more appropriately or effectively dealt with through legislation or government regulation;
    • If the company has already responded in an appropriate and sufficient manner to the issue(s) raised in the proposal;
    • Whether the proposal's request is unduly burdensome (scope, or timeframe) or overly prescriptive;
    • The company's approach compared with any industry standard practices for addressing the issue(s) raised by the proposal;
    • If the proposal requests increased disclosure or greater transparency, whether or not reasonable and sufficient information is currently available to shareholders from the company or from other publicly available sources; and
    • If the proposal requests increased disclosure or greater transparency, whether or not implementation would reveal proprietary or confidential information that could place the company at a competitive disadvantage.

    Generally vote for resolutions requesting that a company disclose information on the risks related to
    climate change on its operations and investments, such as financial, physical, or regulatory risks,
    considering:

    • Whether the company already provides current, publiclyavailable information on the impact that climate change may have on the company as well as associated company policies and procedures to address related risks and/or opportunities;
    • The company’s level of disclosure is at least comparable to that of industry peers; and
    • There are no significant controversies, fines, penalties, or litigation associated with the company’s environmental performance.

    Generally vote for proposals requesting a report on greenhouse gas (GHG) emissions from company
    operations and/or products and operations, unless:

    • The company already discloses current, publiclyavailable information on the impacts that GHG emissions may have on the company as well as associated company policies and procedures to address related risks and/or opportunities;
    • The company's level of disclosure is comparable to that of industry peers; and
    • There are no significant, controversies, fines, penalties, or litigation associated with the company's GHG emissions.

    Vote casebycase on proposals that call for the adoption of GHG reduction goals from products and
    operations, taking into account:

    • Whether the company provides disclosure of yearoveryear GHG emissions performance data;
    • Whether company disclosure lags behind industry peers;
    • The company's actual GHG emissions performance;
    • The company's current GHG emission policies, oversight mechanisms, and related initiatives; and
    • Whether the company has been the subject of recent, significant violations, fines, litigation, or controversy related to GHG emissions.

    Country of Incorporation vs. Country of ListingApplication of Policy


    In general, country of incorporation will be the basis for policy application. However, US policies will be applied to the extent possible at issuers that file DEF 14As, 10
    K annual and 10Q quarterly reports and are thus considered domestic issuers by the U.S. Securities and Exchange Commission (SEC). 

    Foreign Private Issuers Listed on U.S. Exchanges


    Companies that are incorporated outside of the U.S. and listed solely on U.S. exchanges, where they qualify as Foreign Private Issuers, will be subject to the following policy: 

    Vote AGAINST (or WITHHOLD from) non
    independent director nominees at companies which fail to meet the following criteria: a majorityindependent board, and the presence of an audit, a compensation, and a nomination committee, each of which is entirely composed of independent directors. 

    Where the design and disclosure levels of equity compensation plans are comparable to those seen at U.S. companies, U.S. compensation policy will be used to evaluate the compensation plan proposals. In all other cases, equity compensation plans will be evaluated according to the US Proxy Voting Guidelines. 

    All other voting items will be evaluated using the International Proxy Voting Guidelines. 

    Foreign private issuers ("FPIs") are defined as companies whose business is administered principally outside the U.S., with more than 50 percent of assets located outside the U.S.; a majority of whose directors/officers are not U.S. citizens or residents; and a majority of whose outstanding voting shares are held by non
    residents of the U.S. 

    Endnotes


    1. In general, companies with a plurality vote standard use “Withhold” as the contrary vote option in director elections; companies with a majority vote standard use “Against”. However, it will vary by company and the proxy must be checked to determine the valid contrary vote option for the particular company. 

    2. A “new nominee” is any current nominee who has not already been elected by shareholders and who joined the board after the problematic action in question transpired. If ISS cannot determine whether the nominee joined the board before or after the problematic action transpired, the nominee will be considered a “new nominee” if he or she joined the board within the 12 months prior to the upcoming shareholder meeting. 

    3.The Advisor may vote AGAINST or WITHHOLD from an individual director if the director also serves as a director for another company that has (i) adopted a poison pill for any purpose other than protecting such other company’s net operating losses, or (ii) failed to eliminate a poison pill following a proxy contest in which a majority of directors were replaced. 


    4. Under the Advisors' guidelines, implementation of a multi-class voting structure prior to or in connection with the company's public offering will not, per se, warrant a vote AGAINST or WHITHHOLD under this provision.

    5. Examples of failure of risk oversight include, but are not limited to: bribery; large or serial fines or sanctions from regulatory bodies; significant adverse legal judgments or settlements; hedging of company stock; or significant pledging of company stock. 

    6. For new nominees only, schedule conflicts due to commitments made prior to their appointment to the board are considered if disclosed in the proxy or another SEC filing.

    7. An Advisor generally does not consider the duration of required ownership in evaluating proxy access.

    8. See introductory information concerning proxies involving this issue and the supplementary actions the Advisor may take. 

    9. See introductory information concerning proxies involving this issue and the supplementary actions the Advisor may take.

    10. The Advisor may vote AGAINST or WITHHOLD from an individual director if the director has adopted a fee-shifting bylaw provision without a shareholder vote.  

    11. "Unfettered" means no restrictions on agenda items, no restrictions on the number of shareholders who can group together to reach the 10 percent threshold, and only reasonable limits on when a meeting can be called: no greater than 30 days after the last annual meeting and no greater than 90 prior to the next annual meeting. 

    12. See introductory information concerning proxies involving this issue and the supplementary actions the Advisor may take. 

    13. See introductory information concerning proxies involving this issue and the supplementary actions the Advisor may take. 

    14. In addition to the peer group disclosed in a company’s proxy statement, an Advisor may consider other peer companies that are comparable in market cap, revenue (or assets for certain financial firms), industry and other factors.

    15. See introductory information concerning proxies involving this issue and the supplementary actions the Advisor may take. 

    16. Proposals evaluated under the EPSC policy generally include those to approve or amend (1) stock option plans for employees and/or employees and directors, (2) restricted stock plans for employees and/or employees and directors, and (3) omnibus stock incentive plans for employees and/or employees and directors; amended plans will be further evaluated case-by-case. 

    17.See Governance Failures section under Section 1 above (Board of Directors- Accountability)

    18. This is a summary of the majority of International Markets, however, certain countries and/or markets have separate policies which are generally consistent with the principles reflected in this summary but are modified to reflect issues such as those related to customs, disclosure obligations and legal structures of the relevant jurisdiction. 


    19. In Japan, an Advisor may vote FOR individual director(s) where proxy research has identified no overriding concerns beyond the company's failure of a quantitative capital efficiency (ROE) test applied by the proxy research firm.

    20. See introductory information concerning proxies involving this issue and the supplementary actions an Advisor may take. 

    21. See introductory information concerning proxies involving this issue and the supplementary actions an Advisor may take. 

    22. The Advisor may vote AGAINST or WITHHOLD from an individual director if the director also serves as a director for another company that has adopted a poison pill for any purpose other than protecting such other company’s net operating losses. 

    23. See introductory information concerning proxies involving this issue and the supplementary actions an Advisor may take. 

    24. See introductory information concerning proxies involving this issue and the supplementary actions an Advisor may take.

    Dimensional Fund Advisors Ltd. is authorised and regulated by the Financial Conduct Authority (FRN: 150100). You should obtain relevant and specific professional advice before making any investment decision. Past performance is not an indication of future performance. Please read the Important Information.

  • Responsible Investment Policy

    Responsible Investment Statement

    Effective as of February 2018

    General Statement

    Dimensional’s investment philosophy is based on the belief that in liquid capital markets, prices reflect all publicly available information about fundamental values. As such, Dimensional’s view is that securities traded in those markets reflect the aggregate risk and return expectations of all market participants and competition among market participants drives prices toward fair value.

    This belief in markets means that Dimensional expects any value or long-term profitability attributable to a company’s current environmental, social, and governance practices to be reflected in a company’s price. A company can improve its corporate governance practices by aligning company management with shareholder interests, such as by promoting strong board representation, as well as by reducing unnecessary environmental and social risks. Dimensional also believes efforts to improve corporate governance may be reflected in increased valuations through a combination of lower discount rates and higher cash flows. For this reason, Dimensional primarily focuses its responsible investment efforts on improving governance practices in companies within the investment portfolios it manages on behalf of its clients.

    Investors, particularly long-term shareholders with significant positions, can be well positioned to positively influence a company’s governance practices. We believe that shareholders have a right to be heard by company management and that it is our responsibility as an investment manager to judiciously exercise shareholder voting rights on behalf of the portfolios we manage, taking into account both the costs and potential benefits. Dimensional broadly incorporates governance considerations into the investment management process through its proxy voting, which incorporates practices to reflect shareholder interests, as well as communicating with portfolio companies to share Dimensional policies and areas of focus with regard to governance practices. Dimensional improves its internal processes through selected projects, research and consistent review of those processes.

    United Nations Principles for Responsible Investment (“UNPRI”)

    As part of its commitment to encouraging strong governance, Dimensional became a signatory to the UNPRI in August 2012. The UNPRI provides a framework for incorporating environmental, social, and corporate governance (“ESG”) considerations into investment management practices. Dimensional commits to adopt and implement the six principles of the UNPRI (the “Principles”) where consistent with its fiduciary duty to clients, including:

    Principle 1: Dimensional will incorporate ESG issues into investment analysis and decision-making processes.

    Principle 2: Dimensional will incorporate ESG issues into relevant policies and practices.

    Principle 3: Dimensional will seek appropriate disclosure on ESG issues from relevant portfolio companies.

    Principle 4: Dimensional will promote acceptance and implementation of the Principles within the investment industry.

    Principle 5: Dimensional will work to enhance its effectiveness in implementing the Principles.

    Principle 6: Dimensional will report on its activities and progress toward implementing the Principles.

    Responsible Investment Initiatives

    Corporate Governance Committee and CG Group

    Dimensional has established a Corporate Governance Committee that reports to the Investment Committee. The Corporate Governance Committee is composed of senior executives, officers, directors, and members of the portfolio management team and is responsible for administering Dimensional’s proxy voting policy, considering complex proxy voting cases, and overseeing the Corporate Governance Group.

    The Corporate Governance Group is a day-to-day working unit, which implements policies and oversees operations. This group includes dedicated analysts and resides within Portfolio Management. The group also utilizes investment management personnel in the Portfolio Management group.

    Investment Management

    Dimensional’s primary responsible investment focus is on improving governance practices at portfolio companies.  As an example, Dimensional generally excludes closely held companies from its universe of eligible securities for its clients on governance grounds, since companies with large strategic shareholders may not represent the interests of a broad set of shareholders. Dimensional may also choose not to purchase companies for its clients where, based on public information, in its judgment, there is a heightened concern of fraudulent or other behavior or situations that may make market information unreliable.

    Dimensional also takes environmental and social principles into consideration for certain portfolios it manages. If clients have particular social and/or environmental preferences, Dimensional can implement negative screens or overlays to its underlying investment strategies to provide those clients with tailored investment solutions. Many of these preferences are incorporated into Dimensional’s social funds and sustainability funds.

    In social funds, Dimensional seeks to incorporate social considerations into investment strategies by identifying and screening companies to reflect the values of its clients. Dimensional may utilize research from independent third-party vendors, depending on the requirements of each portfolio, to systematically exclude restricted securities.

    In sustainability funds, Dimensional seeks to address the sustainability issues important to investors while maintaining sound investment principles. Sustainability considerations are integrated within a robust investment solution that pursues higher expected returns through increased weighting to smaller market cap, lower relative price, and higher profitability securities. Using data collected by Dimensional and research from independent third-party vendors on company business practices, companies are systematically evaluated with regard to sustainability. Investment in those companies is emphasized, reduced, or excluded based on how they fare on key sustainability metrics, including the primary sustainability impact considerations of high greenhouse gas emissions or reserves that may produce those emissions. Dimensional’s approach to sustainability can offer investors the ability to pursue their sustainability and investment goals simultaneously.

    With regard to social and/or environmental considerations, it is Dimensional’s belief that investors decide whether those preferences should be aligned with their investment decisions, but that choice should not have to come at the expense of sound investment principles. These views are reflected in Dimensional’s social and sustainability funds.

    Approaching Corporate Governance

    • Proxy Voting

    Proxy voting is the act of exercising shareholder voting rights on behalf of clients, and Dimensional views proxy voting as an integral part of its investment management process. As Dimensional believes that stronger corporate governance practices will be reflected in higher security prices, Dimensional seeks to make proxy voting decisions consistent with the goal that boards and management of portfolio companies are focused on protecting and enhancing shareholder value. Dimensional may engage external vendors for voting execution and recommendations for certain shareholder meetings but remains responsible for voting decisions.

    Dimensional takes into consideration the costs associated with voting and generally will vote in instances where the expected economic benefit of doing so outweighs the costs for a given portfolio. Dimensional may use securities lending as a way to increase performance. For securities on loan, Dimensional will balance the revenue-producing value of loans against the value of casting votes. Dimensional does intend to recall securities on loan if, based upon information in Dimensional’s possession, it determines that voting the securities is likely to materially affect the value of a client’s investment and that is in the client’s best interests to do so.

    • Company Communications

    When there is potential to increase shareholder value in connection with corporate governance, Dimensional will listen to the management of companies and may share with such companies Dimensional’s policies and areas of focus with regard to governance best practices. Dimensional’s Corporate Governance Group communicates directly with portfolio companies to understand their approach to corporate governance, including management of material environmental and social factors. In all such communications, Dimensional’s aim is to seek additional information in the interests of protecting and enhancing the value of the investments of Dimensional’s clients.

    A majority of the conversations are prompted when the companies have not provided sufficient information in their disclosures for Dimensional to assess particular elements concerning the company’s proxy, including but not limited to, executive compensation, anti-takeover provisions, board composition and effectiveness, material sustainability factors, and shareholder proposals. In these conversations, Dimensional prioritizes its questions to hear from companies how the board aligns management and shareholder interests, and protects shareholder value.

    Though Dimensional uses its voice to communicate directly with the board and management, Dimensional does not try to impose change through dialog, as it is ultimately the board and management that decide how to run their company, and portfolio companies are aware that they will be held accountable by their large shareholders like Dimensional through the mechanism of proxy voting.

    • Industry Participation

    Dimensional may join or participate in events with relevant industry groups where an opportunity exists to improve its internal processes.

    • Internal Projects and Research

    Dimensional may conduct research on the implications of certain governance practices and what it means for a company to have good governance policies and practices.

    Disclosures and Reporting

    Dimensional discloses information concerning its proxy voting records on its website and in other governance-related materials as appropriate, and updates such information as new information becomes available from time to time. Dimensional also posts detailed proxy voting records on its website where required in accordance with applicable regulations.

    Dimensional will annually report on its progress towards implementing the UNPRI as required.

    Corporate Responsibility

    Dimensional is committed to improving its sustainability practices globally by seeking to understand the impact of its business operations on the environment and develop offices, plans, and processes that minimize those impacts. Dimensional’s corporate headquarters was awarded a three-star rating by Austin Energy Green Building.


    * “Dimensional” refers to the Dimensional separate but affiliated entities generally, rather than one particular entity. These entities are Dimensional Fund Advisors LP, Dimensional Fund Advisors Ltd., DFA Australia Limited, Dimensional Fund Advisors Canada ULC, Dimensional Fund Advisors Pte. Ltd. and Dimensional Japan Ltd.

  • Frequently Asked Questions

    Who is responsible for Corporate Governance at Dimensional?

    Dimensional’s global corporate governance activities are managed by the Corporate Governance (CG) group, which sits within Dimensional’s Portfolio Management department. The group implements policies, monitors day-to-day operations, and researches governance issues and industry trends. Our Corporate Governance Committee, comprised of senior management, is responsible for overseeing the CG group, formulating and recommending changes to policy, and making decisions on governance-related matters.

    What is Dimensional’s policy on proxy voting?

    Dimensional votes or refrains from voting proxies on behalf of Australian trusts as well as those separate account mandates for which clients have given us the authority to vote according to its then current proxy voting policies and procedures. Our voting activities are intended to maximize shareholder value. This involves consideration of the feasibility, costs, and expected benefits of voting for each portfolio.

    Does Dimensional vote proxies at every company meeting?

    Dimensional seeks to vote, or refrain from voting, proxies in a manner that we believe is in the best interest of each portfolio. In instances where the costs—including opportunity costs—of voting exceed the expected economic benefits, we may refrain from voting. Additionally, international market restrictions—such as share blocking, re-registration, and onerous power of attorney requirements—may preclude us from voting in certain markets or at certain company meetings.

    Does Dimensional utilize any third-party services in the proxy voting process?

    Yes. Dimensional has engaged Institutional Shareholder Services (ISS) to provide information on shareholder meeting dates, research on proxy proposals, and voting recommendations based on our proxy voting policies and procedures. ISS also provides vote execution through its proprietary voting platform. In addition to ISS, we may also review voting recommendations from Glass Lewis and other research providers for selected meetings. Third-party research is only one of several inputs into our voting decision on a given proposal. We retain final discretion on how to vote.

    Does Dimensional disclose its voting intentions or share ownership prior to voting?

    Dimensional generally does not disclose our voting intentions or the portfolios’ share ownership prior to voting, except as required by applicable laws and regulation.

    Does Dimensional make its proxy voting record publicly available?

    Yes. We disclose voting information for our Australian trusts on our public website.

    Is Dimensional a signatory to the United Nations Principles for Responsible Investment (UN-PRI)?

    Yes. Dimensional became a signatory to the UN-PRI in August 2012.

    How may I contact Dimensional’s Corporate Governance group?

    The group may be contacted via email: corporategovernance@dimensional.com.

Voting - Australian Trusts

  • Annual Summary

    2016 CALENDAR YEAR

    Voting Summary
    From January 1 to December 31, 2016, Dimensional's Australian Wholesale Trusts voted 14,112 proposals (98%) at 1,087 company meetings.1 All Australian meetings for which ballots were received in a timely manner were voted.

    PROPOSAL COUNT, BY VOTE INSTRUCTION

    Matters Voted

    The following statistics relate to proposals that were voted:

    • Board directorships (56%) and executive compensation (25%) were the most common matters voted.
    • Shareholder proposals represented 1.7% of all proposals.

     

    PROPOSALS VOTED ON, BY ISSUE

    Proposals Voted on By Issue

    SUPPORT FOR MANAGEMENT AND SHAREHOLDER PROPOSALS

    Management Proposals

    Proposal Type Number of Proposals Voted Percentage Voted For Percentage Voted Against
    Antitakeover Related 236 92.8% 7.2%
    Capitalisation 685 86.7% 13.3%
    Compensation 3,464 85.8% 14.2%
    Directors Related 7,894 92.3% 7.7%
    Procedural Matters 1,319 94.8% 5.2%
    Reorganization and Mergers 270 96.3% 3.7%
    Total 13,868 90.7% 9.3%

    Shareholder Proposals

    Proposal Type Number of Proposals Voted Percentage Voted For Percentage Voted Against
    Directors Related 66 62.1% 37.9%
    Procedural Matters 178 22.5% 77.5%
    Total 244 33.2% 66.8%

    1. Dimensional votes proxies wherever it is feasible and economical to do so. We may not vote in markets that have share-blocking, re-registration or other practices that impair our ability to sell voted shares. In addition, we consider the costs associated with voting (per vote charges, meeting representation fees, etc.) and vote in instances where the expected economic benefit of voting outweighs the costs for a given portfolio.

  • Proxy Voting Records