NomGov Chair Vulnerability Tracker

There’s been a notable shift in the level of investor support for the election of chairs of Nominating and Governance Committees, reflecting the evolving landscape of stakeholder expectations. RRA’s NomGov Chair Vulnerability Tracker follows relevant voting guidelines and principles for some of the largest institutional investors and major proxy advisors. We recommend boards annually review these changing policies to understand evolving investor expectations and to prepare for potential effects on director elections.

Amundi        BlackRock        BNY Mellon        CalPERS        Capital Group        Columbia        Fidelity        Goldman        JPMorgan        LGIM        State Street Global Advisors        T. Rowe Price        Vanguard        Wellington        ISS        Glass Lewis

Amundi

Amundi Voting Policy, 2024

Composition and balance of the Board

“Amundi considers that the Board must be composed in such a way as to bring together:

• A diversity of Directors with the skills, culture and experience necessary to develop the company’s strategy and oversee its implementation,

• A sufficient number of independent Directors: at least 50% for non-controlled companies and at least one third in the case of controlled companies, in emerging markets and developed Asian countries, unless local regulations/ market practices are more stringent.”

“Amundi is also attentive to enhancing the gender diversity of Boards, including in countries not subject to any regulatory obligation. Unless local regulations/market practices are more stringent, Amundi expects companies to take steps to ensure that each gender represents a minimum of 33 percent of the Board for developed markets.”

Nomination Committee

“The main responsibility of the Nomination Committee is to seek and propose competent and available candidates for the Board and general management. It must ensure succession planning for corporate officers as part of normal operations or in the event of a sudden crisis or incapacity. Amundi may vote against the re-election of nomination committee members where there is evidence of weak succession planning. The Committee must define a “target Board”, its optimal size, and standard profiles for Directors consistent with the size of the company, the diversity of skills, profiles, culture required in relation to its business sectors, its geographical areas of intervention and its strategic objectives.

The Board is ultimately accountable to shareholders for the long-term stewardship of the company. Accordingly, the Board should be accountable for the company’s long-term resilience with respect to potential shifts in the business landscape that may result from climate change, and therefore should be accountable for the Company’s climate strategy. Amundi is particularly mindful of how the Board ensures it collectively possess the necessary skills to fulfil this duty. The Nomination Committee should explain the criteria it used to recommend this “target” structure and to highlight talent gaps so as to improve the functioning of the Board.”

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BlackRock

BlackRock Investment Stewardship: Proxy voting guidelines for US securities, January 2024

“We believe that an effective and well-functioning board that has appropriate governance structures to facilitate oversight of a company's management and strategic initiatives is critical to the long-term financial success of a company and the protection of shareholders’ economic interests… As part of their responsibilities, board members have a fiduciary duty to shareholders to oversee the strategic direction, operations, and risk management of a company… Disclosure of material risks that may affect a company’s long-term strategy and financial value creation, including material sustainability-related factors when relevant, is essential for shareholders to appropriately understand and assess how effectively management is identifying, managing, and mitigating such risks. Where a company has not adequately disclosed and demonstrated that its board has fulfilled these corporate governance and risk oversight responsibilities, we will consider voting against the election of directors who, on our assessment, have particular responsibility for the issues, as indicated below.”

Independence

“We may vote against directors who we do not consider to be independent, including at controlled companies, when we believe oversight could be enhanced with greater independent director representation. To signal our concerns, we may also vote against the chair of the nominating/governance committee, or where no chair exists, the nominating/governance committee member with the longest tenure.”

Oversight role of the board

“The board should exercise appropriate oversight of management and the business activities of the company. Where we determine that a board has failed to do so in a way that may impede a company’s ability to deliver long-term financial value, we may vote against the responsible committees and/or individual directors.

Common circumstances are illustrated below:

• Where the board has failed to facilitate quality, independent auditing or accounting practices, we may vote against members of the audit committee.

• Where the company has failed to provide shareholders with adequate disclosure to conclude that appropriate strategic consideration is given to material risk factors (including, where relevant, material sustainability factors), we may vote against members of the responsible committee, or the most relevant director.

• Where it appears that a director has acted (at the company or at other companies) in a manner that compromises their ability to represent the best long-term economic interests of shareholders, we may vote against that individual.

• Where a director has a multi-year pattern of poor attendance at combined board and applicable committee meetings, or a director has poor attendance in a single year with no disclosed rationale, we may vote against that individual. Excluding exigent circumstances, BIS generally considers attendance at less than 75% of the combined board and applicable committee meetings to be poor attendance”.

CEO and management succession planning

“Companies should have a robust CEO and senior management succession plan in place at the board level that is reviewed and updated on a regular basis. Succession planning should cover scenarios over both the long-term, consistent with the strategic direction of the company and identified leadership needs over time, as well as the short-term, in the event of an unanticipated executive departure. We encourage the company to explain their executive succession planning process, including where accountability lies within the boardroom for this task, without prematurely divulging sensitive information commonly associated with this exercise.

Where there is significant concern regarding the board’s succession planning efforts, we may vote against members of the responsible committee, or the most relevant director.”

Board term limits and director tenure

“Where boards find that age limits or term limits are a valuable mechanism for ensuring periodic board refreshment, we generally defer to the board’s determination in setting such limits. BIS will also consider the average board tenure to evaluate processes for board renewal. We may oppose boards that appear to have an insufficient mix of short-, medium-, and long-tenured directors.

In addition, where boards have adopted corporate governance guidelines regarding committee leadership and/or membership rotation, we appreciate clear disclosure of those policies”

Board Diversity

“In our view, a strong board provides a competitive advantage to a company, providing valuable oversight and contributing to the most important management decisions that support long-term financial performance.

It is in this context that we are interested in diversity in the boardroom. We see it as a means to promoting diversity of thought and avoiding ‘group think’ in the board’s advising of and overseeing management. It can help boards to have deeper discussions and make more resilient decisions. We ask boards to disclose how diversity is considered in board composition, including professional characteristics, such as a director’s relevant industry experience, specialist areas of expertise and geographic location; as well as demographic characteristics such as gender, race/ethnicity, and age.”

“In the U.S., we believe that boards should aspire to at least 30% diversity of membership, and we encourage large companies, such as those in the S&P 500, to lead in achieving this standard. In light of market developments, an informative indicator of diversity for such companies is having at least two women and a director who identifies as a member of an underrepresented group. We recognize that companies with smaller market capitalizations and in certain sectors may face more challenges. Among these smaller companies, we look for the presence of diversity and take into consideration the steps that companies are taking to ensure diversity on their board.”

“we look to boards to disclose:

• The process by which candidates for board positions are identified, including whether professional firms or other resources outside of incumbent directors’ networks are engaged to identify and/or assess candidates, and whether a diverse slate of nominees is considered for all available board nominations

• How directors’ professional characteristics, which may include domain expertise such as finance or technology, and sector- or market-specific experience, are complementary and link to the company’s long-term strategy

• How diversity, including professional characteristics and demographic factors, is considered in board composition, given the company’s long-term strategy and business model

To the extent that, based on our assessment of corporate disclosures, a company has not adequately explained their approach to diversity in their board composition, we may vote against members of the nominating/governance committee.”

Board size

“We typically defer to the board in setting the appropriate size and believe that directors are generally in the best position to assess the optimal board size to ensure effectiveness. However, we may vote against the appropriate committees and/or individual directors if, in our view, the board is ineffective in its oversight, either because it is too small to allow for the necessary range of skills and experience or too large to function efficiently”

Responsiveness to shareholders

“A board should be engaged with and responsive to the company’s shareholders, including acknowledging voting outcomes for director elections, compensation, shareholder proposals, and other ballot items. Where we determine that a board has not substantially addressed shareholder concerns that we deem material to the business, we may vote against the responsible committees and/or individual directors. Common circumstances are illustrated below:

• The Independent Chair or Lead Independent Director, members of the nominating/governance committee, and/or the longest tenured director(s), where we observe a lack of board responsiveness to shareholders, evidence of board entrenchment, and/or failure to plan for adequate board member succession

• The chair of the nominating/governance committee, or where the chair is not standing for election, the nominating/governance committee member with the longest tenure, where board member(s) at the most recent election of directors have received against votes from more than 25% of shares voted, and the board has not taken appropriate action to respond to shareholder concerns.

• The Independent Chair or Lead Independent Director and/or members of the nominating/governance committee, where a board fails to consider shareholder proposals that (1) receive substantial support, and (2) in our view, have a material impact on the business, shareholder rights, or the potential for long-term value creation”

Exclusive forum provisions

“BIS generally supports proposals to seek exclusive forum for certain shareholder litigation. In cases where a board unilaterally adopts exclusive forum provisions that we consider unfavorable to the interests of shareholders, we will vote against the Independent Chair or Lead Independent director and members of the nominating/governance committee.”

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BNY Mellon

Mellon Proxy Guidelines Summary, April 2024

Incumbent/nominee directors

“The Committee generally votes FOR incumbent and nominee directors. However, the Committee generally votes to WITHHOLD support in cases when individual directors (or the board, as applicable): (1) adopt, amend or renew a poison pill without shareholder approval or commitment to obtain shareholder approval within 12 months (applied to incumbent directors up for re-election at annual or special meetings which follows such action); (2) attend less than 75% of meetings for two consecutive years; (3) serve on more than five boards; (4) are CEOs of a public company and serve on more than three boards; or (5) fail to respond to approved shareholder proposals. In addition, the Committee generally votes to WITHHOLD support when an incumbent or nominee director is also an executive officer (other than the CEO) of the company (e.g., CFO, COO, CAO); however, the Committee will generally consider the proposal on a CASE-BY-CASE basis in situations when such incumbent or nominee director also owns 1% or more of the company’s outstanding stock.”

Board diversity

“The Committee believes diversity of thought, skillsets, background, and gender on boards is an important contributor and enhances the ability of a board to monitor a company’s management and business planning, consistent with maximizing long-term shareholder value. Board diversity also allows differing viewpoints to help ensure the board is making well-informed decisions that better serve the interests of all shareholders. The Committee considers voting AGAINST the Nominating Chairperson in cases of insufficient gender diversity.”

Board tenure

“Board members who have been in place for a long period of time may become too close to the company, or the company’s management and business, to effectively provide oversight. We believe a board should be refreshed in a planned manner to fill missing areas of expertise and to provide new viewpoints and guidance on segments of industry, business, and society. This is not to say that a long-standing board member may not be an important part of the board, but that there generally should be well thought turnover over time to refresh the board membership. Our guidelines utilize a board tenure average in guiding votes against the nominating committee/governance committee chair.”

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CalPERS

CalPERS Proxy Voting Guidelines, February 2023

Director Elections

“We believe that high quality corporate boards should be comprised of mostly independent directors and be diverse with an appropriate balance of skills, expertise, and tenure. The following are common instances that typically will result in a withhold vote for a director:

1. Board Independence We will withhold votes from directors who are not considered independent and serve on a board that is less than 50% independent.

2. Key Board Committee Independence We will withhold votes from directors who are not considered independent and serve on key board committees. The key board committees are Nominating/Governance Committee, Audit Committee, and Compensation Committee.

3. Poor Attendance We will withhold votes from directors who have poor attendance, that is, directors who fail to attend at least 75% of the aggregate board and key board committee meetings on which the director served, absent an appropriate explanation for any extraordinary circumstances.

4. Overboarded We will withhold votes from directors who serve on an excessive number of boards. We consider directors overboarded in the following instances:

   • The director is a non-executive director who serves on more than four public boards.

   • The director is an executive director who serves on more than two public boards. In such cases, we will not withhold from the directors at the company where the director holds the executive position.

5. Board Diversity On a case-by-case basis, where our engagements are not successful, we will withhold votes from directors who are nominating/governance committee members, board chairs, or long-tenured directors (greater than 12 years on the board) on boards that lack diversity and do not make firm commitments to improving the board diversity in the near term.

6. Climate Risk Oversight For the largest GHG emitters in our portfolio, we will withhold votes from relevant committee members (and/or board leadership) who serve on a board that demonstrated a lack of board oversight related to climate-related risks. Consistent with our Climate Action 100+ engagements, we may consider elements of the Climate Action 100+ Benchmark to help inform our voting decisions.

7. Board Refreshment We will withhold votes from directors who are nominating committee members on a board where more than one-third of the directors have a tenure of more than 12 years and less than one-third of the directors were appointed within the past 6 years.

8. Board Oversight We will withhold votes from directors who serve on a board that demonstrated a lack of board oversight in its fiduciary duties and responsibilities.

9. Board Accountability

   • We will withhold votes from incumbent directors on a board that amended or adopted a shareholder rights, plan, also known as a poison pill, without shareholder approval.

   • We will withhold votes from directors who are nominating committee members on a board that amended or adopted the company’s bylaws, articles or charter that would materially and adversely impact shareholder rights without shareholder approval.

10. Board Not Responsive to Shareowners

    • We will withhold votes from directors who received less than majority support in the previous year.

    • We will withhold votes from directors who are nominating committee members on a board that failed to remove directors who received less than majority support at the prior board election.

    • We will withhold votes from directors who are nominating committee members on a board that failed to act on a shareholder proposal that received majority support in the prior year.

11. Multi-Class Share Structure and Unequal Voting Rights

    • We will withhold votes from directors who are nominating committee members on a board with a multi-class share structure and unequal voting rights when the company does not provide a reasonable sunset of the multi-class share structure.

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Capital Group

Capital Group, Proxy Voting Procedures and Principles, March 2024

Independence

“Importantly, we may consider opposing all or some of the nominees or certain committee members if the independence of a board and/or committee does not comply with local regulations, governance codes, listing standards or reasonable shareholder expectation.”

Board Composition

“Where we feel a specific area has fallen short of our expectations, for example in relation to audit, remuneration or board composition, we may vote against the chair and/or members of the relevant committee”

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Columbia Threadneedle

Columbia Threadneedle Corporate Governance Guidelines (CGG), January 2024

Diversity, competencies and perspectives

“A relevant and suitably diverse mix of skills and perspectives is critical to the quality of the board and the strategic direction of the company. Companies should therefore strive to widen the pool of potential candidates for board and management roles to ensure they draw on the richest possible combination of competencies and experiences.

In all cases, candidates must be selected for their ability to oversee and enhance long-term company performance. Boards should recruit members with the appropriate combination of skills and experience, and should affirm the value of individual diversity, including gender, racial, ethnic, national origin, professional background and other relevant factors that may enhance the board’s overall performance. As boards cannot be transformed overnight, we look for a statement that sets out the board’s approach to promoting diversity at the board, executive management, and company-wide workforce level. We welcome disclosure of specific diversity targets set by the board and subsequent reporting on performance against these targets. Where disclosure is absent and appropriate diversity levels across gender, racial and ethnic representation have not been met, we will normally not support the re-election of nomination committee chairs or other relevant directors.”

Re-election of directors

“To ensure that it retains an open and critical perspective, the board should be continually refreshed. For this reason, all directors should be required to submit themselves for re-election at regular intervals. We prefer to have all directors standing for annual election to strengthen the accountability of the board to shareholders. Failing that, we encourage the chair of the board, as well as the chairs of the audit, compensation and nomination committees to stand for annual re-election to strengthen accountability for the core functions of the board. We also believe that a minimum of one-third of board members should stand for election annually.”

Nomination of directors

“We strongly believe that a board nominating committee composed of a majority of independent non-executive directors is best placed to identify and put forward suitable candidates for the board. Shareholders should only put forward candidates where there is clear evidence of ineffective board oversight and unwillingness to correct the problem—or where a cumulative voting system or similar arrangement encourages direct shareholder participation in board nominations. We expect companies to put forward only one candidate for each available position as an indication that the company is clear about the value each director brings to the board. We encourage companies to specify each candidate’s qualifications, experiences and skills that are of relevance and importance to the board’s oversight of company strategy.”

Balanced composition

“We will consider voting against the chair or members of nominating committees who have not constructed appropriately balanced, independent boards. Indicators include: an over-reliance on long-standing members; an over-reliance on affiliated directors; and a lack of appropriate diversity characteristics, including gender, race, nationality, ethnicity, etc., that reflect the nature, scope and aspirations of the business.”

Board evaluation

“Board evaluations are an important tool for improving board performance. All boards should implement an evaluation process that considers the effectiveness of the entire board, its committees, the contributions made by each member, including its systems for interaction between the board and company management, areas for improvement, and behaviors and overall board culture. The nominating or corporate governance committee may oversee the evaluation process and should report general findings and areas for improvement publicly to shareholders. Large or systemically important companies should leverage professional, independent assistance to facilitate evaluations on a periodic basis (typically every three years).”

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Fidelity

Fidelity Proxy Voting Guidelines, January 2024

Election of directors

“Fidelity will generally support director nominees in elections where all directors are unopposed (uncontested elections), except where board composition raises concerns, and/or where a director clearly appears to have failed to exercise reasonable judgment or otherwise failed to sufficiently protect the interests of shareholders.

Fidelity will evaluate board composition and generally will oppose the election of certain or all directors if, by way of example:

1. Inside or affiliated directors serve on boards that are not composed of a majority of independent directors.

2. There is no gender diversity on the board, or if a board of ten or more members has fewer than two gender diverse directors.

3. There are no racially or ethnically diverse directors.

4. The director is a public company CEO who sits on more than two unaffiliated public company boards.

5. The director, other than a CEO, sits on more than five unaffiliated public company boards.

Fidelity will evaluate board actions and generally will oppose the election of certain or all directors if, by way of example:

1. The director attended fewer than 75% of the total number of meetings of the board and its committees on which the director served during the company's prior fiscal year, absent extenuating circumstances.

2. The company made a commitment to modify a proposal or practice to conform to these guidelines, and failed to act on that commitment.

3. For reasons described below under the sections entitled Compensation and Anti-Takeover Provisions and Director Elections.”

Anti-takeover Provisions and director elections

Fidelity will oppose the election of all directors or directors on responsible committees if the board adopted or extended an anti-takeover provision without shareholder approval.

Fidelity will consider supporting the election of directors with respect to poison pills if:

• All of the poison pill’s features outlined under the Anti-Takeover Provisions and Shareholders Rights section above are met when a poison pill is adopted or extended.

• A board is willing to consider seeking shareholder ratification of, or adding the features outlined under the Anti-Takeover Provisions and Shareholders Rights Plans section above to, an existing poison pill. If, however, the company does not take appropriate action prior to the next annual shareholder meeting, Fidelity will oppose the election of all directors at that meeting.

• It determines that the poison pill was narrowly tailored to protect a specific tax benefit, and subject to an evaluation of its likelihood to enhance long-term economic returns or maximize long-term shareholder value

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Goldman Sachs

Policy, Procedures and Guidelines for Goldman Sachs Asset Management’s Global Proxy Voting, March 2024

Board of directors

“The board of directors should promote the interests of shareholders by acting in an oversight and/or advisory role; should consist of a majority of independent directors and/or meet local best practice expectations; and should be held accountable for actions and results related to their responsibilities. Vote on director nominees should be determined on a CASE-BY-CASE basis.”

Voting on director nominees in uncontested elections

Board composition

“We generally believe diverse teams have the potential to outperform and we expect the companies that we invest in to focus on the importance of diversity. When evaluating board composition, we believe a diversity of ethnicity, gender and experience is an important consideration. We encourage companies to disclose the composition of their board in the proxy statement and may vote against members of the board without disclosure. See below how we execute our vote at companies that do not meet our diversity expectations.

Vote AGAINST or WITHHOLD from members of the Nominating Committee:

• At companies that do not meet the board diversity requirements of local listing rules, corporate governance codes, national targets, or is not representative relative to the board composition of companies in their market; and

• At companies within the S&P 500, if, in addition to our gender expectations, the board does not have at least one diverse director from a minority ethnic group;

Vote AGAINST or WITHHOLD from the full board at companies incorporated in the US that do not have any woman directors.

Vote AGAINST or WITHHOLD from individual directors who:

• Sit on more than five public company boards;

• 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.

Vote AGAINST or WITHHOLD from members of the Nominating Committee if the average board tenure exceeds 15 years, and there has not been a new nominee in the past 5 years.”

Director accountability

“Vote AGAINST or WITHHOLD from members of the full board or appropriate committee (or only the independent chairman or lead director as may be appropriate in situations such as where there is a classified board and members of the appropriate committee are not up for re-election or the appropriate committee is comprised of the entire board) for the below reasons. New nominees will be considered on a case-by-case basis. Extreme cases may warrant a vote against the entire board.

• Material failures of governance, stewardship, or fiduciary responsibilities at the company including but not limited to violations of global norms principles and/or other significant global standards;

• Failure to disclose material environmental, social and governance information;

• 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;

• The board failed to act on a shareholder proposal that received approval of the majority of shares cast the previous year (a management proposal with other than a FOR recommendation by management will not be considered as sufficient action taken); an adopted proposal that is substantially similar to the original shareholder proposal will be deemed sufficient; (vote against members of the committee of the board that is responsible for the issue under consideration). If we did not support the shareholder proposal,, we may still vote against the committee member(s).

• The company’s poison pill has a dead-hand or modified dead-hand feature for two or more years. Vote against/withhold every year until this feature is removed; however, vote against the poison pill if there is one on the ballot with this feature rather than the director;

• The board adopts or renews a poison pill without shareholder approval, does not commit to putting it to shareholder vote within 12 months of adoption (or in the case of a newly public company, does not commit to put the pill to a shareholder vote within 12 months following the IPO), or reneges on a commitment to put the pill to a vote, and has not yet received a withhold/against recommendation for this issue;

• The board failed to act on takeover offers where the majority of the shareholders tendered their shares;

• The company does not disclose various components of current emissions, a proxy for a company’s dependency on fossil fuels and other sources of greenhouse gasses (Scope 1, Scope 2, Scope 3 emissions), material to the company’s business

• If in an extreme situation the board lacks accountability and oversight, coupled with sustained poor performance relative to peers.”

Nominating/Governance Committee

“Generally vote AGAINST or WITHHOLD from the members of the Nominating/Governance Committee if:

• A company maintains a classified board structure without a sunset provision, has opted into, or failed to opt out of, state laws requiring a classified board structure or has a capital structure with unequal voting rights

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

• The board does not meet our diversity expectations;

• The board amends the company’s bylaws or charter without shareholder approval in a manner that materially diminishes shareholders’ rights or could adversely impact shareholders.”

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JPMorgan

Global proxy voting guidelines, North America, Europe, Middle East, Africa, Central America, South America, and Asia, April 2024

Uncontested director elections

“Votes on director nominees should be made on a case-by-case basis. Votes generally will be withheld from directors who:

1. attend less than 75% of the board and committee meetings without a valid excuse for the absences;

2. adopt or renew a poison pill without shareholder approval, do not commit to putting it to a shareholder vote within 12 months of adoption (or, in the case of a newly public company, do not commit to put the poison pill to a shareholder vote within 12 months following the initial public offering) or reneges on a commitment to put the poison pill to a vote and has not yet received a withhold recommendation for this issue;

3. are inside or affiliated outside directors and sit on the audit, compensation or nominating committees. For purposes of defining “affiliation”, we will apply either the NYSE listing rule for companies listed on that exchange or the NASDAQ listing rule for all other companies;

4. ignore a shareholder proposal that is approved by i) a majority of the shares outstanding or ii) a majority of the votes cast. The review period will be the vote results over a consecutive two-year time frame;

5. are inside or affiliated outside directors and the full board serves as the audit, compensation or nominating committee or the company does not have one of these committees;

6. are insiders and affiliated outsiders on boards that are not at least majority independent. In the case of controlled companies, we will vote for non-independent directors who serve on committees other than the audit committee;

7. are chief executive officers (“CEOs”) of publicly traded companies who serve on more than two public boards (besides his or her own board) and all other directors who serve on more than four public-company boards;

8. are compensation committee members where there is a pay-for-performance disconnect for Russell 3000 companies. (See Section 9a – Stock-Based Incentive Plans, last paragraph). We will withhold votes from compensation committee members if the company does not submit one-time transferable stock options to shareholders for approval;

9. are audit committee members in circumstances in which there is evidence (such as audit reports or reports mandated under the Sarbanes-Oxley Act of 2002) that there exist material weaknesses in the company’s internal controls;

10. compensation committee members who were present at the time of the grant of backdated options or options the pricing or the timing of which we believe may have been manipulated to provide additional benefits to executives;

11. demonstrated a history of poor performance or inadequate risk oversight;

12. are committee members when the board adopts changes to the company’s by-laws or charter without shareholder approval if the changes materially diminish shareholder rights; or

13. chair the board, are lead independent directors, or chair governance committees of publicly traded companies where employees have departed for significant violations of codes of conduct without clawback of compensation.

For newly public companies, vote case-by-case on directors as we believe the company should have the appropriate time frame to mature and better its governance structure and practices.”

Board composition

“We support board refreshment, independence and a diverse skill set for directors as an important part of contributing to long-term shareholder value. We believe that board composition should contribute to overall corporate strategies and risk management and will evaluate the board’s skills, expertise and qualifications. We expect our investee companies to be committed to diversity and inclusiveness in their general recruitment policies as we believe such diversity contributes to the effectiveness of boards and further development of sound governance and risk oversight. As with all proxy votes, we seek to vote in our clients’ best interests to enhance long-term shareholder value. We will utilize our voting power to bring about change where boards are lagging in gender and racial/ethnic diversity. We will generally vote against the chair of the nominating committee when the issuer does not disclose the gender or racial and ethnic composition of the board. Aggregated diversity data will be considered as adequate in instances where individual directors do not wish to disclose personal identification.

We will generally vote against the chair of the nominating committee when the issuer lacks any gender diversity or any racial/ethnic diversity unless there are mitigating factors. Mitigating factors include, among other factors, recent retirement of relevant directors, a relatively new public company and an ongoing search for a director.

We generally will vote case-by-case on shareholder proposals that seek to force the board to add specific expertise or to change the composition of the board.”

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LGIM

LGIM North America Corporate Governance and Responsible Investment Policy, May 2024

Company Board

“The board of directors is responsible for the management and long-term success of the company. In doing so, it should act as a steward of stakeholders’ interests.

The board has the crucial task of setting the strategy and direction of the business and ensuring that the necessary resources are available to enable their implementation, while making sure that appropriate risk management and internal controls are in place. It sets the philosophy for the company, ensuring that stakeholder views are considered and embedded in its culture. The board is expected to take into account environmental, social and governance considerations and to report on company performance in these areas. It is also responsible for ensuring the integrity of company accounting and reporting, and the effectiveness of internal control systems. Lastly, the board is ultimately accountable to investors and other stakeholders and should make sure its decisions are effectively communicated to them.”

Diversity

We believe a diverse mix of skills, experience and perspectives is essential for a board to function and perform optimally.

Please refer to our diversity policy for further information on the topic.

LGIM will vote against the chair of the nominations or governance committee of:

• All listed companies where women make up less than a third of the board;

• S&P500 companies where there are no women on the executive leadership team;

• S&P500 companies where no board member is of an ethnic minority background; and

• Russell 1000 companies where no board member is of an ethnic minority background (beginning in 2025).

Nomination and governance committee

“The nomination and succession committee is responsible for overseeing all board and senior executive appointments, ensuring an orderly and successful board, and the executive succession process. The committee should ensure the board has the right composition, taking into account important governance considerations such as skill sets, diversity, tenure, and over-boarding.

Given the key role of this committee in board-composition matters, LGIM expects a majority of the members to be independent non-executive directors. The committee should be chaired by an independent non-executive director, and this may include an independent board chair.

The committee chair should be answerable to investors if it is felt that appropriate succession plans are not in place or where there are concerns over the composition of the board.”

Succession planning

“Succession planning is a vital component of an effective board. It ensures continuity, and that individuals with the right sets of skills sit on the board.

We expect companies to put in place a formal and transparent procedure for the appointment of new directors. The external board evaluation exercise should assist in this task. We expect the nomination and governance committee, together with the board to consider setting short, medium, and long-term plans to ensure there is an orderly replacement of board members and senior executives. The plans should map out potential successors in the short term for unexpected departures, in the medium term to replace directors who reach their tenure limits, and in the longer term to take account of future skill requirements and diversity needs. We encourage companies to publish as much of this information as possible in their annual disclosures. This should include the skills the company is looking for and why the selected individual is the right fit for the board.

In addition, we would expect to see a skills matrix linked to the strategy of the company, and an explanation of how the skills of newly appointed directors are complimentary in relation to the matrix, along with the minimum time commitment expected of each director.”

Re-election of directors

“To ensure the successful composition and functioning of the board, it is essential that shareholders exercise their voting rights by holding directors accountable on an annual basis.

LGIM is opposed to the practice of bundled proposals that prevent shareholders from approving individual nominees to the board.

While we acknowledge that retirement by rotation is common, LGIM encourages companies to adopt an annual re-election policy. In addition, we advocate for a majority vote standard for director re-elections.

To allow investors to be able to assess the profiles of the board directors proposed for election or re-election and to make sufficiently informed voting decisions, we expect companies to disclose the name of the directors proposed for election or re-election and their biography. Additionally, we would request the disclosure of key information such as: the attributes and skills that the director brings to the board, and how these fit with the combined skill set of other directors; the expected time commitment to the company; a record of attendance at board and committee meetings, with an explanation where attendance falls short of 75% attendance.”

Board Effectiveness

Culture

“Culture has become an increasingly discussed topic in recent years among businesses, investors and even regulators, and its measurement and assessment are an exercise we expect the board to undertake.

Companies should maintain the highest standards of conduct towards all stakeholders. The board should promote behaviour and values that demonstrate integrity and respect.

For investors to understand company culture, it requires disclosure from the board, given its role in setting values. Investors need reassurance that the CEO and senior management are really driving the cultural message and setting the tone from the top, and that this is regularly discussed and challenged by the board. We are also keen to see how the cultural message is filtered down to the rest of the organisation.

We expect companies to disclose aspects such as:

• How culture is measured and how it relates to the business strategy;

• How the mission statement of the company and its values are communicated and reinforced;

• Any key performance indicators that are linked to culture; and

• Any relevant data linked to the workforce, such as turnover percentage, attrition analysis and how exit interviews are used.

LGIM may vote against the re-election of directors who we believe have not demonstrated good business conduct e.g. harassment, fraud, etc.”

Board tenure

“Regular refreshment of the board helps to ensure that its members remain independent from executive management, that different perspectives feed into board discussions, and that skill sets remain relevant. A regularly refreshed board is more likely to be willing and able to question established practices and avoid ‘group think’, and therefore it exercises more efficient oversight over executives and stays ahead of market changes.

Initially, board tenure is assessed in two different ways:

• On an individual director basis: we consider the optimum tenure for a director to be between six and 12 years.

• On an average board tenure basis: average tenure across all board members should not exceed nine years. LGIM will apply voting sanctions on companies with an average tenure that exceeds 12 years.

LGIM expects the board to be refreshed regularly, and we would be concerned if there had been no new directors appointed to a board in the past five years. Although we accept that there may be some benefit to the board’s discussion by maintaining tenured directors, we would not expect the tenure in the roles of the lead independent director or chair of key committees to exceed 15 years, as this impacts their impartiality and independence. Therefore, we would vote against the re-election of these directors if their tenure exceeded 15 years.

In addition, beginning in 2025, we plan to vote against any director that has served on the board for more than 25 years and is not one of the founders or their direct family representative.”

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State Street Global Advisors

State Street Global Advisors Global Proxy Voting and Engagement Policy, March 2024

Independence

“We believe independent directors are crucial to good corporate governance; they help management establish sound corporate governance policies and practices. We believe a sufficiently independent board is key to effectively monitoring management, maintaining appropriate governance practices, and performing oversight functions necessary to protect shareholder interests. We have developed a set of criteria for determining board independence, which varies by region and/or local jurisdiction. These criteria generally follow relevant listing standards, local regulatory requirements and/or local market practice standards.”

Separation of chair/CEO

“We may take voting action against the chair or members of the nominating committee at companies in the following indexes that have combined the roles of chair and CEO and have not appointed a lead independent director: 

• S&P 500

• STOXX Europe 600”

Board committees

“We believe that board committees are crucial to robust corporate governance and should be composed of a sufficient number of independent directors. We use the same criteria for determining committee independence as we do for determining director independence, which varies by region and/or local jurisdiction. Although we recognize that board structures may vary by jurisdiction, where a board has established an audit committee and/or compensation/remuneration committee, we generally expect the committee to be primarily, and in some cases, fully independent.”

Board Composition

“State Street Global Advisors believes that a well-constituted board of directors, with a balance of skills, expertise, and independence, provides the foundation for a well-governed company.”

Refreshment and tenure

“We may withhold votes from directors if overall average board tenure is excessive. In assessing excessive tenure, we consider factors such as the preponderance of long tenured directors, board refreshment practices, and classified board structures.

Generally, we may vote against age and term limits unless the company is found to have poor board refreshment and director succession practices, and has a preponderance of non-executive directors with excessively long tenures serving on the board.”

Director time commitments

“We consider if a company publicly discloses its director time commitment policy (e.g., within corporate governance guidelines, proxy statement, company website). This policy or associated disclosure must include: 

• Description of the annual review process undertaken by the nominating committee to evaluate director time commitments 

• Numerical limit(s) on public company board seat(s) the company’s directors can serve on

For companies in the S&P 500, we may vote against the nominating committee chair at companies that do not publicly disclose a policy compliant with the above criteria, or do not commit to doing so within a reasonable timeframe.”

Board diversity

“We expect boards of all listed companies to have at least one female board member. If a company does not meet the applicable expectation for three consecutive years, State Street Global Advisors may vote against all incumbent members of the nominating committee or those persons deemed responsible for the nomination process.”

“In addition, we expect the boards of companies in the following indices to be composed of at least 30-percent female directors.

• Russell 3000

• TSX

• FTSE 350

• STOXX 600

• ASX 300

If a company does not meet the applicable expectation, State Street Global Advisors may vote against the chair of the board’s nominating committee or the board leader in the absence of a nominating committee.”

“We may withhold support from the chair of the nominating committee when a company in the S&P 500 or FTSE 100 does not have at least one director from an underrepresented racial/ethnic community on its board. We may waive this voting guideline if a company engages with State Street Global Advisors and provides a specific, timebound plan for reaching this threshold.”

“If a company in the Russell 1000 or FTSE 350 does not disclose the gender, racial and ethnic composition of its board, we may vote against the Chair of the nominating committee.”

Board member expertise

“We believe board members should have adequate skills to provide effective oversight of corporate strategy, operations, and risks, including sustainability-related issues. Boards should also have a regular evaluation process in place to assess the effectiveness of the board and the skills of board members to address issues, such as emerging risks, changes to corporate strategy, and diversification of operations and geographic footprint. We believe nominating committees are best positioned to evaluate the skillset and expertise of both existing and prospective board members. However, we may take such considerations into account in certain circumstances, such as contested elections.”

Board Accountability

Proxy contests

“As long-term shareholders, we vote proxies in director elections, including related to nominating committee members, who play a critical role in determining board composition. While our default position is to support the committees’ judgement, we consider the following factors when evaluating dissident nominees:

• Strategy presented by dissident nominees versus that of current management, as overseen by the incumbent board 

• Effectiveness, quality, and experience of the management slate

• Material governance failures and the level of responsiveness to shareholder concerns and market signals by the incumbent board

• Quality of disclosure and engagement practices to support changes to shareholder rights, capital allocation and/or governance structure

• Company performance and, if applicable, the merit of a recovery plan”

Shareholder meetings

“We generally support proposals that grant boards the right to hold shareholder meetings in a virtual or hybrid format as long as companies uphold the following best practices: 

• Afford virtual attendee shareholders the same rights as would normally be granted to in-person attendee shareholders

• Commit to time-bound renewal (five years or less) of meeting format authorization by shareholders

• Provide a written record of all questions posed during the meeting, and

• Comply with local market laws and regulations relating to virtual and hybrid shareholder meeting practices

• If a company breaches any of the criteria above, we may vote against the chair of the nominating committee.”

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T. Rowe Price

T. Rowe Price Proxy Voting Guidelines, April 2024

Independence

“AGAINST individual directors in the following cases: 

• Inside directors and affiliated outside directors who serve on the board’s Audit, Compensation or Nominating committees”

Board diversity policy

“At a high level, the composition of the average company board does not yet reflect the diversity of the stakeholders these companies represent — their employees, customers, suppliers, communities, or investors. Our experience leads us to observe that boards lacking in diversity represent a sub-optimal composition and a potential risk to the company’s competitiveness over time. We recognize diversity can be defined across a number of dimensions. However, if a board is to be considered meaningfully diverse, in our view some diversity across gender, ethnic, or nationality lines must be present. For companies in the Americas, we generally oppose the re-elections of Governance Committee members if we find no evidence of board diversity.”

Dual-Class Stock

“AGAINST members of the Nominating and Corporate Governance Committee and the Lead Independent Director (or Independent Chair) in the following case:

• For U.S.-listed companies controlled by means of dual-class stock with superior voting rights, our guidelines are to oppose the key board members responsible for setting corporate governance standards.”

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Wellington

Wellington Management 2024 Global Proxy Voting Guidelines, April 2024

Board composition and role of directors

“Effective boards should act in shareholders’ best economic interests and possess the relevant skills to implement the company’s strategy.

We consider shareholders’ ability to elect directors annually an important right and, accordingly, generally support proposals to enable annual director elections and declassify boards.

We may withhold votes from directors for being unresponsive to shareholders or for failing to make progress on issues material to maximizing investment returns. We may also withhold votes from directors who fail to implement shareholder proposals that if adopted would promote long-term shareholder value and have received majority support or have implemented poison pills without shareholder approval.”

Succession planning and board refreshment

“We do not have specific voting policies relating to director age or tenure. We prefer to take a holistic view, evaluating whether the company is balancing the perspectives of new directors with the institutional knowledge of longer-serving board members. Succession planning is a key topic during many of our board engagements.

We expect companies to refresh their board membership every five years and may vote against the chair of the nominating committee for failure to implement. We believe a degree of director turnover allows companies to strengthen board diversity and add new skill sets to the board to enhance their oversight and adapt to evolving strategies.

Boards should offer transparency around their process to evaluate director performance and independence, conducting a rigorous regular evaluation of the board -- key committees as well as individual directors -- which is responsive to shareholder input. We believe externally facilitated board evaluations may contribute to companies retaining an appropriate mix of skills, experience, and diversity on their boards over time.

In certain markets companies are governed by multi-tiered boards, with each tier having different responsibilities. We hold supervisory board members to similar standards, subject to prevailing local governance best practices.”

Independence

“In our view, boards perform best when composed of an appropriate combination of executive and nonexecutive (in particular, independent nonexecutive) directors to challenge and counsel management.

To determine appropriate minimum levels of board independence, we look to prevailing market best practices: two-thirds in the US, for example, and a majority in the UK and France. In addition to the overall independence at the board level, we also consider the independence of audit, compensation, and nominating committees. Where independence falls short of our expectations, we may withhold approval for non-independent directors or those responsible for the board composition. We typically vote in support of shareholder proposals calling for improved independence.”

Board Diversity

“We believe boards that reflect a wide range of perspectives are best positioned to create shareholder value. Appointing boards that thoughtfully debate company strategy and direction is not possible unless boards elect highly qualified and diverse directors. By setting a leadership example, boardrooms with a wide range of experiences, expertise, and perspectives encourage an organizational culture that promotes diverse thinkers, enabling better strategic decisions and the navigation of increasingly complex issues facing companies today.

We think it is not in shareholders’ best interests for the full board to be comprised of directors who all share the same background, experience, and personal characteristics (e.g., gender, race, ethnicity, and age). We expect our portfolio companies to be thoughtful and intentional in considering the widest possible pool of skilled candidates who bring diverse perspectives into the boardroom. We encourage companies to disclose the composition and qualifications of their board and to communicate their ambitions and strategies for creating and fostering a diverse board.

We reserve the right to vote against the reelection of the Nominating/Governance Committee Chair when the board is not meeting local market standards from a diversity perspective. We expect a minimum of 20% gender diversity at major indices such as the S&P 500 and encourage boards to strive for 30% gender diversity. From 2025, we may vote against the reelection of the Nominating/Governance Committee Chair at major indices not meeting this 30% goal.

Outside of the above major indices and absent a market-defined standard, we may vote against the reelection of the Nominating/Governance Committee Chair where no gender-diverse directors are represented on a board.

We reserve the right to vote against the reelection of the Nominating/Governance Committee Chair at US large-cap and FTSE 100 companies that failed to appoint at least one director from a minority ethnic group and fail to provide a clear and compelling reason for being unable to do so. We will continue to engage on diversity of the board in other markets and may vote against the reelection of directors where we fail to see improvements.”

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Vanguard (Global Policy)

Global Proxy Voting Policy for Vanguard-advised funds, February 2024

“The Global Proxy Voting Policy for the Vanguard-advised funds is anchored in the tenet that having companies the funds invest in adopt effective corporate governance practices supports long-term investment returns. As such, the following four pillars establish a framework within which the funds evaluate matters subject to shareholder votes at the funds’ portfolio companies. The funds believe that an effective board provides strategic and risk-based oversight of company management, rational incentives for management, and foundational shareholder rights. This creates a governance environment in which investors’ long-term interests are advanced and protected.”

Pillar I: Board composition and effectiveness

“We examine how boards are composed to provide for their companies’ long-term success, how they consult with management on strategy and oversee material risks, how they align executives’ incentives with shareholders’ interests, and how they provide and safeguard shareholder rights. The funds seek to ensure that the individuals who serve as board directors to represent the interests of all shareholders are appropriately independent, experienced, committed, capable, and diverse.”

Independence

“The funds look for boards to be appropriately independent of company management in both form and substance. Independence at the board level supports a structure of shareholder representatives who are independent in mindset and able to fulfill their role to properly challenge management. In practice, this generally means that the majority of directors on each board should be independent and that the board’s key committees should be composed solely of independent directors. In markets where majority independence is not the norm, the funds look for companies to move in the direction of greater board independence over time.

The funds also support independent leadership in the boardroom. That may take the form of an independent chair or a lead independent director. Regardless of title, the role’s responsibilities should be robust and clearly defined through company disclosure.”

Suitable diversity and experience

“The funds look for boards to be “fit for purpose” by reflecting appropriate diversity of skill, experience, perspectives, and personal characteristics (such as gender, race, age, and ethnicity) resulting in cognitive diversity that enables effective, independent oversight on behalf of all shareholders. The funds believe that the right mix of skills, experience, and characteristics is unique to each board and should reflect expertise related to the company’s strategy and material risks from a variety of vantage points. While the funds are not prescriptive about board composition (with respect to dimensions such as particular personal characteristics or skills), the funds believe boards should determine the composition best suited to their company while considering local market requirements, relevant corporate governance codes, and risks.

The funds look for companies to publish their perspectives on board structure and composition and how it is aligned with their strategy and long-term company performance and shareholder returns. Disclosure of how the board’s composition evolves over time enables the funds and other shareholders to better understand how the board is positioned to serve as effective, engaged stewards of shareholders’ interests.

The funds also believe that regular and meaningful board, committee, and director evaluations enable boards to analyze their current composition and identify opportunity areas for better performance. Our preference is that boards disclose to investors key findings of these evaluations, along with information regarding the skills and experiences of nominated directors, to enable shareholders to make informed proxy voting decisions.”

Appropriate commitment

“The role of public company directors is complex and time-consuming, and the funds believe that directors should maintain sufficient capacity to effectively carry out their responsibilities to shareholders. For this reason, the funds look for directors to appropriately limit their board and other commitments to ensure that they are accessible and responsive to both routine and unexpected board matters (including by attending board and relevant committee meetings). The funds look for boards to have in place policies regarding director commitments and capacity and to disclose such policies (and any potential exceptions) to shareholders, as well as how the board oversees and implements the policy.”

Responsiveness to shareholders

“The funds look for boards to be appropriately responsive to input from shareholders on whose behalf they serve. This may take the form of activist intervention that receives ample support from other shareholders or shareholder proposals that gain majority support. While the funds do not submit shareholder proposals, nominate directors, or seek board seats, the funds look for boards to listen to input from shareholders and consider it in the context of their fiduciary obligations to all shareholders. In cases where the board may choose to not implement actions requested by a majority of shareholders, the funds look for the company to disclose the board’s process and rationale for reaching such decisions.”

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Vanguard (US Policy)

Proxy voting policy for U.S. portfolio companies, February 2024

Pillar I: Board composition and effectiveness

“In the interest of maximizing the long-term return of their investment in each company, the funds seek to ensure that the individuals who serve as board directors to represent the interests of all shareholders are appropriately independent, experienced, committed, capable, and diverse. Diversity of thought, background, and experience, as well as personal characteristics (such as gender, race, ethnicity, and age), meaningfully contribute to the ability of boards to serve as effective, engaged stewards of shareholders’ interests.

In order to appropriately represent shareholder interests in the oversight of company management, a majority of directors should be independent, as should all of the members of the board’s key committees (audit, compensation, and nominating/governance or their equivalents). While the funds generally rely upon the relevant exchange listing or regulatory requirements in establishing a director’s independence, there may be instances (such as former CEOs) in which directors who may be “technically independent” are considered otherwise after engagement and/or research.

As detailed below, if a board’s or committee’s composition is inconsistent with these independence standards, a fund may not support (a) the nonindependent nominees on the board/committee and (b) members of the nominating/governance committee on the ballot.

Majority board independence

“A fund will generally vote against the nominating committee and all nonindependent board members of a noncontrolled company if that company does not maintain a majority independent board. In the second year that a board is not majority independent, the fund may vote against the entire board. Independence is generally defined in accordance with the relevant exchange-listing standards, with the following exceptions:

• Former CEOs. Former CEOs will not be considered independent unless they held only an “interim” CEO position for less than 18 months. An interim CEO who held that temporary position for less than 18 months will be considered independent three years after leaving the position.

• CEO interlocks. CEOs who sit on one another’s boards will not be considered independent.

• Other factors. If it is determined, through engagement or research, that a director’s independence has been compromised, that director may not be considered independent regardless of technical compliance with the exchange listing standards. Likewise, certain circumstances could lead to the determination that a director is independent, regardless of compliance with listing standards.”

Key committee independence

“At noncontrolled companies, a fund will typically vote against nonindependent directors who serve on the following key committees (or their equivalent):

• Audit committee

• Compensation committee

• Nominating and governance committee

In addition to voting against nonindependent committee members, a fund will generally vote against the entire nominating committee if any of the committees noted above is not 100% independent, regardless of the independent status of any committee members. If a board has no nominating and governance committee and instead acts as its own nominating committee, a fund will generally also vote against all directors, except where only the board’s independent directors nominate directors and/ or make the final appointment decision.

At controlled companies, a fund will generally support a nonindependent director on a compensation committee or a nominating and governance committee, so long as the relevant committee is majority independent.

In both instances, if nominating committee members are not up for election in a given year, a fund may vote against any other relevant board member(s).”

Director capacity and commitments

“Directors’ responsibilities are complex and time-consuming. Therefore, the funds seek to understand whether the number of directorship positions held by a director makes it challenging to dedicate the requisite time and attention to effectively fulfill their responsibilities at each company (sometimes referred to as being “overboarded”). While no two boards are identical and time commitments may vary, the funds believe that limitations on the number of board positions held by individual directors are appropriate, absent compelling evidence to the contrary.

A fund will generally vote against any director who is a named executive officer (NEO) and sits on more than two public company boards. The two boards could comprise either the NEO’s “home board” (i.e., a company where the NEO serves as an executive officer) plus one outside board, or two outside boards if the NEO does not serve on their home board. If an NEO sits on more than two public company boards, a fund will typically vote against the nominee at each company where they serve as a nonexecutive director, but not at the nominee’s home board.

A fund will also generally vote against any director who serves on more than four public company boards. In that instance, the fund will typically vote against the director at each company except the one where they serve as board chair or lead independent director.

In certain instances, a fund will consider voting for a director who would otherwise be considered overboarded under the standards above because of company-specific facts and circumstances. This may include, but is not limited to, indications that the director will have sufficient capacity to fulfill their responsibilities and/or a review of the full board’s skill and diversity composition. In addition, a fund may vote for an overboarded director if the director has publicly committed to stepping down from the directorship(s) necessary to fall within the thresholds listed above.

The Vanguard-advised funds look for portfolio companies to adopt good governance practices regarding director commitments, including an overboarding policy and disclosure of the board’s oversight of the implementation of that policy. Helpful disclosure includes a discussion of the company’s policy (e.g., what limits are in place) and, if a nominee for director exceeds its policy, any considerations and rationale for their nomination. Additionally, it is good practice to include disclosure of how the board developed its policy and how frequently it is reviewed to ensure it remains appropriate.”

Board composition

“The funds look for boards to be “fit for purpose” by reflecting sufficient diversity of skills, experience, perspective, and personal characteristics (such as gender, age, race, and ethnicity) resulting in cognitive diversity that enables effective, independent oversight on behalf of all shareholders. The funds believe that the appropriate mix of skills, experience, and characteristics is unique to each board and should reflect expertise related to the company’s strategy and material risks from a variety of vantage points.

The funds look for companies to disclose their perspectives on the appropriate board structure and composition for their company and how those elements support the company’s strategy, long-term performance, and shareholder returns. Disclosure of how the board’s composition evolves over time enables shareholders to better understand how the board is positioned to serve as effective, engaged stewards of shareholders’ interests.

The funds expect disclosure of tenure, skills, and experience at the director level (sometimes referred to as a “skills matrix”). To this end, a fund may support requests for disclosure of the company’s approach to board composition, inclusive of board diversity.

To evaluate board composition in relation to this policy, factors for the funds to consider include applicable market regulations and expectations, along with additional company-specific context.

• Boards should reflect diversity of attributes including tenure, skills, and experience.

• A board should also, at a minimum, represent diversity of personal characteristics, inclusive of at least diversity in gender, race, and ethnicity on the board.

• Boards should take action to reflect a board composition that is appropriately representative, relative to their markets and to the needs of their long-term strategies.

• Disclosure of directors’ personal characteristics (such as race and ethnicity) should occur on a self-identified basis and may occur on an aggregate level or individual director level. Disclosure of skills and experience at the director level is expected.

• Companies should provide disclosure regarding their process for evaluating the composition and effectiveness of their board on a regular basis, the identification of gaps and opportunities to be addressed through board refreshment and evolution, and a robust nomination (and re-nomination) process to ensure the right mix of skills, experience, perspective, and personal characteristics into the future.”

Escalation process: Director and committee accountability

“Directors are generally nominated by boards and elected by shareholders to represent their interests. While a fund may generally support the board’s director nominees, if there are instances in which the board has failed to respond to actions approved by a majority of shareholders, unilaterally taken action against shareholder interests, or, in the fund’s view, failed in its oversight role, the fund may withhold support from those directors deemed responsible (generally based on their functional or committee-level responsibilities). A fund will generally not apply such a vote against a director who has served less than one year on the board and/or applicable committee but in such instances may apply it to another relevant director in their place. Issues that spur such votes may include:

• Lack of majority board and key committee independence. A fund will generally vote against relevant directors to raise concerns when a company lacks majority board independence or key committee independence.

• “Zombie” directors. A fund will typically vote against members of the nominating committee if management proposes the reappointment of a director or directors who failed to receive majority shareholder support and the board has not resolved the underlying issue driving the lack of shareholder support. This vote should apply only when a fund withheld initial support for a director. If nominating committee members are not on the ballot in any given year, a fund may vote against other relevant board members.

• Limiting shareholder rights. A fund will generally vote against members of a governance committee in response to unilateral board actions that meaningfully limit shareholder rights (including, but not limited to, the unilateral adoption of exclusive forum provisions that do not align with the fund’s policy or changing bylaws to include overly onerous advance notice provisions). This vote is based on a holistic review of the company’s governance structures and is applied only when there is concern that shareholders are unable to exercise their rights. If governance committee members are not on the ballot in any given year, a fund may vote against other relevant board members.

• Compensation-related situations.

  • A fund will generally vote against compensation committee members when it votes against the company’s Say on Pay proposal in consecutive years unless meaningful improvements have been made to executive compensation practices since the prior year.

  • If egregious pay practices are identified, a fund will generally vote against compensation committee members if Say on Pay is not on the ballot.

  • A fund will generally also vote against compensation committee members when the fund votes against an equity compensation plan.

• Nonresponsiveness to proposals. A fund will generally vote against members of the relevant committee for failure to adequately respond to proposals (management or shareholder) that received sufficient support based on the applicable vote standard, including the support of the fund, based on votes cast at a prior year’s shareholder meeting.

• Oversight failure. If a situation arises in which the board has failed to effectively identify, monitor, and ensure management of material risks and business practices under its purview based on committee responsibilities, a fund will generally vote against the relevant committee members and/or other relevant directors. These risks may include material social and environmental risks, inclusive of climate change.

  • For example, to assess a climate risk oversight failure, factors for the fund to consider include: the materiality of the risk; the effectiveness of disclosures to enable the market to understand and price the risk; whether the company has disclosed business strategies including reasonable risk mitigation plans in the context of the anticipated regulatory requirements and changes in market activity in line with the Paris Agreement or subsequent agreements; and consideration for company-specific context, market regulations, and expectations. The fund will also consider the board’s overall governance of and effective independent oversight of climate risk.

  • When a specific risk does not fall under the purview of a board committee, a fund will generally vote against the lead independent director and/or chair, and/or any other relevant director(s).

• Board composition. Absent a compelling reason, a fund will generally vote against the nominating and/or governance committee chair, or another relevant board member if the nominating and/or governance committee chair is not up for reelection, if a company’s board is not taking action to achieve board composition that is appropriately representative, relative to their markets and the needs of their long term strategies.”

Exclusive forum/exclusive jurisdiction

“A fund will vote case by case on management proposals to adopt an exclusive forum provision. Considerations include the reasons for the proposal, regulations, governance and shareholder rights available in the applicable jurisdiction, and the breadth of the application of the bylaw.

A fund will generally give companies latitude on organizational matters and, with respect to state forum selection provisions, will generally support proposals to designate state courts in Delaware, or a company’s state of incorporation or principal place of business. Any such choice of a state or federal court should be broad-based, rather than limited to a specific court within a state. The funds will consider withholding support from governance committee members when a company unilaterally adopts a provision that meaningfully limits shareholders’ rights without a compelling rationale for the choice of forum.”

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ISS

ISS Proxy Voting Guidelines Benchmark Policy Recommendations, February 2024

Independence

“Boards should be sufficiently independent from management (and significant shareholders) to ensure that they are able and motivated to effectively supervise management's performance for the benefit of all shareholders, including in setting and monitoring the execution of corporate strategy, with appropriate use of shareholder capital, and in setting and monitoring executive compensation programs that support that strategy. The chair of the board should ideally be an independent director, and all boards should have an independent leadership position or a similar role in order to help provide appropriate counterbalance to executive management, as well as having sufficiently independent committees that focus on key governance concerns such as audit, compensation, and nomination of directors.”

“Vote against or withhold from non-independent directors when:

• Independent directors comprise 50 percent or less of the board;

• The non-independent director serves on the audit, compensation, or nominating committee;

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

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

Composition

“Companies should ensure that directors add value to the board through their specific skills and expertise and by having sufficient time and commitment to serve effectively. Boards should be of a size appropriate to accommodate diversity, expertise, and independence, while ensuring active and collaborative participation by all members. Boards should be sufficiently diverse to ensure consideration of a wide range of perspectives.”

Attendance at board and committee meetings

“In cases of chronic poor attendance without reasonable justification, in addition to voting against the director(s) with poor attendance, generally vote against or withhold from appropriate members of the nominating/governance committees or the full board.”

Overboarded directors

“Generally vote against or withhold from individual directors who:

• Sit on more than five public company boards; 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.”

Board diversity

“Generally vote against or withhold from the chair of the nominating committee (or other directors on a case-by-case basis) at companies where there are no women on the company's board.”

“For companies in the Russell 3000 or S&P 1500 indices, generally vote against or withhold from the chair of the nominating committee (or other directors on a case-by-case basis) where the board has no apparent racially or ethnically diverse members.”

Responsiveness

“Vote case-by-case on individual directors, committee members, or the entire board of directors as appropriate if:

• The board failed to act on a shareholder proposal that received the support of a majority of the shares cast in the previous year or failed to act on a management proposal seeking to ratify an existing charter/bylaw provision that received opposition 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.

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

• 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.”

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Glass Lewis

Glass Lewis, 2024 Benchmark Policy Guidelines

“The purpose of Glass Lewis’ proxy research and advice is to facilitate shareholder voting in favor of governance structures that will drive performance, create shareholder value and maintain a proper tone at the top. Glass Lewis looks for talented boards with a record of protecting shareholders and delivering value over the mediumand long-term. We believe that a board can best protect and enhance the interests of shareholders if it is sufficiently independent, has a record of positive performance, and consists of individuals with diverse backgrounds and a breadth and depth of relevant experience.”

“Regarding the nominating committee, we will consider recommending that shareholders vote against the following:

1. All members of the nominating committee, when the committee nominated or renominated an individual who had a significant conflict of interest or whose past actions demonstrated a lack of integrity or inability to represent shareholder interests
2. The nominating committee chair, if the nominating committee did not meet during the year.
3. In the absence of a governance committee, the nominating committee chair when the chair is not independent, and an independent lead or presiding director has not been appointed
4. The nominating committee chair, when there are fewer than five, or the whole nominating committee when there are more than 20 members on the board.
5. The nominating committee chair, when a director received a greater than 50% against vote the prior year and not only was the director not removed, but the issues that raised shareholder concern were not corrected.
6. The chair of the nominating committee of a board that is not at least 30 percent gender diverse, or all members of the nominating committee of a board with no gender diverse directors, at companies within the Russell 3000 index. For companies outside of the Russell 3000 index, we will recommend voting against the chair of the nominating committee if there are no gender diverse directors.
7. The chair of the nominating committee of a board with fewer than one director from an underrepresented community on the board, at companies within the Russell 1000 index.
8. The nominating committee chair when, alongside other governance or board performance concerns, the average tenure of non-executive directors is 10 years or more and no new independent directors have joined the board in the past five years. We will not be making voting recommendations solely on this basis; rather, insufficient board refreshment may be a contributing factor in our recommendations when additional board-related concerns have been identified.

In addition, we may consider recommending shareholders vote against the chair of the nominating committee where the board’s failure to ensure the board has directors with relevant experience, either through periodic director assessment or board refreshment, has contributed to a company’s poor performance.”

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