Board of Directors

 

 

 

Voting on Director Nominees in Uncontested Elections

 

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

 

1.	Accountability

 

Vote AGAINST 1 or WITHHOLD from the entire board of directors (except new nominees 2 , who should be considered CASE-BY-CASE) 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. Sustained poor performance is measured by one- and three-year total shareholder returns in the bottom half of a company’s four-digit GICS industry group (Russell 3000 companies only). Take into consideration the company’s five-year total shareholder return and operational metrics. 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 carve-out for contested elections;

·

The inability of shareholders to call special meetings;

·

The inability of shareholders to act by written consent;

·

A dual-class capital structure; and/or

·

A non–shareholder-approved poison pill.

Poison Pills 3 :

 

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:

 

 

1.11.

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

1.12.

The company maintains significant problematic pay practices ;

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1.13.

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

1.14.

The company fails to submit one-time transfers of stock options  to a shareholder vote; or

1.15.

The company fails to fulfill the terms of a burn rate commitment  made to shareholders.

 

·

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;

·

Whether the amendment was made prior to or in connection with the company's initial public offering;

·

The timing of the board's amendment to the bylaws/charter in connection with a significant business development;

·

Other factors, as deemed appropriate, that may be relevant to determine the impact of the amendment on shareholders.

 

Governance Failures

 

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

 

    

 

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 AGAINST or WITHHOLD from individual directors who:

 

3.3. 3.4.

Sit on more than six public company boards 6 ; or Are CEOs of public companies who sit on the boards of more than two public companies besides their own—withhold only at their outside boards 7 .

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.

6 Dimensional may screen votes otherwise subject to this policy based on the qualifications and circumstances of the directors involved.

7 Although all of a CEO’s subsidiary boards will be counted as separate boards, ISS will not recommend a withhold vote from the CEO of a parent company board or any of the controlled (>50 percent ownership) subsidiaries of that parent, but will do so at subsidiaries that are less than 50 percent controlled and boards outside the parent/subsidiary relationships.

Vote CASE-BY-CASE on proposals to enact proxy access, taking into account, among other factors:

 

·

Company-specific factors; and

·

Proposal-specific factors, including:

o

The ownership thresholds proposed in the resolution (i.e., percentage and duration);

o

The maximum proportion of directors that shareholders may nominate each year; and

Proxy Contests—Voting for Director Nominees in Contested Elections 9

 

Vote CASE-BY-CASE on the election of directors in contested elections, considering the following factors:

 

·

Long-term financial performance of the target company relative to its industry;

·

Management’s track record;

·

Background to the proxy contest;

·

Nominee qualifications and any compensatory arrangements;

·

Strategic plan of dissident slate and quality of critique against management;

·

Likelihood that the proposed goals and objectives can be achieved (both slates); and

·

Stock ownership positions.

 

When the addition of shareholder nominees to the management card (“proxy access nominees”) results in a number of nominees on the management card which exceeds the number of seats available for election, vote CASE-BY-CASE considering the same factors listed above.

 

Shareholder Rights & Defenses 10

 

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

8 Dimensional will vote against binding proposals where the shareholder proponent(s) hold less than a 5% ownership interest in the company for companies included in the S&P 500 Index, or less than a 7.5% ownership interest in the company for all other companies. Where these ownership thresholds have been met by the shareholder proponent(s), Dimensional will vote in accordance with the recommendation of ISS.

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

 

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