Proxy Voting Policies and Procedures, Geode Capital Management, LLC

Transcription

1 Prxy Vting Plicies and Prcedures, Gede Capital Management, LLC May 2017 As an investment adviser, Gede hlds vting authrity fr securities in many f the client accunts that it manages. Gede takes seriusly its respnsibility t mnitr crprate events affecting securities in thse client accunts and t exercise its vting authrity with respect t thse securities in the best interests f its clients (including sharehlders f mutual funds fr which it serves as advisr r sub-advisr). The purpses f these prxy vting plicies are t (1) establish a framewrk fr Gede's analysis and decisin-making with respect t prxy vting and (2) set frth peratinal prcedures fr Gede's exercise f prxy vting authrity. Overview Gede applies the same vting decisin fr all accunts in which it exercises vting authrity, and seeks in all cases t vte in a manner that Gede believes represents the best interests f its clients (including sharehlders f mutual funds fr which it serves as advisr r sub-advisr). Gede anticipates that, based n its current business mdel, it will manage the vast majrity f assets under its management using passive investment management techniques, such as indexing. Gede als manages private funds and separate accunts using active investment management techniques, primarily emplying quantitative investment strategies. Members f the Operatins Cmmittee versee the exercise f vting authrity under these prxy vting plicies, cnsulting with Gede's legal cunsel with respect t cntrversial matters and fr interpretive and ther guidance. Gede will engage an established cmmercial prxy advisry service (the "Agent") fr cmprehensive analysis, research and vting recmmendatins, particularly fr matters that may be cntrversial, present ptential cnflicts f interest r require additinal analysis under these guidelines. Gede may determine t accept r reject any recmmendatin based n the research and analysis prvided by the Agent r n any independent research and analysis btained r generated by Gede. Hwever, because the recmmended vtes are determined slely based n the custmized plicies established by Gede, Gede expects that the recmmendatins will be fllwed in mst cases. The Agent als acts as a prxy vting agent t effect the vtes and maintain recrds f all f Gede's prxy vtes. In all cases, the ultimate vting decisin and respnsibility rests with the members f the Operatins Cmmittee, which are accuntable t Gede's clients (including sharehlders f mutual funds fr which it serves as advisr r sub-advisr). Due t its fcused business mdel and the number f investments that Gede will make fr its clients (particularly pursuant t its indexing strategy), Gede des nt anticipate that actual r ptential cnflicts f interest are likely t ccur in the rdinary curse f its business. Hwever, Gede believes it is essential t avid having cnflicts f interest affect its bjective f vting in the best interests f its clients. Therefre, in the event that members f the Operatins Cmmittee, the Agent r any ther persn invlved in the analysis r vting f prxies has knwledge f, r has reasn t believe there may exist, any ptential relatinship, business r therwise, between the prtfli cmpany subject t the prxy vte and Gede (and any subsidiary f Gede) r their respective directrs, fficers, emplyees r agents, such persn shall ntify ther members f the Operatins Cmmittee and may cnsult with utside cunsel t Gede t analyze and address such ptential cnflict f interest. In the case f an actual cnflict f interest, n the advice f cunsel, Gede expects that the independent directrs f Gede will cnsider the matter and may (1) determine that there is n cnflict f interest (r that reasnable measures have been taken t remedy r avid any cnflict f interest) that wuld prevent Gede frm vting the applicable prxy, (2) using such infrmatin as is available frm the Agent, vte the applicable prxy, r (3) cause authrity t be delegated t the Agent r a similar special fiduciary t vte the applicable prxy. 1 f 7

2 Gede has established the specific prxy vting plicies that are summarized belw t maximize the value f investments in its clients' accunts, which it believes will be furthered thrugh (1) accuntability f a cmpany's management and directrs t its sharehlders, (2) alignment f the interests f management with thse f sharehlders (including thrugh cmpensatin, benefit and equity wnership prgrams), and (3) increased disclsure f a cmpany's business and peratins. Gede reserves the right t verride any f its prxy vting plicies with respect t a particular sharehlder vte when such an verride is, in Gede's best judgment, cnsistent with the verall principle f vting prxies in the best lng-term ecnmic interests f Gede's clients. Plicies All prxy vtes shall be cnsidered and made in a manner cnsistent with the best interests f Gede's clients (including sharehlders f mutual fund clients) withut regard t any ther relatinship, business r therwise, between the prtfli cmpany subject t the prxy vte and Gede r its affiliates. As a general matter, (1) prxies will be vted FOR incumbent members f a bard f directrs and FOR rutine management prpsals, except as therwise addressed under these plicies; (2) sharehlder and nn-rutine management prpsals addressed by these plicies will be vted as prvided in these plicies; and (3) sharehlder and nn-rutine management prpsals nt addressed by these plicies will be evaluated by members f Gede's Operatins Cmmittee based n fundamental analysis and/r research and recmmendatins prvided by the Agent, ther third-party service prviders, and the members f the Operatins Cmmittee, shall make the vting decisin. When vting the securities f nn-us issuers, Gede will evaluate prpsals in accrdance with these plicies but will als take lcal market standards and best practices int cnsideratin. Gede may als limit r mdify its vting at certain nn-us meetings (e.g., if shares are required t be blcked r reregistered in cnnectin with vting). Gede's specific plicies are as fllws: I. Electin f Directrs Gede will generally vte FOR incumbent members f a bard f directrs except: Attendance. The incumbent bard member failed t attend at least 75% f meetings in the previus year and des nt prvide a reasnable explanatin. Independent Directrs. Nminee is nt independent and full bard cmprises less than a majrity f independents. Nminee is nt independent and sits n the audit, cmpensatin r nminating cmmittee. Directr Respnsiveness. The bard failed t act n sharehlder prpsals that received apprval by Gede and a majrity f the vtes cast in the previus year. The bard failed t act n takever ffers where the majrity f sharehlders tendered their shares. At the previus bard electin, directrs received mre than 50 percent withhld/against vtes f the shares cast, and the cmpany failed t address the issue(s) that caused the high withhld/against vte. Glden Parachutes. Incumbent members f the cmpensatin cmmittee adpted r renewed an excessive glden parachute within the past year. In Other Circumstances where a member f the bard has acted in a manner incnsistent with the interests f sharehlders f a cmpany whse securities are held in client accunts. 2 f 7

3 II. III. Majrity Electin. Unless a cmpany has a plicy achieving a similar result, Gede will generally vte in favr f a prpsal calling fr directrs t be elected by a majrity f vtes cast in a bard electin prvided that the plurality vte applies when there are mre nminees than bard seats. Say n Pay (nn-binding). Advisry Vte n Executive Cmpensatin. Gede will generally vte AGAINST advisry vte when: (1) there is a significant misalignment between executive pay and cmpany perfrmance, (2) the cmpany maintains significant prblematic pay practices; r (3) the bard exhibits a significant level f pr cmmunicatin and respnsiveness t sharehlders. Frequency Vte. Gede will generally vte FOR having an advisry vte n executive cmpensatin every year. Advisry Vte n Glden Parachute. Gede will vte AGAINST excessive change-incntrl severance payments. IV. Vte AGAINST Anti-Takever Prpsals, including: Additin f Special Interest Directrs t the bard. Authrizatin f "Blank Check" Preferred Stck. Gede will vte FOR prpsals t require sharehlder apprval fr the distributin f preferred stck except fr acquisitins and raising capital in the rdinary curse f business. Classificatin f Bards, Gede will vte FOR prpsals t de-classify bards. Fair Price Amendments, ther than thse that cnsider nly a tw-year price histry and are nt accmpanied by ther anti-takever measures. Glden Parachutes, that Gede deems t be excessive in the event f change-in-cntrl. Pisn Pills. Adptin r extensin f a Pisn Pill withut sharehlder apprval will result in ur vting AGAINST the electin f incumbents r a management slate in the cncurrent r next fllwing vte n the electin f directrs, prvided the matter will be cnsidered if (a) the bard has adpted a Pisn Pill with a sunset prvisin; (b) the Pill is linked t a business strategy that will result in greater value fr the sharehlders; (c) the term is less than three years; (d) the Pill includes a qualifying ffer clause; and (e) sharehlder apprval is required t reinstate the expired Pill. Gede will vte FOR sharehlder prpsals requiring r recmmending that sharehlders be given an pprtunity t vte n the adptin f pisn pills. Reductin r Limitatin f Sharehlder Rights (e.g., actin by written cnsent, ability t call meetings, r remve directrs). Reincrpratin in anther state (when accmpanied by Anti-Takever Prvisins, including increased statutry anti-takever prvisins). Gede will vte FOR reincrpratin in anther state when nt accmpanied by such anti-takever prvisins. Requirements that the Bard Cnsider Nn-Financial Effects f merger and acquisitin prpsals. 3 f 7

4 Requirements regarding Size, Selectin and Remval f the Bard that are likely t have an anti-takever effect (althugh changes with legitimate business purpses will be evaluated). Supermajrity Vting Requirements (i.e., typically 2/3 r greater) fr bards and sharehlders. Gede will vte FOR prpsals t eliminate supermajrity vting requirements. Transfer f Authrity frm Sharehlders t Directrs. V. Vte FOR prpsed amendments t a cmpany's certificate f incrpratin r by-laws that enable the cmpany t Opt Out f the Cntrl Shares Acquisitin Statutes. VI. VII. VIII. IX. Vte AGAINST the intrductin f new classes f Stck with Differential Vting Rights. Vte AGAINST intrductin and FOR eliminatin f Cumulative Vting Rights, except in certain instances where it is determined nt t enhance sharehlders' interests. Vte FOR eliminatin f Preemptive Rights. Vte FOR Anti-Greenmail prpsals s lng as they are nt part f anti-takever prvisins (in which case the vte will be AGAINST). X. Vte FOR charter and by-law amendments expanding the Indemnificatin f Directrs t the maximum extent permitted under Delaware law (regardless f the state f incrpratin) and vte AGAINST charter and by-law amendments cmpletely Eliminating Directrs' Liability fr Breaches f Care. XI. XII. XIII. XIV. XV. XVI. Vte FOR prpsals t adpt Cnfidential Vting and Independent Vte Tabulatin practices. Vte FOR Open-Market Stck Repurchase Prgrams, unless there is clear evidence f past abuse f the authrity; the plan cntains n safeguards against selective buybacks, r the authrity can be used as an anti-takever mechanism. Vte FOR management prpsals t implement a Reverse Stck Split when the number f authrized shares will be prprtinately reduced r the Reverse Stck Split is necessary t avid de-listing. Vte FOR management prpsals t Reduce the Par Value f cmmn stck unless the prpsal may facilitate an anti-takever device r ther negative crprate gvernance actin. Vte FOR the Issuance f Large Blcks f Stck if such prpsals have a legitimate business purpse and d nt result in dilutin f greater than 20%. Hwever, a cmpany s specific circumstances and market practices may be cnsidered in determining whether the prpsal is cnsistent with sharehlders interests. Vte AGAINST Excessive Increases in Cmmn Stck. Vte AGAINST increases in authrized cmmn stck that wuld result in authrized capital in excess f three times the cmpany's shares utstanding and reserved fr legitimate purpses. Fr nn-u.s. securities with cnditinal capital requests, vte AGAINST issuances f shares with preemptive rights in excess f 100% f the cmpany's current shares utstanding. Special requests will be evaluated, taking cmpany-specific circumstances int accunt. 4 f 7

5 XVII. Vte AGAINST the adptin f r amendment t authrize additinal shares under a Stck Optin Plan if: The stck ptin plan includes evergreen prvisins, which prvides fr an autmatic alltment f equity cmpensatin every year. The dilutin effect f the shares authrized under the plan (including by virtue f any "evergreen" r replenishment prvisin), plus the shares reserved fr issuance pursuant t all ther ptin r restricted stck plans, is greater than 10%. Hwever, dilutin may be increased t 15% fr small capitalizatin cmpanies, and 20% fr micr capitalizatin cmpanies, respectively. If the plan fails this test, the dilutin effect may be evaluated relative t any unusual factr invlving the cmpany. The ffering price f ptins is less than 100% f fair market value n the date f grant, except that the ffering price may be as lw as 85% f fair market value if the discunt is expressly granted in lieu f salary r cash bnus, except that a mdest number f shares (limited t 5% fr a large capitalizatin cmpany and 10% fr a small and micr capitalizatin cmpanies) may be available fr grant t emplyees and directrs under the plan if the grant is made by a cmpensatin cmmittee cmpsed entirely f independent directrs (the "De Minimis Exceptin"). The plan is administered by (1) a cmpensatin cmmittee nt cmprised entirely f independent directrs r (2) a bard f directrs nt cmprised f a majrity f independent directrs, prvided that a plan is acceptable if it satisfies the De Minimis Exceptin. The plan's terms allw repricing f underwater ptins, r the bard/cmmittee has repriced ptins utstanding under the plan in the past tw years withut sharehlder apprval, unless by the express terms f the plan r a bard reslutin such repricing is rarely used (and then nly t maintain ptin value due t extreme circumstances beynd management's cntrl) and is within the limits f the De Minimis Exceptin. Liberal Definitin f Change in Cntrl: the plan prvides that the vesting f equity awards may accelerate even thugh an actual change in cntrl may nt ccur. XVIII. XIX. Vte AGAINST the electin f incumbent members f the cmpensatin cmmittee r a management slate in the cncurrent r next fllwing vte n the electin f directrs if, within the last year and withut sharehlder apprval, the cmpany's bard f directrs r cmpensatin cmmittee has repriced utstanding ptins. Evaluate prpsals t Reprice Outstanding Stck Optins, taking int accunt such factrs as: (1) whether the repricing prpsal excludes senir management and directrs; (2) whether the ptins prpsed t be repriced exceeded the dilutin threshlds described in these current prxy vting plicies when initially granted; (3) whether the repricing prpsal is value neutral t sharehlders based upn an acceptable ptins pricing mdel; (4) the cmpany's relative perfrmance cmpared t ther cmpanies within the relevant industry r industries; (5) ecnmic and ther cnditins affecting the relevant industry r industries in which the cmpany cmpetes; and (6) ther facts r circumstances relevant t determining whether a repricing prpsal is cnsistent with the interests f sharehlders. 5 f 7

6 XX. Vte AGAINST adptin f r amendments t authrize additinal shares fr Restricted Stck Awards ("RSA") if: The dilutin effect f the shares authrized under the plan, plus the shares reserved fr issuance pursuant t all ther ptin r restricted stck plans, is greater than 10%. Hwever, dilutin may be increased t 15% fr small capitalizatin cmpanies, and 20% fr micr capitalizatin cmpanies, respectively. If the plan fails this test, the dilutin effect may be evaluated relative t any unusual factr invlving the cmpany. XXI. XXII. XXIII. Vte AGAINST Omnibus Stck Plans if ne r mre cmpnent vilates any f the criteria applicable t Stck Optin Plans r RSAs under these prxy vting plicies, unless such cmpnent is de minimis. In the case f an mnibus stck plan, the dilutin limits applicable t Stck Optin Plans r RSAs under these prxy vting plicies will be measured against the ttal number f shares under all cmpnents f such plan. Vte AGAINST Emplyee Stck Purchase Plans if the plan vilates any f the relevant criteria applicable t Stck Optin Plans r RSAs under these prxy vting plicies, except that (1) the minimum stck purchase price may be equal t r greater than 85% f the stck's fair market value if the plan cnstitutes a reasnable effrt t encurage brad based participatin in the cmpany's equity, and (2) in the case f nn-u.s. cmpany stck purchase plans, the minimum stck purchase price may be equal t the prevailing "best practices," as articulated by the Agent, prvided that the minimum stck purchase price must be at least 75% f the stck's fair market value. Vte AGAINST Stck Awards (ther than stck ptins and RSAs) unless it is determined they are identified as being granted t fficers/directrs in lieu f salary r cash bnus, subject t number f shares being reasnable. XXIV. Vte AGAINST equity vesting acceleratin prgrams r amendments t authrize additinal shares under such prgrams if the prgram prvides fr the acceleratin f vesting f equity awards even thugh an actual change in cntrl may nt ccur. XXV. Vte FOR Emplyee Stck Ownership Plans ("ESOPs") f nnleveraged ESOPs, and in the case f leveraged ESOPs, giving cnsideratin t the cmpany's state f incrpratin, existence f supermajrity vte rules in the charter, number f shares authrized fr the ESOP, and number f shares held by insiders. Gede may als examine where the ESOP shares are purchased and the dilutin effect f the purchase. Gede will vte AGAINST a leveraged ESOP if all utstanding lans are due immediately upn a change in cntrl. XXVI. Vte AGAINST management r sharehlder prpsals n ther Cmpensatin Plans r Practices if such plans r practices are Incnsistent with the Interests f Sharehlders. In additin, Gede may vte AGAINST the electin f incumbents r a management slate in the cncurrent r next fllwing vte n the electin f directrs if Gede believes a bard has apprved executive cmpensatin arrangements incnsistent with the interests f sharehlders. 6 f 7

7 XXVII. Envirnmental and Scial Prpsals. Evaluate each prpsal related t envirnmental and scial issues. Generally, Gede expects t vte with management s recmmendatin n sharehlder prpsals cncerning envirnmental r scial issues, as Gede believes management and the bard are rdinarily in the best psitin t address these matters. Gede may supprt certain sharehlder envirnmental and scial prpsals that request additinal disclsures frm cmpanies which may prvide material infrmatin t the investment management prcess, r where Gede therwise believes supprt will help maximize sharehlder value. Gede may take actin against the re-electin f bard members if there are serius cncerns ver ESG practices r the bard failed t act n related sharehlder prpsals that received apprval by Gede and a majrity f the vtes cast in the previus year. XXVIII. ABSTAIN with respect t sharehlder prpsals addressing Plitical Cntributins, which Gede believes generally address rdinary business matters that are primarily the respnsibility f a cmpany s management and bard, except where a prpsal has substantial ecnmic implicatins fr the cmpany s securities held in client accunts. XXIX. XXX. Gede will generally vte AGAINST sharehlder prpsals seeking t establish prxy access. Gede will evaluate management prpsals n prxy access. Shares f Investment Cmpanies. Fr institutinal accunts, Gede will generally vte in favr f prpsals recmmended by the underlying funds Bard f Trustees. Fr retail managed accunts, Gede will emply ech vting when vting shares. T avid certain ptential cnflicts f interest, if an investment cmpany has a sharehlder meeting, Gede wuld vte their shares in the investment cmpany in the same prprtin as the vtes f the ther sharehlders f the investment cmpany f 7