EQUITY
ETFs |
TICKER |
SPDR
DOW JONES REIT ETF |
RWR |
SPDR
FACTSET INNOVATIVE TECHNOLOGY ETF |
XITK |
SPDR
GLOBAL DOW ETF |
DGT |
SPDR
ICE PREFERRED SECURITIES ETF |
PSK |
SPDR
MSCI USA STRATEGICFACTORSSM
ETF |
QUS |
SPDR
NYSE TECHNOLOGY ETF |
XNTK |
SPDR
PORTFOLIO S&P 1500 COMPOSITE STOCK MARKET ETF |
SPTM |
SPDR
PORTFOLIO S&P 400 MID CAP ETF |
SPMD |
SPDR
PORTFOLIO S&P 500®
ETF |
SPLG |
SPDR
PORTFOLIO S&P 500 GROWTH ETF |
SPYG |
SPDR
PORTFOLIO S&P 500 HIGH DIVIDEND ETF |
SPYD |
SPDR
PORTFOLIO S&P 500 VALUE ETF |
SPYV |
SPDR
PORTFOLIO S&P 600 SMALL CAP ETF |
SPSM |
SPDR
RUSSELL 1000®
LOW VOLATILITY FOCUS ETF |
ONEV |
SPDR
RUSSELL 1000 MOMENTUM FOCUS ETF |
ONEO |
SPDR
RUSSELL 1000 YIELD FOCUS ETF |
ONEY |
SPDR
S&P 1500 MOMENTUM TILT ETF |
MMTM |
SPDR
S&P 1500 VALUE TILT ETF |
VLU |
SPDR
S&P 400 MID CAP GROWTH ETF |
MDYG |
SPDR
S&P 400 MID CAP VALUE ETF |
MDYV |
SPDR
S&P 500 FOSSIL FUEL RESERVES FREE ETF |
SPYX |
SPDR
S&P 600 SMALL CAP GROWTH ETF |
SLYG |
SPDR
S&P 600 SMALL CAP VALUE ETF |
SLYV |
SPDR
S&P AEROSPACE & DEFENSE ETF |
XAR |
SPDR
S&P BANK ETF |
KBE |
SPDR
S&P BIOTECH ETF |
XBI |
SPDR
S&P CAPITAL MARKETS ETF |
KCE |
SPDR
S&P DIVIDEND ETF |
SDY |
SPDR
S&P HEALTH CARE EQUIPMENT ETF |
XHE |
SPDR
S&P HEALTH CARE SERVICES ETF |
XHS |
SPDR
S&P HOMEBUILDERS ETF |
XHB |
SPDR
S&P INSURANCE ETF |
KIE |
SPDR
S&P INTERNET ETF |
XWEB |
SPDR
S&P KENSHO CLEAN POWER ETF |
CNRG |
SPDR
S&P KENSHO FINAL FRONTIERS ETF |
ROKT |
SPDR
S&P KENSHO FUTURE SECURITY ETF |
FITE |
SPDR
S&P KENSHO INTELLIGENT STRUCTURES ETF |
SIMS |
SPDR
S&P KENSHO NEW ECONOMIES COMPOSITE ETF |
KOMP |
SPDR
S&P KENSHO SMART MOBILITY ETF |
HAIL |
SPDR
S&P METALS & MINING ETF |
XME |
SPDR
S&P OIL & GAS EQUIPMENT & SERVICES ETF |
XES |
SPDR
S&P OIL & GAS EXPLORATION & PRODUCTION
ETF |
XOP |
SPDR
S&P PHARMACEUTICALS ETF |
XPH |
SPDR
S&P REGIONAL BANKING ETF |
KRE |
SPDR
S&P RETAIL ETF |
XRT |
SPDR
S&P SEMICONDUCTOR ETF |
XSD |
SPDR
S&P SOFTWARE & SERVICES ETF |
XSW |
SPDR
S&P TELECOM ETF |
XTL |
SPDR
S&P TRANSPORTATION ETF |
XTN |
FIXED
INCOME ETFs |
TICKER |
SPDR
BLOOMBERG 1-10 YEAR TIPS ETF |
TIPX |
SPDR
BLOOMBERG 1-3 MONTH T-BILL ETF |
BIL |
SPDR
BLOOMBERG 3-12 MONTH T-BILL ETF |
BILS |
SPDR
BLOOMBERG CONVERTIBLE SECURITIES ETF |
CWB |
FIXED
INCOME ETFs |
TICKER |
SPDR
BLOOMBERG EMERGING MARKETS USD BOND ETF |
EMHC |
SPDR
BLOOMBERG HIGH YIELD BOND ETF |
JNK |
SPDR
BLOOMBERG INVESTMENT GRADE FLOATING RATE ETF |
FLRN |
SPDR
BLOOMBERG SHORT TERM HIGH YIELD BOND ETF |
SJNK |
SPDR
MARKETAXESS INVESTMENT GRADE 400 CORPORATE BOND ETF
|
LQIG |
SPDR
NUVEEN BLOOMBERG HIGH YIELD MUNICIPAL BOND ETF |
HYMB |
SPDR
NUVEEN BLOOMBERG MUNICIPAL BOND ETF |
TFI |
SPDR
NUVEEN BLOOMBERG SHORT TERM MUNICIPAL BOND ETF |
SHM |
SPDR
PORTFOLIO AGGREGATE BOND ETF |
SPAB |
SPDR
PORTFOLIO CORPORATE BOND ETF |
SPBO |
SPDR
PORTFOLIO HIGH YIELD BOND ETF |
SPHY |
SPDR
PORTFOLIO INTERMEDIATE TERM CORPORATE BOND ETF |
SPIB |
SPDR
PORTFOLIO INTERMEDIATE TERM TREASURY ETF |
SPTI |
SPDR
PORTFOLIO LONG TERM CORPORATE BOND ETF |
SPLB |
SPDR
PORTFOLIO LONG TERM TREASURY ETF |
SPTL |
SPDR
PORTFOLIO MORTGAGE BACKED BOND ETF |
SPMB |
SPDR
PORTFOLIO SHORT TERM CORPORATE BOND ETF |
SPSB |
SPDR
PORTFOLIO SHORT TERM TREASURY ETF |
SPTS |
SPDR
PORTFOLIO TIPS ETF |
SPIP |
Name,
Address
and
Year of Birth |
Position(s)
With
Funds |
Term
of
Office
and
Length
of
Time
Served |
Principal
Occupation(s)
During
Past
Five
Years |
Number
of
Portfolios
in
Fund
Complex
Overseen
by
Trustee† |
Other
Directorships
Held
by
Trustee
During
Past
Five
Years |
INDEPENDENT
TRUSTEES | |||||
CARL
G. VERBONCOEUR
c/o
SPDR Series Trust
One
Iron Street
Boston,
MA 02210
1952 |
Independent
Trustee,
Chairman,
Trustee
Committee
Chair |
Term:
Unlimited
Served:
since
April
2010 |
Self-employed
consultant
since 2009. |
122 |
None. |
DWIGHT
D. CHURCHILL
c/o
SPDR Series Trust
One
Iron Street
Boston,
MA 02210
1953 |
Independent
Trustee,
Audit
Committee
Chair |
Term:
Unlimited
Served:
since
April
2010 |
Self-employed
consultant
since 2010;
CEO
and President,
CFA
Institute (June 2014
-
January 2015). |
122 |
Affiliated
Managers
Group,
Inc. (Director)
(2010
- present). |
CLARE
S. RICHER
c/o
SPDR Series Trust
One
Iron Street
Boston,
MA 02210
1958 |
Independent
Trustee |
Term:
Unlimited
Served:
since
July
2018 |
Retired.
Chief Financial
Officer,
Putnam
Investments
LLC
(December
2008 - May
2017). |
122 |
Principal
Financial
Group
(Director and
Financial
Committee
Chair)
(2020 – present);
Bain
Capital Specialty
Finance
(Director) (2019
–
present); Bain Capital
Private
Credit (Director) |
Name,
Address
and
Year of Birth |
Position(s)
With
Funds |
Term
of
Office
and
Length
of
Time
Served |
Principal
Occupation(s)
During
Past
Five
Years |
Number
of
Portfolios
in
Fund
Complex
Overseen
by
Trustee† |
Other
Directorships
Held
by
Trustee
During
Past
Five
Years |
|
|
|
|
|
(2022
– present);
University
of Notre
Dame
(Trustee) (2015 –
present). |
SANDRA
G. SPONEM
c/o
SPDR Series Trust
One
Iron Street
Boston,
MA 02210
1958 |
Independent
Trustee |
Term:
Unlimited
Served:
since
July
2018 |
Retired.
Chief Financial
Officer,
M.A. Mortenson
Companies,
Inc.
(construction
and real
estate
company)
(February
2007 - April
2017). |
122 |
Rydex
Series Funds (52
portfolios),
Rydex
Dynamic
Funds (8
portfolios)
and Rydex
Variable
Trust (49
portfolios)
(Trustee)
(2016
– present);
Guggenheim
Strategy
Funds
Trust (3
portfolios),
Guggenheim
Funds
Trust (18
portfolios),
Guggenheim
Taxable
Municipal Bond
&
Investment Grade
Debt
Trust, Guggenheim
Strategic
Opportunities
Fund,
Guggenheim
Variable
Funds Trust (14
portfolios),
and
Transparent
Value Trust
(5
portfolios) (Trustee)
(2019-present);
Guggenheim
Active
Allocation
Fund
(Trustee)
(2021-present);
Fiduciary/Claymore
Energy
Infrastructure
Fund
(Trustee)
(2019-2022);
Guggenheim
Enhanced
Equity
Income Fund and
Guggenheim
Credit
Allocation
Fund
(Trustee)
(2019-2021);
and
Guggenheim
Energy
& Income Fund
(Trustee)
(2015 - 2023). |
CAROLYN
M. CLANCY
c/o
SPDR Series Trust
One
Iron Street
Boston,
MA 02210
1960 |
Independent
Trustee |
Term
Unlimited
Served:
since
October
2022 |
Retired.
Executive Vice
President,
Head of
Strategy,
Analytics and
Market
Readiness,
Fidelity
Investments
(April
2020 – June
2021);
Executive Vice
President,
Head of
Broker
Dealer Business,
Fidelity
Investments
(July
2017 – March
2020). |
122 |
Assumption
University
(Trustee)
(2011 – 2021)
and
(2022 – present);
Big
Sister Association of
Greater
Boston
(Director)
(2016 – 2023). |
KRISTI
L. ROWSELL
c/o
SPDR Series Trust
One
Iron Street
Boston,
MA 02210
1966 |
Independent
Trustee |
Term
Unlimited
Served:
since
October
2022 |
Partner
and President,
Harris
Associates (2010
–
2021). |
122 |
Harris
Associates
Investment
Trust (8
portfolios)
(Trustee)
(2010
– present); Board
of
Governors,
Investment
Company
Institute
(Member) (2018
–
present); Habitat for
Humanity
Chicago
(Director)
(2015 –
present). |
Name,
Address
and
Year of Birth |
Position(s)
With
Funds |
Term
of
Office
and
Length
of
Time
Served |
Principal
Occupation(s)
During
Past
Five
Years |
Number
of
Portfolios
in
Fund
Complex
Overseen
by
Trustee† |
Other
Directorships
Held
by
Trustee
During
Past
Five
Years |
INTERESTED
TRUSTEES | |||||
JAMES
E. ROSS*
c/o
SPDR Series Trust
One
Iron Street
Boston,
MA 02210
1965 |
Interested
Trustee |
Term:
Unlimited
Served:
since
April
2010 |
President,
Winnisquam
Capital
LLC (December
2022
– present);
Non-Executive
Chairman,
Fusion
Acquisition
Corp II
(February
2020 –
present);
Non-Executive
Chairman,
Fusion
Acquisition
Corp. (June
2020
– September
2021);
Retired Chairman
and
Director, SSGA
Funds
Management, Inc.
(2005
– March 2020);
Retired
Executive Vice
President,
State Street
Global
Advisors (2012 –
March
2020); Retired
Chief
Executive Officer
and
Manager, State
Street
Global Advisors
Funds
Distributors, LLC
(May
2017 – March
2020);
Director, State
Street
Global Markets,
LLC
(2013 – April 2017);
President,
SSGA Funds
Management,
Inc. (2005
–
2012); Principal, State
Street
Global Advisors
(2000
– 2005). |
133 |
Investment
Managers
Series
Trust (50
Portfolios)
(2022 –
present);
The Select
Sector
SPDR Trust (11
portfolios)
(2005 –
present);
SSGA SPDR
ETFs
Europe I plc
(Director)
(2016 – 2020);
SSGA
SPDR ETFs
Europe
II plc (Director)
(2016
– 2020); State
Street
Navigator
Securities
Lending Trust
(2016
– 2020); SSGA
Funds
(2014 – 2020);
State
Street Institutional
Investment
Trust (2007
–2020);
State Street
Master
Funds (2007
–2020);
Elfun Funds
(2016
–2018). |
GUNJAN
CHAUHAN**
c/o
SPDR Series Trust
One
Iron Street
Boston,
MA 02210
1982 |
Interested
Trustee |
Term
Unlimited
Served:
since
October
2022 |
Senior
Managing
Director,
State Street
Global
Advisors (April
2018
– Present);
Managing
Director, State
Street
Global Advisors
(June
2015– March
2018). |
122 |
State
Street ICAV
(Director)
(2018 – 2022). |
Name,
Address
and
Year of Birth |
Position(s)
With
Funds |
Term
of
Office
and
Length
of
Time
Served |
Principal
Occupation(s)
During
Past Five Years |
ANN
M. CARPENTER
SSGA
Funds Management, Inc.
One
Iron Street
Boston,
MA 02210
1966 |
President
and
Principal
Executive
Officer;
Deputy
Treasurer |
Term:
Unlimited
Served:
since
May
2023 (with
respect
to
President
and
Principal
Executive
Officer);
Term:
Unlimited
Served:
since
February
2016
(with
respect to
Deputy
Treasurer) |
Chief
Operating Officer, SSGA Funds Management, Inc.
(April
2005 - present)*; Managing Director, State Street
Global
Advisors (April 2005 - present).* |
BRUCE
S. ROSENBERG
SSGA
Funds Management, Inc.
One
Iron Street
Boston,
MA 02210
1961 |
Treasurer
and
Principal
Financial
Officer |
Term:
Unlimited
Served:
since
February
2016 |
Managing
Director, State Street Global Advisors and
SSGA
Funds Management, Inc. (July 2015 - present);
Director,
Credit Suisse (April 2008 - July 2015). |
CHAD
C. HALLETT
SSGA
Funds Management, Inc.
One
Iron Street
Boston,
MA 02210
1969 |
Deputy
Treasurer |
Term:
Unlimited
Served:
since
February
2016 |
Vice
President, State Street Global Advisors and SSGA
Funds
Management, Inc. (November 2014 - present). |
MICHAEL
P. RILEY
SSGA
Funds Management, Inc.
One
Iron Street
Boston,
MA 02210
1969 |
Vice
President |
Term:
Unlimited
Served:
since
February
2005 |
Managing
Director, State Street Global Advisors (2005 -
present).* |
SEAN
O'MALLEY
SSGA
Funds Management, Inc.
One
Iron Street
Boston,
MA 02210
1969 |
Chief
Legal Officer |
Term:
Unlimited
Served:
since
August
2019 |
Senior
Vice President and Deputy General Counsel,
State
Street Global Advisors (November 2013 - present). |
DAVID
URMAN
SSGA
Funds Management, Inc.
One
Iron Street
Boston,
MA 02210
1985 |
Secretary |
Term:
Unlimited
Served:
since
August
2019 |
Vice
President and Senior Counsel, State Street Global
Advisors
(April 2019 - present); Vice President and
Counsel,
State Street Global Advisors (August 2015 -
April
2019); Associate, Ropes & Gray LLP (November
2012
- August 2015). |
DAVID
BARR
SSGA
Funds Management, Inc.
One
Iron Street
Boston,
MA 02210
1974 |
Assistant
Secretary |
Term:
Unlimited
Served:
since
November
2020 |
Vice
President and Senior Counsel, State Street Global
Advisors
(October 2019 - present); Vice President and
Counsel,
Eaton Vance Corp. (October 2010 - October
2019). |
E.
GERARD MAIORANA, JR.
SSGA
Funds Management, Inc.
One
Iron Street
Boston,
MA 02210
1971 |
Assistant
Secretary |
Term:
Unlimited
Served:
since
May
2023 |
Assistant
Vice President, State Street Global Advisors
(July
2014 - present). |
DARLENE
ANDERSON-VASQUEZ
SSGA
Funds Management, Inc.
One
Iron Street
Boston,
MA 02210
1968 |
Deputy
Treasurer |
Term:
Unlimited
Served:
since
November
2016 |
Managing
Director, State Street Global Advisors and
SSGA
Funds Management, Inc. (May 2016 - present);
Senior
Vice President, John Hancock Investments
(September
2007 - May 2016). |
ARTHUR
A. JENSEN
SSGA
Funds Management, Inc.
1600
Summer Street
Stamford,
CT 06905
1966 |
Deputy
Treasurer |
Term:
Unlimited
Served:
since
August
2017 |
Vice
President, State Street Global Advisors and SSGA
Funds
Management, Inc. (July 2016 - present); Mutual
Funds
Controller, GE Asset Management Incorporated
(April
2011 - July 2016). |
Name,
Address
and
Year of Birth |
Position(s)
With
Funds |
Term
of
Office
and
Length
of
Time
Served |
Principal
Occupation(s)
During
Past Five Years |
DAVID
LANCASTER
SSGA
Funds Management, Inc.
One
Iron Street
Boston,
MA 02210
1971 |
Assistant
Treasurer |
Term:
Unlimited
Served:
since
November
2020 |
Vice
President, State Street Global Advisors and SSGA
Funds
Management, Inc. (July 2017 - present); Assistant
Vice
President, State Street Bank and Trust Company
(November
2011 - July 2017).* |
JOHN
BETTENCOURT
SSGA
Funds Management, Inc.
One
Iron Street
Boston,
MA 02210
1976 |
Assistant
Treasurer |
Term:
Unlimited
Served:
since
May
2022 |
Vice
President, State Street Global Advisors and SSGA
Funds
Management Inc. (March 2020 – present);
Assistant
Vice President, State Street Global Advisors
(June
2007 – March 2020). |
BRIAN
HARRIS
SSGA
Funds Management, Inc.
One
Iron Street
Boston,
MA 02210
1973 |
Chief
Compliance
Officer;
Anti-Money
Laundering
Officer;
Code
of Ethics
Compliance
Officer |
Term:
Unlimited
Served:
since
November
2013 |
Managing
Director, State Street Global Advisors and
SSGA
Funds Management, Inc. (June 2013 -
present).* |
Name
of
Trustee |
Aggregate
Compensation
from
the Trust(1)
|
Pension
or
Retirement
Benefits
Accrued
as
Part
of
Trust
Expenses |
Estimated
Annual
Benefits
Upon
Retirement |
Total
Compensation
from
the
Trust
and
Fund
Complex
Paid
to
Trustees(1)
|
Independent
Trustees:
| ||||
Carl
G. Verboncoeur |
$375,889 |
N/A |
N/A |
$457,500 |
Dwight
D. Churchill |
$326,531 |
N/A |
N/A |
$397,500 |
Clare
S. Richer |
$293,641 |
N/A |
N/A |
$357,500 |
Sandra
G. Sponem |
$297,757 |
N/A |
N/A |
$362,500 |
Carolyn
M. Clancy(2) |
$205,493 |
N/A |
N/A |
$250,000 |
Kristi
L. Rowsell(3) |
$179,653 |
N/A |
N/A |
$218,625 |
Interested
Trustees:
| ||||
James
E. Ross |
$297,757 |
N/A |
N/A |
$362,500 |
Gunjan
Chauhan(4) |
N/A |
N/A |
N/A |
N/A |
Name
of Trustee |
Fund |
Dollar
Range of Equity
Securities
in the Trust |
Aggregate
Dollar Range of Equity
Securities
in All
Funds
Overseen
by
Trustee in Family of
Investment
Companies |
Independent
Trustees: |
| ||
Carl
G. Verboncoeur |
SPDR S&P
Dividend ETF |
$10,001 -
$50,000 |
$50,001 -
$100,000 |
|
SPDR S&P
Kensho New Economies Composite ETF |
$10,001 -
$50,000 |
|
|
SPDR S&P
600 Small Cap Value ETF |
$10,001 -
$50,000 |
|
Dwight
D. Churchill |
SPDR Nuveen
Bloomberg High Yield Municipal Bond ETF |
Over
$100,000 |
Over
$100,000 |
|
SPDR Portfolio
Intermediate Term Treasury ETF |
Over
$100,000 |
|
|
SPDR Portfolio
Short Term Corporate Bond ETF |
Over
$100,000 |
|
|
SPDR S&P
500 ESG ETF |
Over
$100,000 |
|
Clare
S. Richer |
SPDR Portfolio
S&P 500 Value ETF |
Over
$100,000 |
Over
$100,000 |
|
SPDR S&P
Kensho New Economies Composite ETF |
$50,001 -
$100,000 |
|
Sandra
G. Sponem |
SPDR S&P
Kensho New Economies Composite ETF |
Over
$100,000 |
Over
$100,000 |
Carolyn
M. Clancy |
SPDR Portfolio
S&P 500 Value ETF |
Over
$100,000 |
Over
$100,000 |
|
SPDR S&P
Dividend ETF |
$10,001-$50,000 |
|
Kristi
L. Rowsell |
SPDR Bloomberg
1-10 Yr TIPS ETF |
$50,001-$100,000 |
Over
$100,000 |
Interested
Trustees: |
| ||
James
E. Ross |
SPDR Dow Jones
REIT ETF |
$10,001 -
$50,000 |
Over
$100,000 |
|
SPDR Nuveen
Bloomberg High Yield Municipal Bond ETF |
$50,001-$100,000 |
|
|
SPDR Portfolio
S&P 400 Mid Cap ETF |
$10,001 -
$50,000 |
|
|
SPDR Portfolio
S&P 500 ETF |
Over
$100,000 |
|
|
SPDR S&P
400 Mid Cap Growth ETF |
$50,001 -
$100,000 |
|
|
SPDR S&P
600 Small Cap Growth ETF |
$10,001 -
$50,000 |
|
|
SPDR S&P
Biotech ETF |
$1 -
$10,000 |
|
Gunjan
Chauhan |
None |
None |
None |
Fund |
2023 |
2022 |
2021 |
SPDR
Bloomberg 1-10 Year TIPS ETF |
$2,116,926 |
$1,778,158 |
$853,681 |
SPDR
Bloomberg 1-3 Month T-Bill ETF |
$33,963,335 |
$19,097,238 |
$17,677,682 |
SPDR
Bloomberg 3-12 Month T-Bill ETF(1) |
$1,184,375 |
$32,333 |
$11,930 |
SPDR
Bloomberg Convertible Securities ETF |
$16,402,237 |
$23,282,058 |
$24,279,419 |
SPDR
Bloomberg Emerging Markets USD Bond ETF(2) |
$312,064 |
$398,381 |
$83,826 |
SPDR
Bloomberg High Yield Bond ETF |
$32,268,119 |
$32,739,120 |
$46,255,063 |
SPDR
Bloomberg Investment Grade Floating Rate ETF |
$4,379,155 |
$4,070,065 |
$3,640,092 |
SPDR
Bloomberg Short Term High Yield Bond ETF |
$14,137,279 |
$16,900,088 |
$15,306,223 |
Fund |
2023 |
2022 |
2021 |
SPDR
Dow Jones REIT ETF |
$3,853,876 |
$4,897,861 |
$3,574,308 |
SPDR
FactSet Innovative Technology ETF |
$470,481 |
$1,147,608 |
$1,476,288 |
SPDR
Global Dow ETF |
$548,136 |
$505,415 |
$431,062 |
SPDR
ICE Preferred Securities ETF |
$4,558,573 |
$5,957,037 |
$5,955,327 |
SPDR
MarketAxess Investment Grade 400 Corporate Bond ETF(3) |
$55,424 |
$13,101 |
N/A |
SPDR
MSCI USA StrategicFactors ETF |
$1,360,273 |
$1,447,433 |
$1,262,767 |
SPDR
Nuveen Bloomberg High Yield Municipal Bond ETF |
$6,891,466 |
$6,275,371 |
$4,923,239 |
SPDR
Nuveen Bloomberg Municipal Bond ETF(4) |
$8,492,727 |
$9,535,482 |
$9,588,681 |
SPDR
Nuveen Bloomberg Short Term Municipal Bond ETF |
$9,141,937 |
$9,967,659 |
$8,844,101 |
SPDR
NYSE Technology ETF |
$1,439,283 |
$2,208,364 |
$2,112,261 |
SPDR
Portfolio Aggregate Bond ETF(5) |
$1,919,879 |
$1,945,527 |
$2,203,822 |
SPDR
Portfolio Corporate Bond ETF |
$157,778 |
$110,439 |
$177,098 |
SPDR
Portfolio High Yield Bond ETF |
$893,959 |
$573,227 |
$273,307 |
SPDR
Portfolio Intermediate Term Corporate Bond ETF |
$2,439,453 |
$3,033,848 |
$4,360,180 |
SPDR
Portfolio Intermediate Term Treasury ETF |
$2,478,665 |
$2,040,867 |
$1,707,254 |
SPDR
Portfolio Long Term Corporate Bond ETF |
$247,686 |
$480,880 |
$641,322 |
SPDR
Portfolio Long Term Treasury ETF |
$3,633,132 |
$2,917,524 |
$1,714,604 |
SPDR
Portfolio Mortgage Backed Bond ETF(6) |
$1,615,623 |
$1,659,103 |
$1,537,306 |
SPDR
Portfolio S&P 1500 Composite Stock Market ETF |
$1,719,810 |
$1,694,724 |
$1,273,414 |
SPDR
Portfolio S&P 400 Mid Cap ETF |
$2,797,118 |
$2,507,546 |
$1,774,467 |
SPDR
Portfolio S&P 500 ETF |
$4,588,400 |
$3,930,163 |
$2,401,004 |
SPDR
Portfolio S&P 500 Growth ETF |
$5,833,237 |
$5,551,178 |
$3,842,622 |
SPDR
Portfolio S&P 500 High Dividend ETF |
$5,173,933 |
$4,063,859 |
$1,899,309 |
SPDR
Portfolio S&P 500 Value ETF |
$5,741,236 |
$5,272,635 |
$3,222,509 |
SPDR
Portfolio S&P 600 Small Cap ETF |
$2,415,855 |
$2,157,350 |
$1,633,485 |
SPDR
Portfolio Short Term Corporate Bond ETF |
$3,042,497 |
$4,078,700 |
$5,040,828 |
SPDR
Portfolio Short Term Treasury ETF |
$2,623,884 |
$2,202,147 |
$1,862,763 |
SPDR
Portfolio TIPS ETF |
$2,703,845 |
$3,896,930 |
$2,645,219 |
SPDR
Russell 1000 Low Volatility Focus ETF |
$1,134,436 |
$1,166,399 |
$976,781 |
SPDR
Russell 1000 Momentum Focus ETF |
$501,268 |
$627,967 |
$555,965 |
SPDR
Russell 1000 Yield Focus ETF |
$1,653,688 |
$1,458,357 |
$984,003 |
SPDR
S&P 1500 Momentum Tilt ETF |
$91,457 |
$106,251 |
$95,953 |
SPDR
S&P 1500 Value Tilt ETF |
$264,186 |
$290,549 |
$92,792 |
SPDR
S&P 400 Mid Cap Growth ETF |
$2,535,270 |
$2,537,276 |
$2,632,235 |
SPDR
S&P 400 Mid Cap Value ETF |
$3,246,003 |
$2,450,189 |
$2,193,414 |
SPDR
S&P 500 Fossil Fuel Reserves Free ETF(7) |
$2,501,951 |
$2,543,956 |
$1,994,932 |
SPDR
S&P 600 Small Cap Growth ETF |
$3,404,484 |
$3,409,068 |
$2,908,292 |
SPDR
S&P 600 Small Cap Value ETF |
$5,898,654 |
$6,158,126 |
$4,498,675 |
SPDR
S&P Aerospace & Defense ETF |
$4,785,857 |
$4,561,430 |
$4,474,883 |
SPDR
S&P Bank ETF |
$6,195,952 |
$10,926,856 |
$9,085,863 |
SPDR
S&P Biotech ETF |
$25,809,180 |
$23,448,768 |
$23,434,290 |
SPDR
S&P Capital Markets ETF |
$375,509 |
$680,210 |
$197,510 |
SPDR
S&P Dividend ETF |
$79,092,441 |
$71,363,902 |
$60,276,980 |
SPDR
S&P Health Care Equipment ETF |
$1,584,018 |
$2,243,322 |
$2,411,614 |
SPDR
S&P Health Care Services ETF |
$412,328 |
$501,177 |
$449,977 |
SPDR
S&P Homebuilders ETF |
$3,382,073 |
$6,091,660 |
$5,232,560 |
SPDR
S&P Insurance ETF |
$1,770,258 |
$1,699,383 |
$1,568,208 |
SPDR
S&P Internet ETF |
$81,971 |
$156,786 |
$199,898 |
SPDR
S&P Kensho Clean Power ETF |
$1,512,716 |
$1,487,832 |
$1,030,165 |
SPDR
S&P Kensho Final Frontiers ETF |
$79,174 |
$93,233 |
$71,838 |
SPDR
S&P Kensho Future Security ETF |
$132,926 |
$123,574 |
$92,533 |
SPDR
S&P Kensho Intelligent Structures ETF |
$125,743 |
$215,744 |
$121,928 |
SPDR
S&P Kensho New Economies Composite ETF |
$3,320,831 |
$3,822,510 |
$3,380,854 |
SPDR
S&P Kensho Smart Mobility ETF |
$291,285 |
$684,777 |
$569,346 |
Fund |
2023 |
2022 |
2021 |
SPDR
S&P Metals & Mining ETF |
$7,119,348 |
$8,046,945 |
$4,054,108 |
SPDR
S&P Oil & Gas Equipment & Services
ETF |
$1,129,627 |
$743,065 |
$465,055 |
SPDR
S&P Oil & Gas Exploration & Production
ETF |
$14,349,839 |
$15,034,619 |
$9,751,912 |
SPDR
S&P Pharmaceuticals ETF |
$759,795 |
$767,406 |
$899,471 |
SPDR
S&P Regional Banking ETF |
$10,468,023 |
$16,800,115 |
$9,968,681 |
SPDR
S&P Retail ETF |
$1,363,923 |
$2,639,851 |
$2,086,877 |
SPDR
S&P Semiconductor ETF |
$4,237,026 |
$4,302,180 |
$2,799,610 |
SPDR
S&P Software Services ETF |
$782,898 |
$1,499,754 |
$1,387,045 |
SPDR
S&P Telecom ETF |
$225,887 |
$268,939 |
$249,467 |
SPDR
S&P Transportation ETF |
$1,239,207 |
$2,516,666 |
$1,593,356 |
Fund |
2023 |
2022
|
2021
|
SPDR
Nuveen Bloomberg High Yield Municipal Bond ETF |
$2,875,026 |
$2,395,691 |
$1,879,021 |
SPDR
Nuveen Bloomberg Municipal Bond ETF |
$3,425,548 |
$3,500,202 |
$2,792,690 |
SPDR
Nuveen Bloomberg Short Term Municipal Bond ETF |
$3,631,309 |
$3,667,879 |
$3,047,307 |
Portfolio
Management Team |
Fund |
Karl
Schneider and Juan Acevedo |
SPDR
S&P 400 Mid Cap Growth ETF
SPDR
S&P 400 Mid Cap Value ETF |
Karl
Schneider and David Chin |
SPDR
S&P 600 Small Cap Growth ETF
SPDR
S&P 600 Small Cap Value ETF |
Karl
Schneider and Raymond Donofrio |
SPDR
S&P Biotech ETF
SPDR
S&P Health Care Services ETF
SPDR
S&P Homebuilders ETF
SPDR
S&P Insurance ETF
SPDR
S&P Internet ETF
SPDR
S&P Metals & Mining ETF |
Karl
Schneider and Michael Finocchi |
SPDR
FactSet Innovative Technology ETF
SPDR
S&P Telecom ETF
SPDR
S&P Transportation ETF |
Karl
Schneider and Lisa Hobart |
SPDR
Dow Jones REIT ETF |
Portfolio
Management Team |
Fund |
Karl
Schneider and Ted Janowsky |
SPDR
S&P Retail ETF |
Karl
Schneider, Ted Janowsky and Kala O'Donnell |
SPDR
S&P Bank ETF |
Karl
Schneider, Thomas Coleman and Raymond Donofrio |
SPDR
S&P Software & Services ETF
SPDR
S&P Oil & Gas Equipment & Services
ETF |
Karl
Schneider and Mark Krivitsky |
SPDR
Portfolio S&P 400 Mid Cap ETF
SPDR
Portfolio S&P 500 Value ETF
SPDR
Portfolio S&P 500 Growth ETF |
Karl
Schneider and John Law |
SPDR
MSCI USA StrategicFactors ETF
SPDR
Portfolio S&P 500 ETF
SPDR
Portfolio S&P 500 High Dividend ETF
SPDR
Russell 1000 Yield Focus ETF
SPDR
S&P 1500 Momentum Tilt ETF
SPDR
S&P 1500 Value Tilt ETF
SPDR
S&P 500 Fossil Fuel Reserves Free ETF |
Karl
Schneider and Kathleen Morgan |
SPDR
Global Dow ETF
SPDR
NYSE Technology ETF
SPDR
Portfolio S&P 1500 Composite Stock Market ETF |
Karl
Schneider and Kala O'Donnell |
SPDR
S&P Health Care Equipment ETF
SPDR
S&P Capital Markets ETF
SPDR
S&P Regional Banking ETF
SPDR
S&P Semiconductor ETF |
Karl
Schneider and Emiliano Rabinovich |
SPDR
Russell 1000 Low Volatility Focus ETF
SPDR
Russell 1000 Momentum Focus ETF
SPDR
S&P Dividend ETF |
Karl
Schneider and Keith Richardson |
SPDR
S&P Aerospace & Defense ETF
SPDR
S&P Pharmaceuticals ETF |
Karl
Schneider, Amy Scofield and Michael Finocchi |
SPDR
ICE Preferred Securities ETF |
Karl
Schneider and Olga Winner |
SPDR
S&P Oil & Gas Exploration & Production
ETF |
Karl
Schneider and Teddy Wong |
SPDR
Portfolio S&P 600 Small Cap ETF |
Todd
Bean and Sean Lussier |
SPDR
Bloomberg 1-3 Month T-Bill ETF
SPDR
Bloomberg 3-12 Month T-Bill ETF |
Cynthia
Moy and James Kramer |
SPDR
Bloomberg 1-10 Year TIPS ETF
SPDR
Portfolio TIPS ETF |
Joanna
Madden and Cynthia Moy |
SPDR
Portfolio Intermediate Term Treasury ETF
SPDR
Portfolio Long Term Treasury ETF
SPDR
Portfolio Short Term Treasury ETF |
Marc
DiCosimo, Michael Przygoda and Joanna Madden |
SPDR
Portfolio Aggregate Bond ETF |
Marc
DiCosimo and Michael Przygoda |
SPDR
Portfolio Mortgage Backed Bond ETF |
Michael
Brunell and Christopher DiStefano |
SPDR
Bloomberg Convertible Securities ETF |
Michael
Brunell, Frank Miethe and Christopher DiStefano |
SPDR
Portfolio Corporate Bond ETF |
Michael
Brunell, Kyle Kelly and Bradley Sullivan |
SPDR
Bloomberg High Yield Bond ETF
SPDR
Bloomberg Short Term High Yield Bond ETF
SPDR
Portfolio High Yield Bond
ETF |
Portfolio
Management Team |
Fund |
Timothy
T. Ryan and Joel H. Levy |
Municipal
Bond ETFs |
David
Marchetti, Christopher DiStefano and Frank Miethe |
SPDR
Bloomberg Investment Grade Floating Rate ETF
SPDR
Portfolio Intermediate Term Corporate Bond ETF
SPDR
Portfolio Long Term Corporate Bond ETF
SPDR
Portfolio Short Term Corporate Bond ETF |
Mark
Krivitsky and Kathleen Morgan |
SPDR
S&P Kensho Clean Power ETF
SPDR
S&P Kensho Smart Mobility ETF |
Mark
Krivitsky and Kala O'Donnell |
SPDR
S&P Kensho Intelligent Structures ETF
SPDR
S&P Kensho New Economies Composite ETF |
Kathleen
Morgan and Kala O'Donnell |
SPDR
S&P Kensho Final Frontiers ETF
SPDR
S&P Kensho Future Security ETF |
James
Kramer, Joanna Madden, Jennifer Taylor and
Kheng
Siang Ng |
SPDR
Bloomberg Emerging Markets USD Bond ETF |
David
Marchetti, Frank Miethe and Bradley Sullivan |
SPDR
MarketAxess Investment Grade 400 Corporate
Bond
ETF |
Portfolio
Manager |
Registered
Investment
Company
Accounts |
Assets
Managed
(billions)* |
Other
Pooled
Investment
Vehicle
Accounts |
Assets
Managed
(billions)* |
Other
Accounts |
Assets
Managed
(billions)* |
Total
Assets
Managed
(billions) |
Karl
Schneider |
76 |
$794.20 |
365 |
$754.97 |
529 |
$516.38 |
$2,065.55 |
Juan
Acevedo |
76 |
$794.20 |
365 |
$754.97 |
529 |
$516.38 |
$2,065.55 |
David
Chin |
76 |
$794.20 |
365 |
$754.97 |
529 |
$516.38 |
$2,065.55 |
Thomas
Coleman |
76 |
$794.20 |
365 |
$754.97 |
529 |
$516.38 |
$2,065.55 |
Raymond
Donofrio |
76 |
$794.20 |
365 |
$754.97 |
529 |
$516.38 |
$2,065.55 |
Michael
Finocchi |
76 |
$794.20 |
365 |
$754.97 |
529 |
$516.38 |
$2,065.55 |
Lisa
Hobart |
76 |
$794.20 |
365 |
$754.97 |
529 |
$516.38 |
$2,065.55 |
Ted
Janowsky |
76 |
$794.20 |
365 |
$754.97 |
529 |
$516.38 |
$2,065.55 |
Mark
Krivitsky |
76 |
$794.20 |
365 |
$754.97 |
529 |
$516.38 |
$2,065.55 |
John
Law |
76 |
$794.20 |
365 |
$754.97 |
529 |
$516.38 |
$2,065.55 |
Kathleen
Morgan |
76 |
$794.20 |
365 |
$754.97 |
529 |
$516.38 |
$2,065.55 |
Kala
O'Donnell |
76 |
$794.20 |
365 |
$754.97 |
529 |
$516.38 |
$2,065.55 |
Emiliano
Rabinovich |
76 |
$794.20 |
365 |
$754.97 |
529 |
$516.38 |
$2,065.55 |
Keith
Richardson |
76 |
$794.20 |
365 |
$754.97 |
529 |
$516.38 |
$2,065.55 |
Amy
Scofield |
76 |
$794.20 |
365 |
$754.97 |
529 |
$516.38 |
$2,065.55 |
Olga
Winner |
76 |
$794.20 |
365 |
$754.97 |
529 |
$516.38 |
$2,065.55 |
Teddy
Wong |
76 |
$794.20 |
365 |
$754.97 |
529 |
$516.38 |
$2,065.55 |
Todd
Bean |
16 |
$180.52 |
17 |
$106.23 |
74 |
$103.60 |
$390.35 |
Sean
Lussier |
16 |
$180.52 |
17 |
$106.23 |
74 |
$103.60 |
$390.35 |
Michael
Brunell |
19 |
$25.72 |
140 |
$179.07 |
163 |
$108.58 |
$313.37 |
Marc
DiCosimo |
19 |
$25.72 |
140 |
$179.07 |
163 |
$108.58 |
$313.37 |
Christopher
DiStefano |
19 |
$25.72 |
140 |
$179.07 |
163 |
$108.58 |
$313.37 |
Kyle
Kelly |
19 |
$25.72 |
140 |
$179.07 |
163 |
$108.58 |
$313.37 |
James
Kramer |
19 |
$25.72 |
140 |
$179.07 |
163 |
$108.58 |
$313.37 |
Joanna
Madden |
19 |
$25.72 |
140 |
$179.07 |
163 |
$108.58 |
$313.37 |
Portfolio
Manager |
Registered
Investment
Company
Accounts |
Assets
Managed
(billions)* |
Other
Pooled
Investment
Vehicle
Accounts |
Assets
Managed
(billions)* |
Other
Accounts |
Assets
Managed
(billions)* |
Total
Assets
Managed
(billions) |
David
Marchetti |
19 |
$25.72 |
140 |
$179.07 |
163 |
$108.58 |
$313.37 |
Frank
Miethe |
19 |
$25.72 |
140 |
$179.07 |
163 |
$108.58 |
$313.37 |
Cynthia
Moy |
19 |
$25.72 |
140 |
$179.07 |
163 |
$108.58 |
$313.37 |
Michael
Przygoda |
19 |
$25.72 |
140 |
$179.07 |
163 |
$108.58 |
$313.37 |
Bradley
Sullivan |
19 |
$25.72 |
140 |
$179.07 |
163 |
$108.58 |
$313.37 |
Jennifer
Taylor** |
0 |
$0 |
3 |
$0.97 |
5 |
$7.40 |
$8.37 |
Kheng
Siang Ng*** |
3 |
$0.33 |
2 |
$3.40 |
0 |
$0 |
$3.73 |
Portfolio
Manager |
Fund |
Dollar
Range of Trust Shares
Beneficially
Owned |
Marc
DiCosimo |
SPDR Portfolio
Aggregate Bond ETF |
$10,001 -
$50,000 |
Christopher
DiStefano |
SPDR Bloomberg
Convertible Securities ETF |
$10,001 -
$50,000 |
Frank
Miethe |
SPDR
MarketAxess Investment Grade 400 Corporate Bond ETF |
$1 -
$10,000 |
|
SPDR Portfolio
Intermediate Term Corporate Bond ETF |
$1 -
$10,000 |
Karl
Schneider |
SPDR S&P
Dividend ETF |
$10,001 -
$50,000 |
Bradley
Sullivan |
SPDR Bloomberg
Short Term High Yield Bond ETF |
$10,001 -
$50,000 |
Teddy
Wong |
SPDR Portfolio
S&P 600 Small Cap ETF |
$50,001 -
$100,000 |
Portfolio
Manager |
Registered
Investment
Company
Accounts |
Assets
Managed
(billions)* |
Other
Pooled
Investment
Vehicle
Accounts |
Assets
Managed
(billions)* |
Other
Accounts |
Assets
Managed
(billions)* |
Total
Assets
Managed
(billions) |
Timothy
T. Ryan |
9 |
$12.06 |
0 |
$0 |
11 |
$2.27 |
$14.33 |
Joel
H. Levy |
2 |
$0.27 |
0 |
$0 |
0 |
$0 |
$0.27 |
|
Gross
income
earned
by
the
Fund
from
securities
lending
activities |
Fees
and/or compensation paid by the Fund for securities lending activities
and
related
services |
Aggregate
fees
and/or
compensation
paid
by
the
Fund
for
securities
lending
activities
and
related
services |
Net
income
from
securities
lending
activities | |||||
Fees
paid
to
State
Street
from
a
revenue
split |
Fees
paid
for
any
cash
collateral
management
service
(including
fees
deducted
from
a
pooled
cash
collateral
reinvestment
vehicle)
that
are not
included
in a
revenue
split |
Admini-
strative
fees
not
included
in
a
revenue
split |
Indemnifi-
cation
fees
not
included
in
a
revenue
split |
Rebate
(paid
to
borrower) |
Other
fees
not
included
in
a
revenue
split | ||||
SPDR
Bloomberg
1-10
Year
TIPS
ETF |
$1,743,783 |
$13,721 |
$15,582 |
$0 |
$0 |
$1,620,220 |
$0 |
$1,649,523 |
$94,261 |
SPDR
Bloomberg
1-3
Month
T-Bill
ETF |
$23,891,369 |
$548,061 |
$177,106 |
$0 |
$0 |
$19,472,696 |
$0 |
$20,197,863 |
$3,693,506 |
SPDR
Bloomberg
3-12
Month
T-Bill
ETF |
$0 |
$0 |
$0 |
$0 |
$0 |
$0 |
$0 |
$0 |
$0 |
SPDR
Bloomberg
Convertible
Securities
ETF |
$9,671,943 |
$374,691 |
$92,227 |
$0 |
$0 |
$6,429,587 |
$0 |
$6,896,505 |
$2,775,438 |
SPDR
Bloomberg
Emerging
Markets
USD
Bond
ETF |
$86,736 |
$1,590 |
$733 |
$0 |
$0 |
$72,814 |
$0 |
$75,136 |
$11,600 |
SPDR
Bloomberg
High
Yield
Bond
ETF |
$28,825,806 |
$989,624 |
$260,186 |
$0 |
$0 |
$20,331,040 |
$0 |
$21,580,849 |
$7,244,956 |
SPDR
Bloomberg
Investment
Grade
Floating
Rate
ETF |
$882,329 |
$9,360 |
$9,977 |
$0 |
$0 |
$791,822 |
$0 |
$811,159 |
$71,170 |
SPDR
Bloomberg
Short
Term
High
Yield
Bond
ETF |
$12,537,554 |
$450,855 |
$115,587 |
$0 |
$0 |
$8,610,041 |
$0 |
$9,176,483 |
$3,361,071 |
SPDR
Bloomberg
Short
Term
International
Treasury
Bond
ETF |
$0 |
$0 |
$0 |
$0 |
$0 |
$0 |
$0 |
$0 |
$0 |
|
Gross
income
earned
by
the
Fund
from
securities
lending
activities |
Fees
and/or compensation paid by the Fund for securities lending activities
and
related
services |
Aggregate
fees
and/or
compensation
paid
by
the
Fund
for
securities
lending
activities
and
related
services |
Net
income
from
securities
lending
activities | |||||
Fees
paid
to
State
Street
from
a
revenue
split |
Fees
paid
for
any
cash
collateral
management
service
(including
fees
deducted
from
a
pooled
cash
collateral
reinvestment
vehicle)
that
are not
included
in a
revenue
split |
Admini-
strative
fees
not
included
in
a
revenue
split |
Indemnifi-
cation
fees
not
included
in
a
revenue
split |
Rebate
(paid
to
borrower) |
Other
fees
not
included
in
a
revenue
split | ||||
SPDR
Dow
Jones
REIT
ETF |
$726,710 |
$8,076 |
$7,113 |
$0 |
$0 |
$653,445 |
$0 |
$668,635 |
$58,075 |
SPDR
FactSet
Innovative
Technology
ETF |
$618,502 |
$41,370 |
$3,691 |
$0 |
$0 |
$268,655 |
$0 |
$313,715 |
$304,787 |
SPDR
Global
Dow
ETF |
$65,888 |
$1,839 |
$564 |
$0 |
$0 |
$49,854 |
$0 |
$52,258 |
$13,630 |
SPDR
ICE
Preferred
Securities
ETF |
$2,779,548 |
$207,130 |
$21,844 |
$0 |
$0 |
$1,005,221 |
$0 |
$1,234,195 |
$1,545,353 |
SPDR
MarketAxess
Investment
Grade
400
Corporate
Bond
ETF |
$50,288 |
$582 |
$456 |
$0 |
$0 |
$44,725 |
$0 |
$45,763 |
$4,525 |
SPDR
MSCI
USA
Strategic-
Factors
ETF |
$28,729 |
$1,732 |
$210 |
$0 |
$0 |
$12,586 |
$0 |
$14,529 |
$14,200 |
SPDR
Nuveen
Bloomberg
High
Yield
Municipal
Bond
ETF |
$0 |
$0 |
$0 |
$0 |
$0 |
$0 |
$0 |
$0 |
$0 |
SPDR
Nuveen
Bloomberg
Municipal
Bond
ETF |
$0 |
$0 |
$0 |
$0 |
$0 |
$0 |
$0 |
$0 |
$0 |
SPDR
Nuveen
Bloomberg
Short
Term
Municipal
Bond
ETF |
$0 |
$0 |
$0 |
$0 |
$0 |
$0 |
$0 |
$0 |
$0 |
SPDR
NYSE
Technology
ETF |
$90,229 |
$957 |
$1,070 |
$0 |
$0 |
$80,284 |
$0 |
$82,311 |
$7,918 |
SPDR
Portfolio
Aggregate
Bond
ETF |
$12,128,505 |
$130,843 |
$119,691 |
$0 |
$0 |
$10,920,585 |
$0 |
$11,171,119 |
$957,387 |
SPDR
Portfolio
Corporate
Bond
ETF |
$1,042,817 |
$17,267 |
$9,703 |
$0 |
$0 |
$889,152 |
$0 |
$916,122 |
$126,695 |
|
Gross
income
earned
by
the
Fund
from
securities
lending
activities |
Fees
and/or compensation paid by the Fund for securities lending activities
and
related
services |
Aggregate
fees
and/or
compensation
paid
by
the
Fund
for
securities
lending
activities
and
related
services |
Net
income
from
securities
lending
activities | |||||
Fees
paid
to
State
Street
from
a
revenue
split |
Fees
paid
for
any
cash
collateral
management
service
(including
fees
deducted
from
a
pooled
cash
collateral
reinvestment
vehicle)
that
are not
included
in a
revenue
split |
Admini-
strative
fees
not
included
in
a
revenue
split |
Indemnifi-
cation
fees
not
included
in
a
revenue
split |
Rebate
(paid
to
borrower) |
Other
fees
not
included
in
a
revenue
split | ||||
SPDR
Portfolio
High
Yield
Bond
ETF |
$3,227,314 |
$120,790 |
$28,825 |
$0 |
$0 |
$2,201,711 |
$0 |
$2,351,326 |
$875,989 |
SPDR
Portfolio
Intermediate
Term
Corporate
Bond
ETF |
$11,158,437 |
$188,208 |
$106,134 |
$0 |
$0 |
$9,477,275 |
$0 |
$9,771,617 |
$1,386,820 |
SPDR
Portfolio
Intermediate
Term
Treasury
ETF |
$7,079,316 |
$56,905 |
$69,661 |
$0 |
$0 |
$6,546,060 |
$0 |
$6,672,626 |
$406,690 |
SPDR
Portfolio
Long
Term
Corporate
Bond
ETF |
$616,204 |
$11,948 |
$6,146 |
$0 |
$0 |
$511,157 |
$0 |
$529,251 |
$86,953 |
SPDR
Portfolio
Long
Term
Treasury
ETF |
$13,569,365 |
$126,403 |
$125,603 |
$0 |
$0 |
$12,387,299 |
$0 |
$12,639,305 |
$930,060 |
SPDR
Portfolio
Mortgage
Backed
Bond
ETF |
$0 |
$0 |
$0 |
$0 |
$0 |
$0 |
$0 |
$0 |
$0 |
SPDR
Portfolio
S&P
1500
Composite
Stock
Market
ETF |
$1,763,878 |
$31,436 |
$16,106 |
$0 |
$0 |
$1,475,528 |
$0 |
$1,523,069 |
$240,809 |
SPDR
Portfolio
S&P
400 Mid
Cap
ETF |
$12,883,550 |
$315,015 |
$109,303 |
$0 |
$0 |
$10,114,686 |
$0 |
$10,539,004 |
$2,344,546 |
SPDR
Portfolio
S&P
500 ETF |
$3,056,888 |
$37,520 |
$26,872 |
$0 |
$0 |
$2,716,032 |
$0 |
$2,780,424 |
$276,464 |
SPDR
Portfolio
S&P
500
Growth
ETF |
$92,087 |
$4,705 |
$552 |
$0 |
$0 |
$46,870 |
$0 |
$52,127 |
$39,961 |
SPDR
Portfolio
S&P
500 High
Dividend
ETF |
$3,039,695 |
$50,406 |
$28,113 |
$0 |
$0 |
$2,554,657 |
$0 |
$2,633,176 |
$406,519 |
SPDR
Portfolio
S&P
500
Value
ETF |
$2,198,058 |
$39,597 |
$17,772 |
$0 |
$0 |
$1,842,105 |
$0 |
$1,899,475 |
$298,583 |
SPDR
Portfolio
S&P
600
Small
Cap
ETF |
$14,251,516 |
$183,169 |
$128,060 |
$0 |
$0 |
$12,620,926 |
$0 |
$12,932,155 |
$1,319,361 |
|
Gross
income
earned
by
the
Fund
from
securities
lending
activities |
Fees
and/or compensation paid by the Fund for securities lending activities
and
related
services |
Aggregate
fees
and/or
compensation
paid
by
the
Fund
for
securities
lending
activities
and
related
services |
Net
income
from
securities
lending
activities | |||||
Fees
paid
to
State
Street
from
a
revenue
split |
Fees
paid
for
any
cash
collateral
management
service
(including
fees
deducted
from
a
pooled
cash
collateral
reinvestment
vehicle)
that
are not
included
in a
revenue
split |
Admini-
strative
fees
not
included
in
a
revenue
split |
Indemnifi-
cation
fees
not
included
in
a
revenue
split |
Rebate
(paid
to
borrower) |
Other
fees
not
included
in
a
revenue
split | ||||
SPDR
Portfolio
Short
Term
Corporate
Bond
ETF |
$7,595,962 |
$97,573 |
$76,815 |
$0 |
$0 |
$6,689,618 |
$0 |
$6,864,006 |
$731,955 |
SPDR
Portfolio
Short
Term
Treasury
ETF |
$14,618,681 |
$126,645 |
$137,714 |
$0 |
$0 |
$13,445,026 |
$0 |
$13,709,385 |
$909,296 |
SPDR
Portfolio
TIPS
ETF |
$5,013,130 |
$33,229 |
$48,654 |
$0 |
$0 |
$4,690,619 |
$0 |
$4,772,502 |
$240,628 |
SPDR
Russell
1000
Low
Volatility
Focus
ETF |
$191,201 |
$4,146 |
$1,759 |
$0 |
$0 |
$151,836 |
$0 |
$157,741 |
$33,460 |
SPDR
Russell
1000
Momentum
Focus
ETF |
$85,489 |
$1,618 |
$918 |
$0 |
$0 |
$69,936 |
$0 |
$72,472 |
$13,017 |
SPDR
Russell
1000
Yield
Focus
ETF |
$275,060 |
$3,707 |
$2,835 |
$0 |
$0 |
$239,806 |
$0 |
$246,348 |
$28,712 |
SPDR
S&P
1500
Momentum
Tilt
ETF |
$4,623 |
$92 |
$39 |
$0 |
$0 |
$3,762 |
$0 |
$3,894 |
$729 |
SPDR
S&P
1500
Value
Tilt
ETF |
$45,496 |
$1,052 |
$419 |
$0 |
$0 |
$36,169 |
$0 |
$37,641 |
$7,855 |
SPDR
S&P 400
Mid
Cap
Growth
ETF |
$3,182,925 |
$99,069 |
$26,169 |
$0 |
$0 |
$2,240,847 |
$0 |
$2,366,084 |
$816,841 |
SPDR
S&P 400
Mid
Cap Value
ETF |
$4,505,819 |
$117,926 |
$36,875 |
$0 |
$0 |
$3,584,703 |
$0 |
$3,739,504 |
$766,314 |
SPDR
S&P 500
Fossil
Fuel
Reserves
Free
ETF |
$20,355 |
$973 |
$150 |
$0 |
$0 |
$11,476 |
$0 |
$12,598 |
$7,757 |
SPDR
S&P 600
Small
Cap
Growth
ETF |
$5,937,791 |
$78,178 |
$57,728 |
$0 |
$0 |
$5,232,409 |
$0 |
$5,368,314 |
$569,476 |
SPDR
S&P 600
Small
Cap
Value
ETF |
$10,436,646 |
$174,905 |
$93,792 |
$0 |
$0 |
$8,908,225 |
$0 |
$9,176,923 |
$1,259,723 |
SPDR
S&P
Aerospace
&
Defense
ETF |
$2,792,137 |
$81,196 |
$26,174 |
$0 |
$0 |
$2,061,172 |
$0 |
$2,168,542 |
$623,594 |
|
Gross
income
earned
by
the
Fund
from
securities
lending
activities |
Fees
and/or compensation paid by the Fund for securities lending activities
and
related
services |
Aggregate
fees
and/or
compensation
paid
by
the
Fund
for
securities
lending
activities
and
related
services |
Net
income
from
securities
lending
activities | |||||
Fees
paid
to
State
Street
from
a
revenue
split |
Fees
paid
for
any
cash
collateral
management
service
(including
fees
deducted
from
a
pooled
cash
collateral
reinvestment
vehicle)
that
are not
included
in a
revenue
split |
Admini-
strative
fees
not
included
in
a
revenue
split |
Indemnifi-
cation
fees
not
included
in
a
revenue
split |
Rebate
(paid
to
borrower) |
Other
fees
not
included
in
a
revenue
split | ||||
SPDR
S&P
Bank
ETF |
$2,680,016 |
$94,724 |
$23,151 |
$0 |
$0 |
$1,798,003 |
$0 |
$1,915,878 |
$764,138 |
SPDR
S&P
Biotech
ETF |
$30,202,385 |
$1,041,895 |
$262,190 |
$0 |
$0 |
$21,412,266 |
$0 |
$22,716,351 |
$7,486,034 |
SPDR
S&P
Capital
Markets
ETF |
$182,212 |
$5,897 |
$1,678 |
$0 |
$0 |
$131,941 |
$0 |
$139,517 |
$42,696 |
SPDR
S&P
Dividend
ETF |
$17,846,991 |
$250,605 |
$158,941 |
$0 |
$0 |
$15,462,369 |
$0 |
$15,871,915 |
$1,975,076 |
SPDR
S&P
Health
Care
Equipment
ETF |
$857,863 |
$37,206 |
$6,715 |
$0 |
$0 |
$522,190 |
$0 |
$566,111 |
$291,752 |
SPDR
S&P
Health
Care
Services
ETF |
$346,453 |
$7,642 |
$3,414 |
$0 |
$0 |
$275,820 |
$0 |
$286,877 |
$59,576 |
SPDR
S&P
Homebuilders
ETF |
$1,171,871 |
$12,152 |
$12,164 |
$0 |
$0 |
$1,056,280 |
$0 |
$1,080,596 |
$91,275 |
SPDR
S&P
Insurance
ETF |
$549,027 |
$5,477 |
$6,013 |
$0 |
$0 |
$496,922 |
$0 |
$508,412 |
$40,615 |
SPDR
S&P
Internet
ETF |
$71,336 |
$2,279 |
$706 |
$0 |
$0 |
$50,201 |
$0 |
$53,185 |
$18,151 |
SPDR
S&P
Kensho
Clean
Power
ETF |
$1,522,345 |
$47,817 |
$12,862 |
$0 |
$0 |
$1,089,368 |
$0 |
$1,150,048 |
$372,297 |
SPDR
S&P
Kensho
Final
Frontiers
ETF |
$45,082 |
$1,382 |
$402 |
$0 |
$0 |
$32,624 |
$0 |
$34,409 |
$10,673 |
SPDR
S&P
Kensho
Future
Security
ETF |
$65,246 |
$1,267 |
$587 |
$0 |
$0 |
$53,260 |
$0 |
$55,113 |
$10,132 |
SPDR
S&P
Kensho
Intelligent
Structures
ETF |
$432,772 |
$46,075 |
$1,080 |
$0 |
$0 |
$46,496 |
$0 |
$93,650 |
$339,122 |
SPDR
S&P
Kensho
New
Economies
Composite
ETF |
$15,572,149 |
$1,385,664 |
$66,489 |
$0 |
$0 |
$3,771,845 |
$0 |
$5,223,999 |
$10,348,150 |
SPDR
S&P
Kensho
Smart
Mobility
ETF |
$1,361,788 |
$142,500 |
$2,580 |
$0 |
$0 |
$94,850 |
$0 |
$239,930 |
$1,121,858 |
|
Gross
income
earned
by
the
Fund
from
securities
lending
activities |
Fees
and/or compensation paid by the Fund for securities lending activities
and
related
services |
Aggregate
fees
and/or
compensation
paid
by
the
Fund
for
securities
lending
activities
and
related
services |
Net
income
from
securities
lending
activities | |||||
Fees
paid
to
State
Street
from
a
revenue
split |
Fees
paid
for
any
cash
collateral
management
service
(including
fees
deducted
from
a
pooled
cash
collateral
reinvestment
vehicle)
that
are not
included
in a
revenue
split |
Admini-
strative
fees
not
included
in
a
revenue
split |
Indemnifi-
cation
fees
not
included
in
a
revenue
split |
Rebate
(paid
to
borrower) |
Other
fees
not
included
in
a
revenue
split | ||||
SPDR
S&P
Metals
&
Mining
ETF |
$5,343,910 |
$61,552 |
$53,679 |
$0 |
$0 |
$4,766,398 |
$0 |
$4,881,629 |
$462,281 |
SPDR
S&P Oil &
Gas
Equipment
&
Services
ETF |
$884,312 |
$8,640 |
$7,858 |
$0 |
$0 |
$807,622 |
$0 |
$824,120 |
$60,191 |
SPDR
S&P Oil &
Gas
Exploration
&
Production
ETF |
$11,713,793 |
$302,403 |
$109,359 |
$0 |
$0 |
$9,063,092 |
$0 |
$9,474,854 |
$2,238,939 |
SPDR
S&P
Pharmaceuticals
ETF |
$1,669,388 |
$148,530 |
$6,069 |
$0 |
$0 |
$303,629 |
$0 |
$458,228 |
$1,211,159 |
SPDR
S&P
Regional
Banking
ETF |
$2,596,664 |
$156,917 |
$17,546 |
$0 |
$0 |
$1,373,055 |
$0 |
$1,547,518 |
$1,049,146 |
SPDR
S&P
Retail
ETF |
$2,809,343 |
$262,750 |
$11,974 |
$0 |
$0 |
$764,513 |
$0 |
$1,039,236 |
$1,770,107 |
SPDR
S&P
Semiconductor
ETF |
$2,598,031 |
$128,849 |
$19,111 |
$0 |
$0 |
$1,581,556 |
$0 |
$1,729,515 |
$868,515 |
SPDR
S&P
Software
Services
ETF |
$1,109,429 |
$70,226 |
$7,557 |
$0 |
$0 |
$521,264 |
$0 |
$599,046 |
$510,383 |
SPDR
S&P
Telecom
ETF |
$128,062 |
$3,398 |
$1,098 |
$0 |
$0 |
$95,573 |
$0 |
$100,070 |
$27,992 |
SPDR
S&P
Transportation
ETF |
$690,215 |
$39,285 |
$5,669 |
$0 |
$0 |
$343,309 |
$0 |
$388,263 |
$301,953 |
Fund |
2023 |
2022 |
2021 |
SPDR
Bloomberg Convertible Securities ETF |
$3,808 |
$9,142 |
$0 |
SPDR
Bloomberg High Yield Bond ETF |
$952 |
$444 |
$1,400 |
SPDR
Dow Jones REIT ETF |
$38,415 |
$34,439 |
$15,289 |
SPDR
FactSet Innovative Technology ETF |
$31,114 |
$77,333 |
$34,874 |
SPDR
Global Dow ETF |
$3,663 |
$3,350 |
$4,144 |
SPDR
ICE Preferred Securities ETF |
$119,537 |
$139,344 |
$249,520 |
SPDR
MSCI USA StrategicFactors ETF |
$9,860 |
$13,443 |
$21,229 |
SPDR
NYSE Technology ETF |
$4,279 |
$12,542 |
$18,777 |
SPDR
Portfolio High Yield Bond ETF |
$0 |
$18 |
$0 |
SPDR
Portfolio Mortgage Backed Bond ETF |
$0 |
$0 |
$1,446 |
SPDR
Portfolio S&P 1500 Composite Stock Market ETF |
$13,817 |
$6,645 |
$15,864 |
SPDR
Portfolio S&P 400 Mid Cap ETF |
$219,148 |
$123,559 |
$96,490 |
SPDR
Portfolio S&P 500 ETF |
$26,713 |
$24,094 |
$26,569 |
SPDR
Portfolio S&P 500 Growth ETF |
$205,321 |
$212,526 |
$112,956 |
SPDR
Portfolio S&P 500 High Dividend ETF |
$957,685 |
$450,030 |
$443,839 |
SPDR
Portfolio S&P 500 Value ETF |
$512,273 |
$284,048 |
$244,800 |
SPDR
Portfolio S&P 600 Small Cap ETF |
$273,568 |
$147,398 |
$149,617 |
SPDR
Russell 1000 Low Volatility Focus ETF |
$34,753 |
$32,600 |
$30,088 |
SPDR
Russell 1000 Momentum Focus ETF |
$6,319 |
$18,806 |
$26,507 |
SPDR
Russell 1000 Yield Focus ETF |
$19,466 |
$16,763 |
$86,150 |
SPDR
S&P 1500 Momentum Tilt ETF |
$4,621 |
$4,470 |
$5,687 |
SPDR
S&P 1500 Value Tilt ETF |
$3,384 |
$5,480 |
$4,396 |
SPDR
S&P 400 Mid Cap Growth ETF |
$84,221 |
$126,571 |
$141,301 |
SPDR
S&P 400 Mid Cap Value ETF |
$287,458 |
$116,817 |
$156,209 |
SPDR
S&P 500 Fossil Fuel Reserves Free ETF |
$2,088 |
$1,356 |
$3,306 |
SPDR
S&P 600 Small Cap Growth ETF |
$192,621 |
$312,025 |
$147,277 |
SPDR
S&P 600 Small Cap Value ETF |
$785,363 |
$572,776 |
$526,243 |
SPDR
S&P Aerospace & Defense ETF |
$78,824 |
$133,324 |
$64,972 |
SPDR
S&P Bank ETF |
$109,592 |
$163,752 |
$333,642 |
SPDR
S&P Biotech ETF |
$2,219,697 |
$1,919,773 |
$2,580,199 |
SPDR
S&P Capital Markets ETF |
$8,379 |
$12,901 |
$5,386 |
SPDR
S&P Dividend ETF |
$1,334,621 |
$1,221,811 |
$1,099,064 |
SPDR
S&P Health Care Equipment ETF |
$60,824 |
$117,543 |
$141,910 |
SPDR
S&P Health Care Services ETF |
$33,101 |
$22,725 |
$22,107 |
SPDR
S&P Homebuilders ETF |
$20,268 |
$37,055 |
$58,939 |
SPDR
S&P Insurance ETF |
$16,706 |
$12,809 |
$23,139 |
SPDR
S&P Internet ETF |
$7,444 |
$8,773 |
$14,499 |
SPDR
S&P Kensho Clean Power ETF |
$42,691 |
$65,414 |
$66,096 |
SPDR
S&P Kensho Final Frontiers ETF |
$1,008 |
$2,487 |
$2,012 |
SPDR
S&P Kensho Future Security ETF |
$2,493 |
$4,110 |
$3,951 |
SPDR
S&P Kensho Intelligent Structures ETF |
$3,108 |
$14,968 |
$10,260 |
SPDR
S&P Kensho New Economies Composite ETF |
$423,492 |
$884,528 |
$870,821 |
SPDR
S&P Kensho Smart Mobility ETF |
$19,714 |
$69,966 |
$70,495 |
SPDR
S&P Metals & Mining ETF |
$217,815 |
$435,843 |
$533,904 |
SPDR
S&P Oil & Gas Equipment & Services
ETF |
$42,972 |
$35,256 |
$27,158 |
Fund |
2023 |
2022 |
2021 |
SPDR
S&P Oil & Gas Exploration & Production
ETF |
$441,647 |
$520,628 |
$876,161 |
SPDR
S&P Pharmaceuticals ETF |
$46,430 |
$39,599 |
$41,555 |
SPDR
S&P Regional Banking ETF |
$411,621 |
$304,675 |
$458,843 |
SPDR
S&P Retail ETF |
$46,418 |
$84,506 |
$60,073 |
SPDR
S&P Semiconductor ETF |
$115,533 |
$232,738 |
$83,463 |
SPDR
S&P Software & Services ETF |
$40,669 |
$51,777 |
$40,798 |
SPDR
S&P Telecom ETF |
$12,994 |
$24,202 |
$7,974 |
SPDR
S&P Transportation ETF |
$47,154 |
$180,926 |
$28,457 |
J.P.
Morgan Securities LLC |
$762,304,001 |
BofA
Securities, Inc. |
$497,352,020 |
Morgan
Stanley & Co. LLC |
$275,425,249 |
Citigroup
Global Markets Inc. |
$255,451,098 |
Goldman
Sachs & Co. LLC |
$186,802,589 |
Wells
Fargo Securities, LLC |
$44,140,345 |
Piper
Sandler & Co. |
$9,620,046 |
Virtu
Americas LLC |
$2,853,706 |
Santander
Securities LLC |
$1,274,430 |
BNP
Paribas Securities Corp. |
$1,131,679 |
Fund |
Name
and Address |
%
Ownership |
SPDR
BLOOMBERG 1-10 YEAR TIPS ETF |
State
Street Bank & Trust Company
1776
Heritage Drive
North
Quincy, MA 02171 |
55.23% |
|
Charles
Schwab & Co., Inc.
211
Main St.
San
Francisco, CA 94105-1905 |
12.28% |
|
LPL
Financial LLC
4707
Executive Drive
San
Diego, CA 92121 |
10.15% |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
8.02% |
Fund |
Name
and Address |
%
Ownership |
SPDR
BLOOMBERG 1-3 MONTH T-BILL ETF |
Charles
Schwab & Co., Inc.
211
Main St.
San
Francisco, CA 94105-1905 |
27.09% |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
10.87% |
|
Morgan
Stanley Smith Barney LLC
522
5th Avenue
New
York, NY 10036 |
7.85% |
|
Pershing
LLC
One
Pershing Plaza
Jersey
City, NJ 07399 |
6.09% |
|
Merrill
Lynch, Pierce, Fenner &
Smith
Inc.
1
Bryant Park
New
York, NY 10036 |
5.23% |
SPDR
BLOOMBERG 3-12 MONTH T-BILL ETF |
Charles
Schwab & Co., Inc.
211
Main Street
San
Francisco, CA 94105-1905 |
36.97% |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
15.25% |
|
LPL
Financial LLC
4707
Executive Drive
San
Diego, CA 92121 |
9.52% |
|
Merrill
Lynch, Pierce, Fenner &
Smith
Inc.
1
Bryant Park
New
York, NY 10036 |
6.82% |
|
Pershing
LLC
One
Pershing Plaza
Jersey
City, NJ 07399 |
5.95% |
SPDR
BLOOMBERG CONVERTIBLE SECURITIES ETF |
Charles
Schwab & Co., Inc.
211
Main Street
San
Francisco, CA 94105-1905 |
16.88% |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
16.14% |
|
Pershing
LLC
One
Pershing Plaza
Jersey
City, NJ 07399 |
7.28% |
|
State
Street Bank & Trust Company
1776
Heritage Drive
North
Quincy, MA 02171 |
7.02% |
|
Merrill
Lynch, Pierce, Fenner &
Smith
Inc.
1
Bryant Park
New
York, NY 10036 |
5.68% |
Fund |
Name
and Address |
%
Ownership |
|
Morgan
Stanley Smith Barney LLC
522
5th Avenue
New
York, NY 10036 |
5.14% |
SPDR
BLOOMBERG EMERGING MARKETS USD BOND ETF |
The
Bank of New York Mellon
240
Greenwich Street, 13FL East
New
York, NY 10286 |
85.31% |
|
Brown
Brothers Harriman & Co.
140
Broadway
New
York, NY 10005 |
9.75% |
SPDR
BLOOMBERG HIGH YIELD BOND ETF |
Charles
Schwab & Co., Inc.
211
Main St.
San
Francisco, CA 94105-1905 |
12.69% |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
11.38% |
|
The
Bank of New York Mellon
240
Greenwich Street, 13FL East
New
York, NY 10286 |
8.88% |
|
Wells
Fargo Clearing Services, LLC
1
North Jefferson Avenue
St.
Louis, MO 63103 |
7.71% |
|
Citibank,
N.A.
390
Greenwich Street, 3rd Floor
New
York, NY 10013 |
6.79% |
|
Goldman,
Sachs & Co.
180
Maiden Lane
New
York, NY 10038 |
5.61% |
SPDR
BLOOMBERG INVESTMENT GRADE FLOATING RATE ETF |
Charles
Schwab & Co., Inc.
211
Main St.
San
Francisco, CA 94105-1905 |
28.93% |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
10.50% |
|
American
Enterprise Investment
Services,
Inc.
707
2nd Avenue South
Minneapolis,
MN 55402 |
7.96% |
|
LPL
Financial LLC
4707
Executive Drive
San
Diego, CA 92121 |
5.01% |
SPDR
BLOOMBERG SHORT TERM HIGH YIELD BOND ETF |
Charles
Schwab & Co., Inc.
211
Main St
San
Francisco, CA 94105-1905 |
17.91% |
|
American
Enterprise Investment
Services,
Inc
707
2ND Avenue South
Minneapolis,
MN 55402 |
12.39% |
Fund |
Name
and Address |
%
Ownership |
|
The
Bank Of New York Mellon
240
Greenwich Street, 13 Fl. East
New
York, NY 10286 |
10.57% |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
7.85% |
|
State
Street Bank & Trust Company
1776
Heritage Drive
North
Quincy, MA 02171 |
7.53% |
SPDR
DOW JONES REIT ETF |
Charles
Schwab & Co., Inc.
211
Main St.
San
Francisco, CA 94105-1905 |
23.05% |
|
The
Northern Trust Company
50
South LaSalle Street
Chicago,
IL 60675 |
16.60% |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
9.33% |
SPDR
FACTSET INNOVATIVE TECHNOLOGY ETF |
Charles
Schwab & Co., Inc.
211
Main St
San
Francisco, CA 94105-1905 |
24.09% |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
21.87% |
|
LPL
Financial LLC
4707
Executive Drive
San
Diego, CA 92121 |
8.13% |
|
Pershing
LLC
One
Pershing Plaza
Jersey
City, NJ 07399 |
6.36% |
|
TD
Ameritrade Clearing, Inc
1005
N. Ameritrade Place
Bellevue,
NE 68005 |
5.17% |
SPDR
GLOBAL DOW ETF |
Charles
Schwab & Co., Inc.
211
Main St.
San
Francisco, CA 94105-1905 |
27.70% |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
10.12% |
|
LPL
Financial LLC
4707
Executive Drive
San
Diego, CA 92121 |
9.40% |
|
UMB
Bank, National Association
1010
Grand Blvd.
Kansas
City, Missouri 64106 |
5.93% |
|
Morgan
Stanley Smith Barney LLC
522
5th Avenue
New
York, NY 10036 |
5.48% |
Fund |
Name
and Address |
%
Ownership |
|
Pershing
LLC
One
Pershing Plaza
Jersey
City, NJ 07399 |
5.19% |
|
Merrill
Lynch, Pierce, Fenner &
Smith
Inc.
1
Bryant Park
New
York, NY 10036 |
5.11% |
|
CDS
Clearing and Depository
Services
Inc.
100
Adelaide St W
Toronto,
ON M5H 1S3 |
5% |
SPDR
ICE PREFERRED SECURITIES ETF |
Charles
Schwab & Co., Inc.
211
Main St
San
Francisco, CA 94105-1905 |
25.88% |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
15.98% |
|
Wells
Fargo Clearing Services, LLC
1
North Jefferson Avenue
St
Louis, MO 63103 |
8.88% |
|
The
Bank Of New York Mellon
240
Greenwich Street, 13 Fl. East
New
York, NY 10286 |
8.47% |
SPDR
MARKETAXESS INVESTMENT GRADE 400 CORPORATE BOND
ETF |
BOFA
Securities, Inc. /Safekeeping
One
Bryant Park
New
York, NY 10036 |
82.33% |
|
J.P.
Morgan Securities LLC/JPMC
383
Madison Ave
New
York, NY 10179 |
6.70% |
|
BOFA
Securities, Inc.,
One
Bryant Park
New
York, NY 10036 |
5.05% |
SPDR
MSCI USA STRATEGICFACTORS ETF |
Charles
Schwab & Co., Inc.
211
Main St
San
Francisco, CA 94105-1905 |
31.20% |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
24.61% |
|
Pershing
LLC
One
Pershing Plaza
Jersey
City, NJ 07399 |
12.67% |
|
LPL
Financial LLC
4707
Executive Drive
San
Diego, CA 92121 |
12.59% |
SPDR
NUVEEN BLOOMBERG HIGH YIELD MUNICIPAL BOND ETF |
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
23.31% |
Fund |
Name
and Address |
%
Ownership |
|
Charles
Schwab & Co., Inc.
211
Main St
San
Francisco, CA 94105-1905 |
21.38% |
|
SEI
Private Trust Company C/O
GWP
One
Freedom Valley Dr.
Oaks,
PA 19456 |
8.84% |
|
Raymond
James & Associates, Inc.
880
Carillon Pkwy
St.
Petersburg, FL 33716 |
8.30% |
|
Wells
Fargo Clearing Services, LLC
1
North Jefferson Avenue
St
Louis, MO 63103 |
6.30% |
|
LPL
Financial LLC
4707
Executive Drive
San
Diego, CA 92121 |
6.28% |
|
Merrill
Lynch, Pierce, Fenner &
Smith
Inc
1
Bryant Park
New
York, NY 10036 |
5.31% |
SPDR
NUVEEN BLOOMBERG MUNICIPAL BOND ETF |
Charles
Schwab & Co., Inc.
211
Main St.
San
Francisco, CA 94105-1905 |
18.56% |
|
Morgan
Stanley Smith Barney LLC
522
5th Avenue
New
York, NY 10036 |
17.87% |
|
Merrill
Lynch, Pierce, Fenner &
Smith
Inc.
1
Bryant Park
New
York, NY 10036 |
12.91% |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
8.29% |
|
Pershing
LLC
One
Pershing Plaza
Jersey
City, NJ 07399 |
8.03% |
|
APEX
Clearing Corporation
One
Dallas Center
350
N. St. Paul, Suite 1300
Dallas,
TX 75201 |
6.89% |
|
UBS
Financial Services Inc.
1200
Harbor Boulevard
Weehawken,
NJ 07086 |
5.69% |
SPDR
NUVEEN BLOOMBERG SHORT TERM MUNICIPAL BOND ETF |
Charles
Schwab & Co., Inc.
211
Main St.
San
Francisco, CA 94105-1905 |
19.70% |
|
Merrill
Lynch, Pierce, Fenner &
Smith
Inc.
1
Bryant Park
New
York, NY 10036 |
16.55% |
Fund |
Name
and Address |
%
Ownership |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
13.86% |
|
Morgan
Stanley Smith Barney LLC
522
5th Avenue
New
York, NY 10036 |
8.88% |
|
Pershing
LLC
One
Pershing Plaza
Jersey
City, NJ 07399 |
6.02% |
|
Wells
Fargo Bank, National
Association
1525
W WT Harris Blvd
Charlotte,
NC 28262-8522 |
5.49% |
SPDR
NYSE TECHNOLOGY ETF |
The
Northern Trust Company
50
South LaSalle Street
Chicago,
IL 60675 |
30.89% |
|
Charles
Schwab & Co., Inc.
211
Main St.
San
Francisco, CA 94105-1905 |
14.42% |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
9.69% |
|
Morgan
Stanley Smith Barney LLC
522
5th Avenue
New
York, NY 10036 |
7.32% |
|
Wells
Fargo Clearing Services, LLC
1
North Jefferson Avenue
St.
Louis, MO 63103 |
7.02% |
SPDR
PORTFOLIO AGGREGATE BOND ETF |
Charles
Schwab & Co., Inc.
211
Main St.
San
Francisco, CA 94105-1905 |
33.53% |
|
LPL
Financial LLC
4707
Executive Drive
San
Diego, CA 92121 |
18.58% |
|
The
Bank of New York Mellon
240
Greenwich Street, 13FL East
New
York, NY 10286 |
8.21% |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
8.05% |
|
Pershing
LLC
One
Pershing Plaza
Jersey
City, NJ 07399 |
6.72% |
SPDR
PORTFOLIO CORPORATE BOND ETF |
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
36.94% |
|
Charles
Schwab & Co., Inc.
211
Main St
San
Francisco, CA 94105-1905 |
25.24% |
Fund |
Name
and Address |
%
Ownership |
|
LPL
Financial LLC
4707
Executive Drive
San
Diego, CA 92121 |
20.42% |
SPDR
PORTFOLIO HIGH YIELD BOND ETF |
Charles
Schwab & Co., Inc.
211
Main St
San
Francisco, CA 94105-1905 |
21.15% |
|
State
Street Bank & Trust Company
1776
Heritage Drive
North
Quincy, MA 02171 |
17.09% |
|
The
Northern Trust Company
50
South LaSalle Street
Chicago,
IL 60675 |
11.68% |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
8.63% |
|
The
Bank Of New York Mellon
240
Greenwich Street, 13 Fl. East
New
York, NY 10286 |
6.57% |
SPDR
PORTFOLIO INTERMEDIATE TERM CORPORATE BOND ETF |
Charles
Schwab & Co., Inc.
211
Main St
San
Francisco, CA 94105-1905 |
44.82% |
|
Citibank,
N.A.
390
Greenwich Street, 3rd Floor
New
York, NY 10013 |
9.54% |
|
LPL
Financial LLC
4707
Executive Drive
San
Diego, CA 92121 |
8.83% |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
5.99% |
SPDR
PORTFOLIO INTERMEDIATE TERM TREASURY ETF |
Charles
Schwab & Co., Inc.
211
Main St.
San
Francisco, CA 94105-1905 |
30.03% |
|
LPL
Financial LLC
4707
Executive Drive
San
Diego, CA 92121 |
25.01% |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
13.88% |
|
State
Street Bank & Trust / State
Street
Total ETF
1776
Heritage Drive
North
Quincy, MA 02169 |
7.03% |
SPDR
PORTFOLIO LONG TERM CORPORATE BOND ETF |
Charles
Schwab & Co., Inc.
211
Main St
San
Francisco, CA 94105-1905 |
18.29% |
|
Citibank,
N.A.
390
Greenwich Street, 3rd Floor
New
York, NY 10013 |
14.15% |
Fund |
Name
and Address |
%
Ownership |
|
Merrill
Lynch, Pierce, Fenner &
Smith
Inc
1
Bryant Park
New
York, NY 10036 |
9.24% |
|
LPL
Financial LLC
4707
Executive Drive
San
Diego, CA 92121 |
8.98% |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
8.61% |
|
JPMorgan
Chase Bank, National
Association
1111
Polaris Parkway,
Columbus,
OH 43240 |
6.47% |
SPDR
PORTFOLIO LONG TERM TREASURY ETF |
Charles
Schwab & Co., Inc.
211
Main St.
San
Francisco, CA 94105-1905 |
25.90% |
|
State
Street Bank & Trust Company
1776
Heritage Drive
North
Quincy, MA 02171 |
24.79% |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
10.20% |
|
LPL
Financial LLC
4707
Executive Drive
San
Diego, CA 92121 |
6.35% |
SPDR
PORTFOLIO MORTGAGE BACKED BOND ETF |
Charles
Schwab & Co., Inc.
211
Main St
San
Francisco, CA 94105-1905 |
78.60% |
|
LPL
Financial LLC
4707
Executive Drive
San
Diego, CA 92121 |
7.90% |
SPDR
PORTFOLIO S&P 1500 COMPOSITE STOCK MARKET ETF |
Charles
Schwab & Co., Inc.
211
Main St.
San
Francisco, CA 94105-1905 |
45.73% |
|
LPL
Financial LLC
4707
Executive Drive
San
Diego, CA 92121 |
19.86% |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
9.02% |
|
Pershing
LLC
One
Pershing Plaza
Jersey
City, NJ 07399 |
5.79% |
SPDR
PORTFOLIO S&P 400 MID CAP ETF |
Charles
Schwab & Co., Inc.
211
Main St.
San
Francisco, CA 94105-1905 |
55.01% |
Fund |
Name
and Address |
%
Ownership |
|
LPL
Financial LLC
4707
Executive Drive
San
Diego, CA 92121 |
15.75% |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
14.72% |
SPDR
PORTFOLIO S&P 500®
ETF |
Charles
Schwab & Co., Inc.
211
Main St.
San
Francisco, CA 94105-1905 |
38.45% |
|
LPL
Financial LLC
4707
Executive Drive
San
Diego, CA 92121 |
15.54% |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
12.47% |
|
Pershing
LLC
One
Pershing Plaza
Jersey
City, NJ 07399 |
7.12% |
|
American
Enterprise Investment
Services,
Inc.
702
2nd Avenue South
Minneapolis,
MN 55402 |
5.49% |
SPDR
PORTFOLIO S&P 500 GROWTH ETF |
Charles
Schwab & Co., Inc.
211
Main St.
San
Francisco, CA 94105-1905 |
38.07% |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
15.20% |
|
LPL
Financial LLC
4707
Executive Drive
San
Diego, CA 92121 |
15.07% |
|
Pershing
LLC
One
Pershing Plaza
Jersey
City, NJ 07399 |
6.35% |
SPDR
PORTFOLIO S&P 500 HIGH DIVIDEND ETF |
Charles
Schwab & Co., Inc.
211
Main St
San
Francisco, CA 94105-1905 |
17.27% |
|
The
Bank of New York Mellon
240
Greenwich Street, 13 Fl. East
New
York, NY 10286 |
11.55% |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
10.56% |
|
Interactive
Brokers LLC
Two
Pickwick Plaza
Greenwich,
CT 06830 |
9.99% |
Fund |
Name
and Address |
%
Ownership |
|
JPMorgan
Chase Bank, National
Association
1111
Polaris Parkway,
Columbus,
OH 43240 |
9.09% |
|
Citibank,
N.A.
390
Greenwich Street, 3rd Floor
New
York, NY 10013 |
6.49% |
|
Merrill
Lynch, Pierce, Fenner &
Smith
Inc
1
Bryant Park
New
York, NY 10036 |
5.10% |
SPDR
PORTFOLIO S&P 500 VALUE ETF |
Charles
Schwab & Co., Inc.
211
Main St.
San
Francisco, CA 94105-1905 |
45.25% |
|
LPL
Financial LLC
4707
Executive Drive
San
Diego, CA 92121 |
14.05% |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
11.76% |
SPDR
PORTFOLIO S&P 600 SMALL CAP ETF |
Charles
Schwab & Co., Inc.
211
Main St.
San
Francisco, CA 94105-1905 |
38.97% |
|
LPL
Financial LLC
4707
Executive Drive
San
Diego, CA 92121 |
16.57% |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
9.66% |
SPDR
PORTFOLIO SHORT TERM CORPORATE BOND ETF |
Charles
Schwab & Co., Inc.
211
Main St
San
Francisco, CA 94105-1905 |
37.10% |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
9.16% |
|
Euroclear
Bank SA/NV
1
Boulevard du Roi Albert II
1210
Brussels, Belgium |
5.63% |
SPDR
PORTFOLIO SHORT TERM TREASURY ETF |
Charles
Schwab & Co., Inc.
211
Main St.
San
Francisco, CA 94105-1905 |
23.52% |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
13.49% |
|
LPL
Financial LLC
4707
Executive Drive
San
Diego, CA 92121 |
9.70% |
Fund |
Name
and Address |
%
Ownership |
|
Pershing
LLC
One
Pershing Plaza
Jersey
City, NJ 07399 |
7.65% |
|
UBS
Financial Services Inc.
1200
Harbor Boulevard
Weehawken,
NJ 07086 |
7.55% |
|
The Bank of New York
Mellon
240
Greenwich Street, 13FL East
New
York, NY 10286 |
6.39% |
|
Merrill
Lynch, Pierce, Fenner &
Smith
Inc.
1
Bryant Park
New
York, NY 10036 |
5.00% |
SPDR
PORTFOLIO TIPS ETF |
Charles
Schwab & Co., Inc.
211
Main St.
San
Francisco, CA 94105-1905 |
31.22% |
|
State
Street Bank & Trust Company
1776
Heritage Drive
North
Quincy, MA 02171 |
18.95% |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
8.85% |
|
LPL
Financial LLC
4707
Executive Drive
San
Diego, CA 92121 |
6.32% |
|
Pershing
LLC
One
Pershing Plaza
Jersey
City, NJ 07399 |
6.04% |
|
Merrill
Lynch, Pierce, Fenner &
Smith
Inc.
1
Bryant Park
New
York, NY 10036 |
5.58% |
SPDR
RUSSELL 1000 LOW VOLATILITY FOCUS ETF |
The
Bank Of New York Mellon
240
Greenwich Street, 13 Fl. East
New
York, NY 10286 |
58.48% |
|
Charles
Schwab & Co., Inc.
211
Main St
San
Francisco, CA 94105-1905 |
15.56% |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
11.57% |
|
LPL
Financial LLC
4707
Executive Drive
San
Diego, CA 92121 |
6.70% |
SPDR
RUSSELL 1000 MOMENTUM FOCUS ETF |
The
Bank of New York Mellon
240
Greenwich Street, 13 Fl. East
New
York, NY 10286 |
89.05% |
Fund |
Name
and Address |
%
Ownership |
|
Charles
Schwab & Co., Inc.
211
Main St
San
Francisco, CA 94105-1905 |
5.58% |
SPDR
RUSSELL 1000 YIELD FOCUS ETF |
The
Bank Of New York Mellon
240
Greenwich Street, 13 Fl. East
New
York, NY 10286 |
42.39% |
|
Charles
Schwab & Co., Inc.
211
Main St
San
Francisco, CA 94105-1905 |
17.62% |
|
LPL
Financial LLC
4707
Executive Drive
San
Diego, CA 92121 |
10.99% |
|
American
Enterprise Investment
Services,
Inc
707
2ND Avenue South
Minneapolis,
MN 55402 |
8.74% |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
7.49% |
SPDR
S&P 1500 MOMENTUM TILT ETF |
Charles
Schwab & Co., Inc.
211
Main St
San
Francisco, CA 94105-1905 |
41.99% |
|
LPL
Financial LLC
4707
Executive Drive
San
Diego, CA 92121 |
21.44% |
|
Raymond
James & Associates, Inc.
880
Carillon Pkwy
St.
Petersburg, FL 33716 |
6.04% |
|
BOFA
Securities, Inc.,
One
Bryant Park
New
York, NY 10036 |
5.27% |
SPDR
S&P 1500 VALUE TILT ETF |
LPL
Financial LLC
4707
Executive Drive
San
Diego, CA 92121 |
20.98% |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
16.87% |
|
Charles
Schwab & Co., Inc.
211
Main St
San
Francisco, CA 94105-1905 |
14.97% |
|
American
Enterprise Investment
Services,
Inc
707
2ND Avenue South
Minneapolis,
MN 55402 |
13.13% |
|
Merrill
Lynch, Pierce, Fenner &
Smith
Inc
1
Bryant Park
New
York, NY 10036 |
6.16% |
Fund |
Name
and Address |
%
Ownership |
|
Raymond
James & Associates, Inc.
880
Carillon Pkwy
St.
Petersburg, FL 33716 |
5.83% |
|
Morgan
Stanley Smith Barney, LLC
522
5th Avenue
New
York, NY 10036 |
5.54% |
SPDR
S&P 400 MID CAP GROWTH ETF |
Charles
Schwab & Co., Inc.
211
Main St.
San
Francisco, CA 94105-1905 |
41.44% |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
12.14% |
|
LPL
Financial LLC
4707
Executive Drive
San
Diego, CA 92121 |
11.39% |
|
Pershing
LLC
One
Pershing Plaza
Jersey
City, NJ 07399 |
6.48% |
|
Stifel,
Nicolaus & Company, Inc.
501
N Broadway
St
Louis, MO63102 |
5.34% |
SPDR
S&P 400 MID CAP VALUE ETF |
Charles
Schwab & Co., Inc.
211
Main St.
San
Francisco, CA 94105-1905 |
49.87% |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
9.68% |
|
LPL
Financial LLC
4707
Executive Drive
San
Diego, CA 92121 |
8.15% |
|
Pershing
LLC
One
Pershing Plaza
Jersey
City, NJ 07399 |
6.50% |
SPDR
S&P 500 FOSSIL FUEL RESERVES FREE ETF |
Charles
Schwab & Co., Inc.
211
Main St
San
Francisco, CA 94105-1905 |
21.19% |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
15.03% |
|
SEI
Private Trust Company C/O
GWP
One
Freedom Valley Dr.
Oaks,
PA 19456 |
9.75% |
|
The
Northern Trust Company
50
South LaSalle Street
Chicago,
IL 60675 |
7.54% |
|
The
Bank Of New York Mellon
240
Greenwich Street, 13 Fl. East
New
York, NY 10286 |
6.83% |
Fund |
Name
and Address |
%
Ownership |
|
APEX
Clearing Corporation
One
Dallas Center
350
N. St. Paul, Suite 1300
Dallas,
TX 75201 |
5.64% |
SPDR
S&P 600 SMALL CAP GROWTH ETF |
Charles
Schwab & Co., Inc.
211
Main St.
San
Francisco, CA 94105-1905 |
44.54% |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
11.08% |
|
LPL
Financial LLC
4707
Executive Drive
San
Diego, CA 92121 |
11.03% |
|
Merrill
Lynch, Pierce, Fenner &
Smith
Inc.
1
Bryant Park
New
York, NY 10036 |
5.10% |
SPDR
S&P 600 SMALL CAP VALUE ETF |
Charles
Schwab & Co., Inc.
211
Main St.
San
Francisco, CA 94105-1905 |
46.45% |
|
National
Financial Services
LLC499
Washington Blvd
Jersey
City, NJ 07310 |
14.08% |
|
LPL
Financial LLC
4707
Executive Drive
San
Diego, CA 92121 |
8.10% |
|
American
Enterprise Investment
Services,
Inc.
702
2nd Avenue South
Minneapolis,
MN 55402 |
5.06% |
SPDR
S&P AEROSPACE & DEFENSE ETF |
Charles
Schwab & Co., Inc.
211
Main St.
San
Francisco, CA 94105-1905 |
18.33% |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
12.84% |
|
LPL
Financial LLC
4707
Executive Drive
San
Diego, CA 92121 |
10.29% |
|
Merrill
Lynch, Pierce, Fenner &
Smith
Inc.
1
Bryant Park
New
York, NY 10036 |
8.59% |
|
Morgan
Stanley Smith Barney LLC
522
5th Avenue
New
York, NY 10036 |
7.58% |
SPDR
S&P BANK ETF |
Charles
Schwab & Co., Inc.
211
Main St.
San
Francisco, CA 94105-1905 |
13.70% |
Fund |
Name
and Address |
%
Ownership |
|
Goldman,
Sachs & Co.
180
Maiden Lane
New
York, NY 10038 |
12.54% |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
9.95% |
|
Morgan
Stanley Smith Barney LLC
522
5th Avenue
New
York, NY 10036 |
8.48% |
|
JPMorgan
Chase Bank, National
Association
14201
Dallas Parkway
Chase
International Plaza
Dallas,
TX 75254 |
7.25% |
|
Citibank,
N.A.
390
Greenwich Street, 3rd Floor
New
York, NY 10013 |
5.55% |
SPDR
S&P BIOTECH ETF |
Charles
Schwab & Co., Inc.
211
Main St.
San
Francisco, CA 94105-1905 |
14.67% |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
13.51% |
|
Morgan
Stanley Smith Barney LLC
522
5th Avenue
New
York, NY 10036 |
8.08% |
|
Citibank,
N.A.
390
Greenwich Street, 3rd Floor
New
York, NY 10013 |
5.50% |
SPDR
S&P CAPITAL MARKETS ETF |
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
54.97% |
|
Merrill
Lynch, Pierce, Fenner &
Smith
Inc.
1
Bryant Park
New
York, NY 10036 |
13.42% |
|
Charles
Schwab & Co., Inc.
211
Main St.
San
Francisco, CA 94105-1905 |
10.26% |
|
Morgan
Stanley Smith Barney LLC
522
5th Avenue
New
York, NY 10036 |
5.82% |
|
Pershing
LLC
One
Pershing Plaza
Jersey
City, NJ 07399 |
5.76% |
SPDR
S&P DIVIDEND ETF |
Charles
Schwab & Co., Inc.
211
Main St.
San
Francisco, CA 94105-1905 |
20.78% |
Fund |
Name
and Address |
%
Ownership |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
13.29% |
|
Merrill
Lynch, Pierce, Fenner &
Smith
Inc.
1
Bryant Park
New
York, NY 10036 |
8.13% |
|
Morgan
Stanley Smith Barney LLC
522
5th AvenueNew York, NY
10036 |
7.77% |
|
Edward
D. Jones & Co.
12555
Manchester Road
St.
Louis, MO 63131 |
5.59% |
SPDR
S&P HEALTH CARE EQUIPMENT ETF |
Citibank,
N.A.
390
Greenwich Street, 3rd Floor
New
York, NY 10013 |
20.47% |
|
Charles
Schwab & Co., Inc.
211
Main St.
San
Francisco, CA 94105-1905 |
19.38% |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
12.45% |
|
American
Enterprise Investment
Services,
Inc.
702
2nd Avenue South
Minneapolis,
MN 55402 |
5.94% |
SPDR
S&P HEALTH CARE SERVICES ETF |
Charles
Schwab & Co., Inc.
211
Main St.
San
Francisco, CA 94105-1905 |
17.35% |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
14.40% |
|
Morgan
Stanley Smith Barney LLC
522
5th Avenue
New
York, NY 10036 |
10.87% |
|
Merrill
Lynch, Pierce, Fenner &
Smith
Inc.
1
Bryant Park
New
York, NY 10036 |
7.09% |
|
State
Street Bank & Trust / State
Street
Total ETF
1776
Heritage Drive
North
Quincy, MA 02169 |
5.93% |
|
LPL
Financial LLC
4707
Executive Drive
San
Diego, CA 92121 |
5.78% |
|
Pershing
LLC
One
Pershing Plaza
Jersey
City, NJ 07399 |
5.75% |
Fund |
Name
and Address |
%
Ownership |
SPDR
S&P HOMEBUILDERS ETF |
Charles
Schwab & Co., Inc.
211
Main St.
San
Francisco, CA 94105-1905 |
17.67% |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
11.66% |
|
State
Street Bank & Trust Company
1776
Heritage Drive
North
Quincy, MA 02171 |
11.35% |
|
Morgan
Stanley Smith Barney LLC
522
5th Avenue
New
York, NY 10036 |
6.34% |
SPDR
S&P INSURANCE ETF |
Charles
Schwab & Co., Inc.
211
Main St.
San
Francisco, CA 94105-1905 |
15.09% |
|
J.P.
Morgan Securities, LLC
383
Madison Avenue
New
York, NY 10179 |
12.81% |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
10.16% |
|
Morgan
Stanley Smith Barney LLC
522
5th Avenue
New
York, NY 10036 |
8.90% |
|
JPMorgan
Chase Bank, National
Association
14201
Dallas Parkway
Chase
International Plaza
Dallas,
TX 75254 |
8.12% |
|
Merrill
Lynch, Pierce, Fenner &
Smith
Inc.
1
Bryant Park
New
York, NY 10036 |
5.65% |
SPDR
S&P INTERNET ETF |
JPMorgan
Chase Bank, National
Association
1111
Polaris Parkway,
Columbus,
OH 43240 |
41.91% |
|
Charles
Schwab & Co., Inc.
211
Main St
San
Francisco, CA 94105-1905 |
18.93% |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
13.27% |
SPDR
S&P KENSHO CLEAN POWER ETF |
Charles
Schwab & Co., Inc.
211
Main St
San
Francisco, CA 94105-1905 |
27.83% |
|
State
Street Bank & Trust Company
1776
Heritage Drive
North
Quincy, MA 02171 |
18.18% |
Fund |
Name
and Address |
%
Ownership |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
12.60% |
|
LPL
Financial LLC
4707
Executive Drive
San
Diego, CA 92121 |
6.58% |
|
Merrill
Lynch, Pierce, Fenner &
Smith
Inc
1
Bryant Park
New
York, NY 10036 |
5.68% |
SPDR
S&P KENSHO FINAL FRONTIERS ETF |
Charles
Schwab & Co., Inc.
211
Main St
San
Francisco, CA 94105-1905 |
31.98% |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
17.54% |
|
Morgan
Stanley Smith Barney, LLC
522
5th Avenue
New
York, NY 10036 |
7.50% |
|
Merrill
Lynch, Pierce, Fenner &
Smith
Inc
1
Bryant Park
New
York, NY 10036 |
7.37% |
|
Vanguard
Marketing Corporation
100
Vanguard Blvd.
Malvern,
PA 19355 |
6.35% |
SPDR
S&P KENSHO FUTURE SECURITY ETF |
Charles
Schwab & Co., Inc.
211
Main St
San
Francisco, CA 94105-1905 |
50.69% |
|
LPL
Financial LLC
4707
Executive Drive
San
Diego, CA 92121 |
10.50% |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
9.59% |
|
Pershing
LLC
One
Pershing Plaza
Jersey
City, NJ 07399 |
5.68% |
SPDR
S&P KENSHO INTELLIGENT STRUCTURES ETF |
Charles
Schwab & Co., Inc.
211
Main St
San
Francisco, CA 94105-1905 |
32.15% |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
13.52% |
|
Raymond
James & Associates, Inc.
880
Carillon Pkwy
St.
Petersburg, FL 33716 |
11.44% |
Fund |
Name
and Address |
%
Ownership |
|
Merrill
Lynch, Pierce, Fenner &
Smith
Inc
1
Bryant Park
New
York, NY 10036 |
9.33% |
|
LPL
Financial LLC
4707
Executive Drive
San
Diego, CA 92121 |
6.50% |
|
BOFA
Securities, Inc.,
One
Bryant Park
New
York, NY 10036 |
5.01% |
SPDR
S&P KENSHO NEW ECONOMIES COMPOSITE ETF |
Charles
Schwab & Co., Inc.
211
Main St
San
Francisco, CA 94105-1905 |
80.36% |
SPDR
S&P KENSHO SMART MOBILITY ETF |
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
21.75% |
|
Charles
Schwab & Co., Inc.
211
Main St
San
Francisco, CA 94105-1905 |
20.02% |
|
Citibank,
N.A.
390
Greenwich Street, 3rd Floor
New
York, NY 10013 |
6.78% |
|
Pershing
LLC
One
Pershing Plaza
Jersey
City, NJ 07399 |
6.03% |
|
Morgan
Stanley Smith Barney, LLC
522
5th Avenue
New
York, NY 10036 |
5.64% |
|
UBS
Financial Services Inc.
1000
Harbor Boulevard
Weehawken,
NJ 07086 |
5.00% |
SPDR
S&P METALS & MINING ETF |
Charles
Schwab & Co., Inc.
211
Main St.
San
Francisco, CA 94105-1905 |
13.49% |
|
Citibank,
N.A.
390
Greenwich Street, 3rd Floor
New
York, NY 10013 |
12.05% |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
10.36% |
|
The
Bank of New York Mellon
240
Greenwich Street, 13FL East
New
York, NY 10286 |
8.71% |
|
Merrill
Lynch, Pierce, Fenner &
Smith
Inc.
1
Bryant Park
New
York, NY 10036 |
8.18% |
Fund |
Name
and Address |
%
Ownership |
|
Morgan
Stanley Smith Barney LLC
522
5th Avenue
New
York, NY 10036 |
6.23% |
SPDR
S&P OIL & GAS EQUIPMENT & SERVICES ETF |
Charles
Schwab & Co., Inc.
211
Main St.
San
Francisco, CA 94105-1905 |
19.84% |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
16.79% |
|
Morgan
Stanley Smith Barney LLC
522
5th Avenue
New
York, NY 10036 |
9.89% |
|
Euroclear
Bank SA/NV
1
Boulevard du Roi Albert II
1210
Brussels, Belgium |
7.82% |
|
Citibank,
N.A.
390
Greenwich Street, 3rd Floor
New
York, NY 10013 |
5.54% |
SPDR
S&P OIL & GAS EXPLORATION & PRODUCTION
ETF |
Charles
Schwab & Co., Inc.
211
Main St.
San
Francisco, CA 94105-1905 |
14.73% |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
13.41% |
|
The
Bank of New York Mellon
240
Greenwich Street, 13FL East
New
York, NY 10286 |
6.26% |
|
Morgan
Stanley Smith Barney LLC
522
5th Avenue
New
York, NY 10036 |
5.22% |
|
Citibank,
N.A.
390
Greenwich Street, 3rd Floor
New
York, NY 10013 |
5.10% |
SPDR
S&P PHARMACEUTICALS ETF |
The
Bank of New York Mellon
240
Greenwich Street, 13FL East
New
York, NY 10286 |
18.91% |
|
Charles
Schwab & Co., Inc.
211
Main St.
San
Francisco, CA 94105-1905 |
15.07% |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
9.98% |
|
Morgan
Stanley Smith Barney LLC
522
5th Avenue
New
York, NY 10036 |
7.83% |
|
Merrill
Lynch, Pierce, Fenner &
Smith
Inc.
1
Bryant Park
New
York, NY 10036 |
5.99% |
Fund |
Name
and Address |
%
Ownership |
|
Citibank,
N.A.
390
Greenwich Street, 3rd Floor
New
York, NY 10013 |
5.86% |
|
LPL
Financial LLC
4707
Executive Drive
San
Diego, CA 92121 |
5.74% |
SPDR
S&P REGIONAL BANKING ETF |
Charles
Schwab & Co., Inc.
211
Main St.
San
Francisco, CA 94105-1905 |
16.50% |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
10.52% |
|
Morgan
Stanley Smith Barney LLC
522
5th Avenue
New
York, NY 10036 |
8.07% |
SPDR
S&P RETAIL ETF |
Charles
Schwab & Co., Inc.
211
Main St.
San
Francisco, CA 94105-1905 |
20.09% |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
14.91% |
|
The
Bank of New York Mellon
240
Greenwich Street, 13FL East
New
York, NY 10286 |
5.85% |
|
BNP
Paribas Securities Corp./
Prime
Brokerage
787
Seventh Avenue
New
York, NY 10019 |
5.66% |
SPDR
S&P SEMICONDUCTOR ETF |
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
21.53% |
|
Charles
Schwab & Co., Inc.
211
Main St.
San
Francisco, CA 94105-1905 |
17.85% |
|
Morgan
Stanley Smith Barney LLC
522
5th Avenue
New
York, NY 10036 |
6.56% |
|
Merrill
Lynch, Pierce, Fenner &
Smith
Inc.
1
Bryant Park
New
York, NY 10036 |
6.01% |
SPDR
S&P SOFTWARE & SERVICES ETF |
Merrill
Lynch, Pierce, Fenner &
Smith
Inc.
1
Bryant Park
New
York, NY 10036 |
20.88% |
|
Charles
Schwab & Co., Inc.
211
Main St.
San
Francisco, CA 94105-1905 |
15.98% |
Fund |
Name
and Address |
%
Ownership |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
14.72% |
|
Morgan
Stanley Smith Barney LLC
522
5th Avenue
New
York, NY 10036 |
6.86% |
SPDR
S&P TELECOM ETF |
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
17.19% |
|
Raymond
James & Associates, Inc.
880
Carillon Parkway
St.
Petersburg, FL 33733 |
12.96% |
|
Charles
Schwab & Co., Inc.
211
Main St.
San
Francisco, CA 94105-1905 |
10.60% |
|
RBC
Capital Markets, LLC
510
Marquette Ave S.
Minneapolis,
MN 55418 |
10.17% |
|
Morgan
Stanley Smith Barney LLC
522
5th Avenue
New
York, NY 10036 |
6.73% |
|
LPL
Financial LLC
4707
Executive Drive
San
Diego, CA 92121 |
6.22% |
|
Merrill
Lynch, Pierce, Fenner &
Smith
Inc.
1
Bryant Park
New
York, NY 10036 |
5.93% |
SPDR
S&P TRANSPORTATION ETF |
Charles
Schwab & Co., Inc.
211
Main St.
San
Francisco, CA 94105-1905 |
20.20% |
|
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
17.38% |
|
Merrill
Lynch, Pierce, Fenner &
Smith
Inc.
1
Bryant Park
New
York, NY 10036 |
9.66% |
|
Morgan
Stanley Smith Barney LLC
522
5th Avenue
New
York, NY 10036 |
7.53% |
|
The
Northern Trust Company
50
South LaSalle Street
Chicago,
IL 60675 |
5.62% |
Fund |
Name
and Address |
%
Ownership |
SPDR
BLOOMBERG 1-10 YEAR TIPS ETF |
State
Street Bank & Trust Company
1776
Heritage Drive
North
Quincy, MA 02171 |
55.23% |
SPDR
BLOOMBERG 3-12 MONTH T-BILL ETF |
Charles
Schwab & Co., Inc.
211
Main Street
San
Francisco, CA 94105-1905 |
36.97% |
SPDR
BLOOMBERG EMERGING MARKETS USD BOND ETF |
The
Bank of New York Mellon
240
Greenwich Street, 13FL East
New
York, NY 10286 |
85.31% |
SPDR
NYSE TECHNOLOGY ETF |
The
Northern Trust Company
50
South LaSalle Street
Chicago,
IL 60675 |
30.89% |
SPDR
PORTFOLIO AGGREGATE BOND ETF |
Charles
Schwab & Co., Inc.
211
Main Street
San
Francisco, CA 94105-1905 |
33.53% |
SPDR
PORTFOLIO CORPORATE BOND ETF |
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
36.94% |
|
Charles
Schwab & Co., Inc.
211
Main Street
San
Francisco, CA 94105-1905 |
25.24% |
SPDR
PORTFOLIO MORTGAGE BACKED BOND ETF |
Charles
Schwab & Co., Inc.
211
Main Street
San
Francisco, CA 94105-1905 |
78.60% |
SPDR
PORTFOLIO S&P 1500 COMPOSITE STOCK MARKET ETF |
Charles
Schwab & Co., Inc.
211
Main Street
San
Francisco, CA 94105-1905 |
45.73% |
SPDR
PORTFOLIO S&P 400 MID CAP ETF |
Charles
Schwab & Co., Inc.
211
Main Street
San
Francisco, CA 94105-1905 |
55.01% |
SPDR
PORTFOLIO S&P 500®
ETF |
Charles
Schwab & Co., Inc.
211
Main Street
San
Francisco, CA 94105-1905 |
38.45% |
SPDR
PORTFOLIO S&P 500 VALUE ETF |
Charles
Schwab & Co., Inc.
211
Main Street
San
Francisco, CA 94105-1905 |
45.25% |
SPDR
PORTFOLIO S&P 600 SMALL CAP ETF |
Charles
Schwab & Co., Inc.
211
Main St.
San
Francisco, CA 94105-1905 |
38.97% |
SPDR
RUSSELL 1000 LOW VOLATILITY FOCUS ETF |
The
Bank of New York Mellon
240
Greenwich Street, 13FL East
New
York, NY 10286 |
58.48% |
Fund |
Name
and Address |
%
Ownership |
SPDR
RUSSELL 1000 MOMENTUM FOCUS ETF |
The
Bank of New York Mellon
240
Greenwich Street, 13FL East
New
York, NY 10286 |
89.05% |
SPDR
RUSSELL 1000 YIELD FOCUS ETF |
The
Bank of New York Mellon
240
Greenwich Street, 13FL East
New
York, NY 10286 |
42.39% |
SPDR
S&P 1500 MOMENTUM TILT ETF |
Charles
Schwab & Co., Inc.
211
Main Street
San
Francisco, CA 94105-1905 |
42% |
SPDR
S&P 400 MID CAP GROWTH ETF |
Charles
Schwab & Co., Inc.
211
Main Street
San
Francisco, CA 94105-1905 |
41.44% |
SPDR
S&P 400 MID CAP VALUE ETF |
Charles
Schwab & Co., Inc.
211
Main Street
San
Francisco, CA 94105-1905 |
49.87% |
SPDR
S&P 600 SMALL CAP GROWTH ETF |
Charles
Schwab & Co., Inc.
211
Main Street
San
Francisco, CA 94105-1905 |
44.54% |
SPDR
S&P 600 SMALL CAP VALUE ETF |
Charles
Schwab & Co., Inc.
211
Main Street
San
Francisco, CA 94105-1905 |
46.45% |
SPDR
S&P CAPITAL MARKETS ETF |
National
Financial Services LLC
499
Washington Blvd
Jersey
City, NJ 07310 |
54.97% |
SPDR
S&P INTERNET ETF |
JPMorgan
Chase Bank, National
Association
1111
Polaris Parkway,
Columbus,
OH 43240 |
41.91% |
SPDR
S&P KENSHO CLEAN POWER ETF |
Charles
Schwab & Co., Inc.
211
Main Street
San
Francisco, CA 94105-1905 |
27.83% |
SPDR
S&P KENSHO FINAL FRONTIERS ETF |
Charles
Schwab & Co., Inc.
211
Main Street
San
Francisco, CA 94105-1905 |
31.98% |
SPDR
S&P KENSHO FUTURE SECURITY ETF |
Charles
Schwab & Co., Inc.
211
Main Street
San
Francisco, CA 94105-1905 |
50.69% |
SPDR
S&P KENSHO INTELLIGENT STRUCTURES ETF |
Charles
Schwab & Co., Inc.
211
Main Street
San
Francisco, CA 94105-1905 |
32.15% |
SPDR
S&P KENSHO NEW ECONOMIES COMPOSITE ETF |
Charles
Schwab & Co., Inc.
211
Main Street
San
Francisco, CA 94105-1905 |
80.36% |
SPDR
BLOOMBERG 1-3 MONTH T-BILL ETF |
Charles
Schwab & Co., Inc.
211
Main Street
San
Francisco, CA 94105-1905 |
27.09% |
SPDR
BLOOMBERG INVESTMENT GRADE FLOATING RATE ETF |
Charles
Schwab & Co., Inc.
211
Main Street
San
Francisco, CA 94105-1905 |
28.93% |
Fund |
Name
and Address |
%
Ownership |
SPDR
MARKETAXESS INVESTMENT GRADE 400 CORPORATE BOND
ETF |
BOFA
Securities, Inc. /Safekeeping
One
Bryant Park
New
York, NY 10036 |
82.33% |
SPDR®
PORTFOLIO INTERMEDIATE TERM CORPORATE BOND ETF |
Charles
Schwab & Co., Inc.
211
Main Street
San
Francisco, CA 94105-1905 |
44.82% |
SPDR
PORTFOLIO INTERMEDIATE TERM TREASURY ETF |
Charles
Schwab & Co., Inc.
211
Main Street
San
Francisco, CA 94105-1905 |
30.03% |
|
LPL
Financial Corporation
4707
Executive Drive
San
Diego, CA 92121 |
25.01% |
SPDR
PORTFOLIO LONG TERM TREASURY ETF |
Charles
Schwab & Co., Inc.
211
Main Street
San
Francisco, CA 94105-1905 |
25.90% |
SPDR®
PORTFOLIO SHORT TERM CORPORATE BOND ETF |
Charles
Schwab & Co., Inc.
211
Main Street
San
Francisco, CA 94105-1905 |
37.10% |
SPDR
PORTFOLIO TIPS ETF |
Charles
Schwab & Co., Inc.
211
Main Street
San
Francisco, CA 94105-1905 |
31.22% |
SPDR
GLOBAL DOW ETF |
Charles
Schwab & Co., Inc.
211
Main Street
San
Francisco, CA 94105-1905 |
27.70% |
SPDR®
ICE PREFERRED SECURITIES ETF |
Charles
Schwab & Co., Inc.
211
Main Street
San
Francisco, CA 94105-1905 |
25.88% |
SPDR
MSCI USA STRATEGICFACTORS ETF |
Charles
Schwab & Co., Inc.
211
Main Street
San
Francisco, CA 94105-1905 |
31.20% |
SPDR
PORTFOLIO S&P 500 GROWTH ETF |
Charles
Schwab & Co., Inc.
211
Main Street
San
Francisco, CA 94105-1905 |
38.07% |
Fund |
Creation* |
Redemption* |
SPDR
Bloomberg 1-10 Year TIPS ETF |
In-Kind |
In-Kind |
SPDR
Bloomberg 1-3 Month T-Bill ETF |
In-Kind |
In-Kind |
Fund |
Creation* |
Redemption* |
SPDR
Bloomberg 3-12 Month T-Bill ETF |
In-Kind |
In-Kind |
SPDR
Bloomberg Convertible Securities ETF |
In-Kind |
In-Kind |
SPDR
Bloomberg Emerging Markets USD Bond ETF |
In-Kind |
In-Kind |
SPDR
Bloomberg High Yield Bond ETF |
In-Kind |
In-Kind |
SPDR
Bloomberg Investment Grade Floating Rate ETF |
In-Kind |
In-Kind |
SPDR
Bloomberg Short Term High Yield Bond ETF |
In-Kind |
In-Kind |
SPDR
MarketAxess Investment Grade 400 Corporate Bond ETF |
In-Kind |
In-Kind |
SPDR
Nuveen Bloomberg High Yield Municipal Bond ETF |
Cash |
In-Kind |
SPDR
Nuveen Bloomberg Municipal Bond ETF |
Cash |
In-Kind |
SPDR
Nuveen Bloomberg Short Term Municipal Bond ETF |
Cash |
In-Kind |
SPDR
Portfolio Aggregate Bond ETF |
In-Kind
** |
In-Kind
** |
SPDR
Portfolio Corporate Bond ETF |
In-Kind |
In-Kind |
SPDR
Portfolio High Yield Bond ETF |
In-Kind |
In-Kind |
SPDR
Portfolio Intermediate Term Corporate Bond ETF |
In-Kind |
In-Kind |
SPDR
Portfolio Intermediate Term Treasury ETF |
In-Kind |
In-Kind |
SPDR
Portfolio Long Term Corporate Bond ETF |
In-Kind |
In-Kind |
SPDR
Portfolio Long Term Treasury ETF |
In-Kind |
In-Kind |
SPDR
Portfolio Mortgage Backed Bond ETF |
Cash |
Cash |
SPDR
Portfolio Short Term Corporate Bond ETF |
In-Kind |
In-Kind |
SPDR
Portfolio Short Term Treasury ETF |
In-Kind |
In-Kind |
SPDR
Portfolio TIPS ETF |
In-Kind |
In-Kind |
Fund |
Transaction
Fee*,
** |
Maximum
Transaction
Fee*,
** |
SPDR
Bloomberg 1-10 Year TIPS ETF |
$50 |
$200 |
SPDR
Bloomberg 1-3 Month T-Bill ETF |
$250 |
$1,000 |
SPDR
Bloomberg 3-12 Month T-Bill ETF |
$250 |
$1,000 |
SPDR
Bloomberg Convertible Securities ETF |
$500 |
$2,000 |
SPDR
Bloomberg Emerging Markets USD Bond ETF |
$700 |
$2,800 |
SPDR
Bloomberg High Yield Bond ETF |
$500 |
$2,000 |
SPDR
Bloomberg Investment Grade Floating Rate ETF |
$200 |
$800 |
SPDR
Bloomberg Short Term High Yield Bond ETF |
$500 |
$2,000 |
SPDR
Dow Jones REIT ETF |
$1,000 |
$4,000 |
SPDR
FactSet Innovative Technology ETF |
$250 |
$1,000 |
SPDR
Global Dow ETF |
$1,000 |
$4,000 |
SPDR
ICE Preferred Securities ETF |
$750 |
$3,000 |
SPDR
MarketAxess Investment Grade 400 Corporate Bond ETF |
$250 |
$1,000 |
SPDR
MSCI USA StrategicFactors ETF |
$750 |
$3,000 |
SPDR
NYSE Technology ETF |
$500 |
$2,000 |
SPDR Nuveen Bloomberg High Yield Municipal Bond
ETF |
$250 |
$1,000 |
SPDR
Nuveen Bloomberg Municipal Bond ETF |
$250 |
$1,000 |
SPDR
Nuveen Bloomberg Short Term Municipal Bond ETF |
$250 |
$1,000 |
SPDR
Portfolio Aggregate Bond ETF |
$500 |
$2,000 |
SPDR
Portfolio Corporate Bond ETF |
$500 |
$2,000 |
SPDR
Portfolio High Yield Bond ETF |
$250 |
$1,000 |
SPDR
Portfolio Intermediate Term Corporate Bond ETF |
$500 |
$2,000 |
SPDR
Portfolio Intermediate Term Treasury ETF |
$500 |
$2,000 |
SPDR
Portfolio Long Term Corporate Bond ETF |
$500 |
$2,000 |
SPDR
Portfolio Long Term Treasury ETF |
$500 |
$2,000 |
SPDR
Portfolio Mortgage Backed Bond ETF |
$250 |
$1,000 |
SPDR
Portfolio S&P 1500 Composite Stock Market ETF |
$500 |
$2,000 |
SPDR
Portfolio S&P 400 Mid Cap ETF |
$500 |
$2,000 |
SPDR
Portfolio S&P 500 ETF |
$500 |
$2,000 |
SPDR
Portfolio S&P 500 Growth ETF |
$350 |
$1,400 |
SPDR
Portfolio S&P 500 High Dividend ETF |
$250 |
$1,000 |
SPDR
Portfolio S&P 500 Value ETF |
$500 |
$2,000 |
SPDR
Portfolio S&P 600 Small Cap ETF |
$500 |
$2,000 |
SPDR
Portfolio Short Term Corporate Bond ETF |
$500 |
$2,000 |
Fund |
Transaction
Fee*,
** |
Maximum
Transaction
Fee*,
** |
SPDR
Portfolio Short Term Treasury ETF |
$250 |
$1,000 |
SPDR
Portfolio TIPS ETF |
$250 |
$1,000 |
SPDR
Russell 1000 Low Volatility Focus ETF |
$500 |
$2,000 |
SPDR
Russell 1000 Momentum Focus ETF |
$1,000 |
$4,000 |
SPDR
Russell 1000 Yield Focus ETF |
$500 |
$2,000 |
SPDR
S&P 1500 Momentum Tilt ETF |
$1,500 |
$6,000 |
SPDR
S&P 1500 Value Tilt ETF |
$1,700 |
$6,800 |
SPDR
S&P 400 Mid Cap Growth ETF |
$500 |
$2,000 |
SPDR
S&P 400 Mid Cap Value ETF |
$500 |
$2,000 |
SPDR
S&P 500 Fossil Fuel Reserves Free ETF |
$500 |
$2,000 |
SPDR
S&P 600 Small Cap Growth ETF |
$1,500 |
$6,000 |
SPDR
S&P 600 Small Cap Value ETF |
$1,500 |
$6,000 |
SPDR
S&P Aerospace & Defense ETF |
$250 |
$1,000 |
SPDR
S&P Bank ETF |
$250 |
$1,000 |
SPDR
S&P Biotech ETF |
$250 |
$1,000 |
SPDR
S&P Capital Markets ETF |
$250 |
$1,000 |
SPDR
S&P Dividend ETF |
$250 |
$1,000 |
SPDR
S&P Health Care Equipment ETF |
$250 |
$1,000 |
SPDR
S&P Health Care Services ETF |
$250 |
$1,000 |
SPDR
S&P Homebuilders ETF |
$250 |
$1,000 |
SPDR
S&P Insurance ETF |
$250 |
$1,000 |
SPDR
S&P Internet ETF |
$250 |
$1,000 |
SPDR
S&P Kensho Clean Power ETF |
$250 |
$1,000 |
SPDR
S&P Kensho Final Frontiers ETF |
$250 |
$1,000 |
SPDR
S&P Kensho Future Security ETF |
$250 |
$1,000 |
SPDR
S&P Kensho Intelligent Structures ETF |
$250 |
$1,000 |
SPDR
S&P Kensho New Economies Composite ETF |
$750 |
$3,000 |
SPDR
S&P Kensho Smart Mobility ETF |
$250 |
$1,000 |
SPDR
S&P Metals & Mining ETF |
$250 |
$1,000 |
SPDR
S&P Oil & Gas Equipment & Services
ETF |
$250 |
$1,000 |
SPDR S&P Oil & Gas Exploration &
Production ETF |
$250 |
$1,000 |
SPDR
S&P Pharmaceuticals ETF |
$250 |
$1,000 |
SPDR
S&P Regional Banking ETF |
$250 |
$1,000 |
SPDR
S&P Retail ETF |
$250 |
$1,000 |
SPDR
S&P Semiconductor ETF |
$250 |
$1,000 |
SPDR
S&P Software & Services ETF |
$250 |
$1,000 |
SPDR
S&P Telecom ETF |
$250 |
$1,000 |
SPDR
S&P Transportation ETF |
$250 |
$1,000 |
AAA |
An
obligation rated ‘AAA' has the highest rating assigned by S&P Global
Ratings. The obligor's
capacity
to meet its financial commitments on the obligation is extremely
strong. |
AA |
An
obligation rated ‘AA' differs from the highest-rated obligations only to a
small degree. The
obligor's
capacity to meet its financial commitments on the obligation is very
strong. |
A |
An
obligation rated ‘A' is somewhat more susceptible to the adverse effects
of changes in
circumstances
and economic conditions than obligations in higher-rated categories.
However,
the
obligor's capacity to meet its financial commitments on the obligation is
still strong. |
BBB |
An
obligation rated ‘BBB' exhibits adequate protection parameters. However,
adverse economic
conditions
or changing circumstances are more likely to weaken the obligor's capacity
to meet
its
financial commitments on the obligation. |
BB,
B, CCC, CC, and C |
Obligations
rated ‘BB', ‘B', ‘CCC', ‘CC', and ‘C' are regarded as having significant
speculative
characteristics.
‘BB' indicates the least degree of speculation and ‘C' the highest. While
such
obligations
will likely have some quality and protective characteristics, these may be
outweighed
by
large uncertainties or major exposure to adverse
conditions. |
BB |
An
obligation rated ‘BB' is less vulnerable to nonpayment than other
speculative issues.
However,
it faces major ongoing uncertainties or exposure to adverse business,
financial, or
economic
conditions that could lead to the obligor's inadequate capacity to meet
its financial
commitments
on the obligation. |
B |
An
obligation rated ‘B' is more vulnerable to nonpayment than obligations
rated ‘BB', but the
obligor
currently has the capacity to meet its financial commitments on the
obligation. Adverse
business,
financial, or economic conditions will likely impair the obligor's
capacity or willingness
to
meet its financial commitments on the obligation. |
CCC |
An
obligation rated ‘CCC' is currently vulnerable to nonpayment and is
dependent upon
favorable
business, financial, and economic conditions for the obligor to meet its
financial
commitments
on the obligation. In the event of adverse business, financial, or
economic
conditions,
the obligor is not likely to have the capacity to meet its financial
commitments on the
obligation. |
CC |
An
obligation rated ‘CC' is currently highly vulnerable to nonpayment. The
‘CC' rating is used
when
a default has not yet occurred but S&P Global Ratings expects default
to be a virtual
certainty,
regardless of the anticipated time to default. |
C |
An
obligation rated ‘C' is currently highly vulnerable to nonpayment, and the
obligation is
expected
to have lower relative seniority or lower ultimate recovery compared with
obligations
that
are rated higher. |
D |
An
obligation rated ‘D' is in default or in breach of an imputed promise. For
non-hybrid capital
instruments,
the ‘D' rating category is used when payments on an obligation are not
made on
the
date due, unless S&P Global Ratings believes that such payments will
be made within five
business
days in the absence of a stated grace period or within the earlier of the
stated grace
period
or 30 calendar days. The ‘D' rating also will be used upon the filing of a
bankruptcy
petition
or the taking of similar action and where default on an obligation is a
virtual certainty, for
example
due to automatic stay provisions. A rating on an obligation is lowered to
‘D' if it is
subject
to a distressed debt
restructuring. |
Aaa |
Obligations
rated Aaa are judged to be of the highest quality, subject to the lowest
level of credit risk. |
Aa |
Obligations
rated Aa are judged to be of high quality and are subject to very low
credit risk. |
A |
Obligations
rated A are judged to be upper-medium grade and are subject to low credit
risk. |
Baa |
Obligations
rated Baa are judged to be medium-grade and subject to moderate credit
risk and as such may
possess
certain speculative characteristics. |
Ba |
Obligations
rated Ba are judged to be speculative and are subject to substantial
credit risk. |
B |
Obligations
rated B are considered speculative and are subject to high credit
risk. |
Caa |
Obligations
rated Caa are judged to be speculative of poor standing and are subject to
very high credit risk. |
Ca |
Obligations
rated Ca are highly speculative and are likely in, or very near, default,
with some prospect of recovery
of
principal and interest. |
C |
Obligations
rated C are the lowest rated and are typically in default, with little
prospect for recovery of principal or
interest. |
Adopted
(SPDR Series Trust/SPDR Index Shares Funds): |
May
31, 2006
|
Updated: |
August
1, 2007 |
Amended: |
May
29, 2009 |
Amended: |
November
19, 2010 |
Adopted
(SSGA Active Trust)/Amended: |
May
25, 2011
|
Amended: |
February
25, 2016 |
Amended: |
August
17, 2023 |
APPENDIX C – ADVISER’S PROXY VOTING PROCEDURES AND GUIDELINES
March 2023
Global Proxy Voting and Engagement Principles
State Street Global Advisors, one of the industry’s largest institutional asset managers, is the investment management arm of State Street Corporation, a leading provider of financial services to institutional investors. As an investment manager, State Street Global Advisors has discretionary proxy voting authority over most of its client accounts, and State Street Global Advisors votes these proxies in the manner that we believe will most likely protect and promote the long-term economic value of client investments, as described in this document.i
i |
These Global Proxy Voting and Engagement Principles (the “Principles”) are also applicable to SSGA Funds Management, Inc., State Street Global Advisors Trust Company, and other advisory affiliates of State Street Corporation. Additionally, State Street Global Advisors maintains Proxy Voting and Engagement Guidelines for select markets, including: Australia, continental Europe, Japan, New Zealand, North America (Canada and the US), the UK and Ireland, and emerging markets. International markets not covered by our market-specific guidelines are reviewed and voted in a manner that is consistent with the Principles; however, State Street Global Advisors also endeavors to show sensitivity to local market practices when voting in these various markets. |
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State Street Global Advisors’ Authority and Duties to Vote Client and Fund Securities | Where State Street Global Advisors’ clients have asked it to vote their shares on their behalf or where a commingled fund fiduciary has delegated the responsibility to vote the fund’s securities to State Street Global Advisors, State Street Global Advisors votes those client and fund-owned securities in a unified manner, consistent with the Principles described in this document. Exceptions to this unified voting policy are: (1) where State Street Global Advisors has made proxy voting choices (i.e., the proxy voting program) available to investors within a commingled fund, in which case a pro rata portion of shares held by the fund attributable to investors who choose to participate in the proxy voting program would be voted consistent with the third-party proxy voting policies selected by the investors, and (2) in the limited circumstances where a pooled investment vehicle managed by State Street Global Advisors utilizes a third party proxy voting guideline as set forth in that fund’s organizational and/or offering documents. With respect to such funds utilizing third-party proxy voting guidelines, the terms of the applicable third-party proxy voting guidelines shall apply in place of the Principles described herein and the proxy votes implemented with respect to such a fund may differ from and be contrary to those votes implemented for other portfolios managed by State Street Global Advisors pursuant to its proprietary proxy voting guidelines. | |||
The Principles-State Street Global Advisors’ Approach to Proxy Voting and Issuer Engagement | At State Street Global Advisors, we take our fiduciary duties as an asset manager very seriously. We have a dedicated team of corporate governance professionals who help us carry out our duties as a responsible investor. These duties include engaging with companies, developing and enhancing in-house corporate governance guidelines, analyzing corporate governance issues on a case-by-case basis at the company level, and exercising voting rights. The underlying goal is to maximize shareholder value. | |||
The Principles may take different perspectives on common governance issues that vary from one market to another. Similarly, engagement activity may take different forms in order to best achieve long-term engagement goals. Rather than divesting from portfolio companies, our approach is to engage with such companies. We believe that proxy voting and engagement with portfolio companies is often the most direct and productive way for shareholders to exercise their ownership rights. This comprehensive toolkit is an integral part of the overall investment process. | ||||
We believe engagement and voting activity have a direct relationship. As a result, the integration of our engagement activities, while leveraging the exercise of voting rights, provides a meaningful shareholder tool that we believe protects and enhances the long-term economic value of the holdings in our clients’ accounts. We maximize voting power and engagement by maintaining a centralized proxy voting and active ownership process covering all holdings, regardless of strategy. Despite the vast array of investment strategies and objectives across State Street Global Advisors, the fiduciary responsibilities of share ownership and voting for which State Street Global Advisors has voting discretion are carried out with a single voice and objective. |
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The Principles support governance structures that we believe add to, or maximize, shareholder value for the companies held in our clients’ portfolios. We conduct issuer-specific engagements with companies to discuss our principles, including sustainability-related risks and opportunities. In addition, we encourage issuers to find ways to increase the amount of direct communication board members have with shareholders. Direct communication with executive board members and independent non-executive directors is critical to helping companies understand shareholder concerns. | ||||
In conducting our engagements, we also evaluate the various factors that influence the corporate governance framework of a country, including the macroeconomic conditions and broader political system, the quality of regulatory oversight, the enforcement of property and shareholder rights, and the independence of the judiciary. We understand that regulatory requirements and investor expectations relating to governance practices and engagement activities differ from country to country. As a result, we engage with issuers, regulators, or a combination of the two depending upon the market. We are also a member of various investor associations that seek to address broader corporate governance-related policy at the country level. | ||||
The State Street Global Advisors Asset Stewardship Team may consult with members of various investment teams to engage with companies on corporate governance issues and to address any specific concerns. This facilitates our comprehensive approach to information gathering as it relates to items that are to be voted upon at upcoming shareholder meetings. We also conduct issuer-specific engagements with companies, covering various corporate governance and sustainability-related topics outside of proxy season. | ||||
The Asset Stewardship Team employs a blend of quantitative and qualitative research, analysis and data in order to support screens that identify issuers where active engagement may be necessary to protect and promote shareholder value. Issuer engagement may also be event-driven, focusing on issuer-specific corporate governance or sustainability concerns, or broader industry-related trends. We also consider the size of our total position in the issuer in question and/or the potential negative governance, performance profile, and circumstance at hand. As a result, we believe issuer engagement can take many forms and be triggered by numerous circumstances. The following approaches represent how we define engagement methods: | ||||
Active | We use screening tools designed to capture a mix of company-specific data, including governance and sustainability profiles, to inform our voting and engagement activity. |
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We will actively seek direct dialogue with the board and management of companies that we have identified through our screening processes. Such engagements may lead to further monitoring to ensure that the company improves its governance or sustainability practices. In these cases, the engagement process represents the most meaningful opportunity for us to protect long-term shareholder value from excessive risk due to poor governance and sustainability practices. | ||||
Reactive | Reactive engagement is initiated by issuers. We routinely discuss specific voting issues and items with the issuer community. Reactive engagement is an opportunity to address not only voting items, but also a wide range of governance and sustainability issues. | |||
We have established an engagement protocol that further describes our approach to issuer engagement. | ||||
Measurement | Our stewardship activities are designed to have an impact on company-specific and market-level disclosure and oversight practices that we believe protect and promote shareholder value. | |||
Company-specific successes Assessing the effectiveness of our company-specific engagement process can be challenging to measure. To limit subjectivity in measuring our success, we actively seek issuer feedback and monitor the actions taken by issuers post-engagement in order to identify tangible changes. This enables us to establish indicators to gauge how issuers respond to our concerns and to what degree these responses satisfy our requests. It is also important to note that successful engagement activity can be measured over multiple years depending on the facts and circumstances involved. These engagements not only inform our voting decisions but also allow us to monitor improvement over time and to contribute to our evolving perspectives on priority areas. We also track the impact of our proxy votes by reviewing changing trends in market practices on specific corporate-governance or sustainability-related issues that we address through voting action. We report engagement and voting actions to clients on an annual basis. | ||||
Market-level successes We track the broader adoption of our stewardship priorities — Effective Board Oversight, Climate Risk Management, Human Capital Management, and Diversity, Equity, and Inclusion - which we consider core to creating long-term value, by assessing the number of market participants that have embraced positions consistent with our thought leadership and advocacy. |
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Proxy Voting Procedure | ||||
Oversight |
The Asset Stewardship Team is responsible for developing and implementing State Street Global Advisors’ Global Proxy Voting and Engagement Principles, Global Proxy Voting and Engagement Guidelines for Environmental and Social Factors, regional proxy voting and engagement guidelines, and guidance published thereunder by State Street Global Advisors from time to time, available at ssga.com/about-us/asset-stewardship.html (collectively, the “Voting Policy”), the implementation of third-party proxy voting guidelines where applicable, case-by-case voting items, issuer engagement activities, and research and analysis of governance-related issues. The Asset Stewardship Team’s activities are overseen by our internal governance body, State Street Global Advisors’ ESG Committee (the “ESG Committee”). The ESG Committee is responsible for reviewing State Street Global Advisors’ stewardship strategy, engagement priorities, and proxy voting guidelines, and for monitoring the delivery of voting objectives. | |||
Proxy Voting Process | In order to facilitate our proxy voting process, we retain Institutional Shareholder Services Inc. (“ISS”), a firm with expertise in proxy voting and corporate governance. We utilize ISS to: (1) act as our proxy voting agent (providing State Street Global Advisors with vote execution and administration services), (2) assist in applying the Voting Policy, (3) provide research and analysis relating to general corporate governance issues and specific proxy items, and (4) provide proxy voting guidelines in limited circumstances. | |||
All voting decisions and engagement activities are undertaken in accordance with our in-house Voting Policy, ensuring that the interests of our clients remain the sole consideration when discharging our stewardship responsibilities. Exceptions to this policy is the use of an independent third party to vote on State Street stock and other State Street Global Advisors affiliated entities, to mitigate a conflict of interest of voting on our parent company or affiliated entities, and other situations where we retain an independent fiduciary to make a voting decision where we believe we may be conflicted from voting (for example, due to an outside business interest). In such cases, delegated third parties exercise vote decisions based upon State Street Global Advisors’ Proxy Voting and Engagement Guidelines. | ||||
We aim to vote at all shareholder meetings where our clients have given us the authority to vote their shares and where it is feasible to do so. However, when we deem appropriate, we could refrain from voting at meetings in cases where: | ||||
• Power of attorney documentation is required. |
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• Voting will have a material impact on our ability to trade the security. | ||||
• Voting is not permissible due to sanctions affecting a company or individual. | ||||
• Issuer-specific special documentation is required or various market or issuer certifications are required. | ||||
• Unless a client directs otherwise, State Street Global Advisors will not vote proxies in so-called “share blocking” markets (markets where proxy voters have their securities blocked from trading during the period of the annual meeting). | ||||
Additionally, we are unable to vote proxies when certain custodians, used by our clients, do not offer proxy voting in a jurisdiction or when they charge a meeting-specific fee in excess of the typical custody service agreement. | ||||
In rare circumstances where nuances within specific resolutions fall outside of the scope of existing voting guidelines, requiring case-by-case analysis, such resolutions are escalated to the head of Asset Stewardship and reported to the ESG Committee. Additionally, in certain cases, where a material conflict of interest is identified, the matter may be referred to the ESG Committee for review. | ||||
Conflict of Interest | See our standalone Conflicts Mitigation Guidelines. | |||
Proxy Voting and Engagement Principles | ||||
Directors and Boards | The election of directors is one of the most important fiduciary duties we perform on behalf of our clients. We believe that well-governed companies can protect and pursue shareholder interests better and withstand the challenges of an uncertain economic environment. As such, we seek to vote director elections in a way that we believe will maximize long-term value. | |||
Principally, a board acts on behalf of shareholders by protecting their interests and preserving their rights. This concept establishes the standard by which board and director performance is measured. In order to achieve this fundamental principle, the role of the board is to carry out its responsibilities in the best long-term interest of the company and its shareholders. An independent and effective board sets the strategy and provides guidance on strategic matters, oversees management, selects the CEO and other senior executives, creates a succession plan for the board and management, provides risk oversight, and assesses the performance of the CEO and management. In contrast, management implements the business and capital allocation strategies and runs the company’s day-to-day operations. As part of our engagement process, we routinely discuss the importance of these responsibilities with the boards of issuers. |
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We believe the quality of a board is a measure of director independence, director succession planning, board diversity, evaluations and refreshment, and company governance practices. In voting to elect nominees, we consider many factors. We believe independent directors are crucial to good corporate governance; they help management establish sound corporate governance policies and practices. A sufficiently independent board will effectively monitor management, maintain appropriate governance practices, and perform oversight functions necessary to protect shareholder interests. We also believe the right mix of skills, independence, diversity, and qualifications among directors provides boards with the knowledge and direct experience to manage risks and operating structures that are often complex and industry-specific. | ||||
Accounting and Audit- Related Issues | We believe audit committees are critical and necessary as part of the board’s risk oversight role. The audit committee is responsible for setting out an internal audit function that provides robust audit and internal control systems designed to effectively manage potential and emerging risks to the company’s operations and strategy. We believe audit committees should have independent directors as members, and we will hold the members of the audit committee responsible for overseeing the management of the audit function. | |||
We believe the disclosure and availability of reliable financial statements in a timely manner is imperative for the investment process. As a result, board oversight of the internal controls and the independence of the audit process are essential if investors are to rely upon financial statements. It is important for the audit committee to appoint external auditors who are independent from management as we expect auditors to provide assurance of a company’s financial condition. | ||||
Capital Structure, Reorganization and Mergers | The ability to raise capital is critical for companies to carry out strategy, to grow, and to achieve returns above their cost of capital. The approval of capital raising activities is fundamental to a shareholder’s ability to monitor the amounts of proceeds and to ensure capital is deployed efficiently. Altering the capital structure of a company is a critical decision for boards. When making such a decision, we believe the company should disclose a comprehensive business rationale that is consistent with corporate strategy and not overly dilutive to its shareholders. | |||
Mergers or reorganization of the structure of a company often involve proposals relating to reincorporation, restructurings, liquidations, and other major changes to the corporation. | ||||
Proposals that are in the best interests of shareholders, demonstrated by enhancing share value or improving the effectiveness of the company’s operations, will be supported. In evaluating mergers and acquisitions, we consider the impact of the corporate governance provisions to shareholders. In all cases, we use our discretion in order to maximize shareholder value. |
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Occasionally, companies add anti-takeover provisions that reduce the chances of a potential acquirer to make an offer, or to reduce the likelihood of a successful offer. We do not support proposals that reduce shareholders’ rights, entrench management, or reduce the likelihood of shareholders’ right to vote on reasonable offers. | ||||
Compensation | We consider it the board’s responsibility to identify the appropriate level of executive compensation. Despite the differences among the types of plans and the awards possible, there is a simple underlying philosophy that guides our analysis of executive compensation: we believe that there should be a direct relationship between executive compensation and company performance over the long term. | |||
Shareholders should have the opportunity to assess whether pay structures and levels are aligned with business performance. When assessing remuneration reports, we consider factors such as adequate disclosure of various remuneration elements, absolute and relative pay levels, peer selection and benchmarking, the mix of long-term and short-term incentives, alignment of pay structures with shareholder interests, as well as with corporate strategy and performance. We may oppose remuneration reports where pay seems misaligned with shareholders’ interests. We may also consider executive compensation practices when re-electing members of the remuneration committee. | ||||
We recognize that compensation policies and practices are unique from market to market; often there are significant differences between the level of disclosures, the amount and forms of compensation paid, and the ability of shareholders to approve executive compensation practices. As a result, our ability to assess the appropriateness of executive compensation is often dependent on market practices and laws. | ||||
Environmental and Social Issues | As a fiduciary, State Street Global Advisors takes a comprehensive approach to engaging with our portfolio companies about material environmental and social issues. Our Asset Stewardship program prioritization process allows us to proactively identify companies for engagement and voting in order to mitigate sustainability risks in our portfolio. Through engagement, we aim to build long-term relationships with the issuers in which we invest on behalf of our clients and to address a broad range of topics relating to the promotion of long-term shareholder value creation. When voting, we fundamentally consider whether the adoption of a shareholder proposal addressing a material environmental or social topic would promote long-term shareholder value in the context of the company’s existing practices and disclosures as well as existing market practice. | |||
For more information on our approach to environmental and social topics, please see our Global Proxy Voting and Engagement Guidelines for Environmental and Social Factors, available at ssga.com/about-us/asset-stewardship.html. |
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General/Routine | Although we do not seek involvement in the day-to-day operations of an organization, we recognize the need for conscientious oversight and input into management decisions that may affect a company’s value. We support proposals that encourage economically advantageous corporate practices and governance, while leaving decisions that are deemed to be routine or constitute ordinary business to management and the board of directors. | |||
Fixed Income Stewardship | The two elements of our fixed income stewardship program are: | |||
Proxy Voting: | ||||
While matters that arise for a vote at bondholder meetings vary by jurisdiction, examples of common proxy voting resolutions at bondholder meetings include: | ||||
• Approving amendments to debt covenants and/or terms of issuance | ||||
• Authorizing procedural matters, such as filing of required documents/other formalities | ||||
• Approving debt restructuring plans | ||||
• Abstaining from challenging the bankruptcy trustees | ||||
• Authorizing repurchase of issued debt security | ||||
• Approving the placement of unissued debt securities under the control of directors | ||||
• Approving spin-off/absorption proposals | ||||
Given the nature of the items that arise for vote at bondholder meetings, we take a case-by-case approach to voting bondholder resolutions. Where necessary, we will engage with issuers on voting matters prior to arriving at voting decisions. All voting decisions will be made in the best interest of our clients. | ||||
Issuer Engagement: | ||||
We recognize that debt holders have limited leverage with companies on a day-to-day basis. Our guidelines for engagement with fixed income issuers broadly follow the engagement guidelines for our equity holdings, as described above. | ||||
Securities on Loan | As a responsible investor and fiduciary, we recognize the importance of balancing the benefits of voting shares and the incremental lending revenue for the pooled funds that participate in State Street Global Advisors’ securities lending program (the “Funds”). Our objective is to recall securities on loan and restrict future lending until after the record date for the respective vote in instances where we believe that a particular vote could have a material impact on the Funds’ long-term financial performance and the benefit of voting shares will outweigh the forgone lending income. |
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Accordingly, we have set systematic recall and lending restriction criteria for shareholder meetings involving situations with the highest potential financial implications (such as proxy contests and strategic transactions including mergers and acquisitions, going dark transactions, change of corporate form, bankruptcy and liquidation). | ||||
Generally, these criteria for recall and restriction for lending only apply to certain large cap indices in developed markets. | ||||
State Street Global Advisors monitors the forgone lending revenue associated with each recall to determine if the impact on the Funds’ long-term financial performance and the benefit of voting shares will outweigh the forgone lending income. | ||||
Although our objective is to systematically recall securities based on the aforementioned criteria, we must receive notice of the vote in sufficient time to recall the shares on or before the record date. In cases in which we do not receive timely notice, we may be unable to recall the shares on or before the record date. | ||||
Reporting | We provide transparency for our stewardship activities through our regular client reports and relevant information reported online. We publish an annual stewardship report that provides details of our stewardship approach, engagement and voting policies, and activities during the year. The annual report is complemented by quarterly stewardship activity reports as well as the regular publication of thought leadership on governance and sustainability on our website. Our voting record information is available on Vote View, an interactive platform that provides relevant company details, proposal types, resolution descriptions, and records of our votes cast. | |||
About State Street Global Advisors | For four decades, State Street Global Advisors has served the world’s governments, institutions and financial advisors. With a rigorous, risk-aware approach built on research, analysis and market-tested experience, we build from a breadth of index and active strategies to create cost-effective solutions. And, as pioneers in index, ETF, and ESG investing, we are always inventing new ways to invest. As a result, we have become the world’s fourth-largest asset manager* with US $3.62 trillion† under our care. | |||
* Pensions & Investments Research Center, as of December 31, 2021. | ||||
† This figure is presented as of March 31, 2023 and includes approximately $65.03 billion USD of assets with respect to SPDR products for which State Street Global Advisors Funds Distributors, LLC (SSGA FD) acts solely as the marketing agent. SSGA FD and State Street Global Advisors are affiliated. Please note all AUM is unaudited. |
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ssga.com
Marketing communications
State Street Global Advisors Worldwide Entities
Abu Dhabi: State Street Global Advisors Limited, ADGM branch is regulated by the Financial Services Regulatory Authority (FSRA). This document is intended for Professional Clients or Market Counterparties only as defined by the FSRA and no other person should act upon it. State Street Global Advisors Limited, ADGM Branch, Al Khatem Tower, Suite 42801, Level 28, ADGM Square, Al Maryah Island, P.O Box 76404, Abu Dhabi, United Arab Emirates. Regulated by the ADGM Financial Services Regulatory Authority. T: +971 2 245 9000. Australia: State Street Global Advisors, Australia, Limited (ABN 42 003 914 225) is the holder of an Australian Financial Services License (AFSL Number 238276). Registered office: Level 14, 420 George Street, Sydney, NSW 2000, Australia. T: +612 9240-7600. F: +612 9240-7611. Belgium: State Street Global Advisors Belgium, Chaussée de La Hulpe 185, 1170 Brussels, Belgium. T: +32 2 663 2036. State Street Global Advisors Belgium is a branch office of State Street Global
Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s
Quay, Dublin 2. Canada: State Street Global Advisors, Ltd., 1981 McGill College
Avenue, Suite 500, Montreal, Qc, H3A 3A8, T: +514 282 2400 and 30 Adelaide Street East Suite 800, Toronto, Ontario M5C 3G6. T: +647 775 5900. France: State Street Global Advisors Europe Limited, France Branch (“State Street Global Advisors France”) is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. State Street Global Advisors France is registered in France with company number RCS Nanterre 899 183 289, and its office is located at Coeur Défense — Tour A — La Défense 4, 33e étage, 100, Esplanade du Général de Gaulle, 92 931 Paris La Défense Cedex, France. T: +33 1 44 45 40 00. F: +33 1 44 45 41 92. Germany: State Street Global Advisors Europe Limited, Branch in Germany, Brienner Strasse 59, D-80333 Munich, Germany (“State Street Global Advisors Germany”). T: +49 (0)89 55878 400. State Street Global Advisors Germany is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay,
Dublin 2. Hong Kong: State Street Global Advisors Asia Limited, 68/F, Two International Finance Centre, 8 Finance Street, Central, Hong Kong. T: +852 2103-0288. F: +852 2103-0200.
Ireland: State Street Global Advisors Europe Limited is regulated by the Central Bank of Ireland. Registered office address 78 Sir John Rogerson’s Quay, Dublin 2. Registered Number: 49934. T: +353 (0)1 776 3000. F: +353 (0)1 776 3300. Italy: State Street Global Advisors Europe Limited, Italy Branch (“State Street Global Advisors Italy”) is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. State Street Global Advisors Italy is registered in Italy with company number 11871450968 — REA: 2628603 and VAT number 11871450968, and its office is located at Via Ferrante Aporti, 10 - 20125 Milan, Italy. T: +39 02 32066 100. F: +39
02 32066 155. Japan: State Street Global Advisors (Japan) Co., Ltd., Toranomon Hills Mori Tower 25F 1-23-1 Toranomon, Minato-ku, Tokyo 105-6325 Japan. T: +81-3-4530-7380. Financial Instruments Business Operator, Kanto Local Financial Bureau (Kinsho #345), Membership: Japan Investment Advisers Association, The Investment Trust Association, Japan,
Japan Securities Dealers’ Association. Netherlands: State Street Global Advisors Netherlands, Apollo Building 7th floor,
Herikerbergweg 29, 1101 CN Amsterdam, Netherlands. T: +31 20 7181 000. State Street Global Advisors Netherlands is a branch office of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. Singapore: State Street Global Advisors Singapore Limited, 168, Robinson Road, #33-01 Capital Tower, Singapore 068912 (Company Reg. No: 200002719D, regulated by the Monetary Authority of Singapore). T: +65 6826-7555. F: +65 6826-7501. Switzerland: State Street Global Advisors AG, Beethovenstr. 19, CH-8027 Zurich. Registered with the Register of Commerce Zurich CHE-105.078.458. T: +41 (0)44 245 70 00. F: +41 (0)44 245 70 16. United Kingdom: State Street Global Advisors Limited. Authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No. 2509928. VAT No.
5776591 81. Registered office: 20 Churchill Place, Canary Wharf, London, E14 5HJ. T: 020 3395 6000. F: 020 3395
6350. United States: State Street Global Advisors, 1 Iron Street, Boston, MA 02210-1641. T: +1 617 786 3000.
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The views expressed in this material are the views of SSGA Asset Stewardship Team through the period ended March 23, 2023 and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.
Investing involves risk including the risk of loss of principal.
The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA’s express written consent.
All information is from SSGA unless otherwise noted and has been obtained from sources believed to be reliable, but its accuracy is not
guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.
The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor.
The returns on a portfolio of securities which exclude companies that do not meet the portfolio’s specified ESG criteria may trail the returns on a portfolio of securities which include such companies.
A portfolio’s ESG criteria may result in the portfolio investing in industry sectors or securities which underperform the market as a whole.
This communication is directed at professional clients (this includes eligible counterparties as defined by the appropriate EU regulator who are deemed both knowledgeable and experienced in matters relating to investments. The products and services to which this communication relates are only available to such persons and persons of any other description (including retail clients) should not rely on this communication.
The trademarks and service marks referenced herein are the property of their respective owners. Third party data providers make no warranties or representations of any kind relating to the accuracy, completeness or timeliness of the data and have no liability for damages of any kind relating to the use of such data.
Responsible-Factor (R Factor) scoring is designed by State Street to reflect certain ESG characteristics and does not represent investment performance. Results generated out of the scoring
model is based on sustainability and corporate governance dimensions of a scored entity.
The information contained in this communication is not a research recommendation or ‘investment research’ and is classified as a ‘Marketing Communication’ in accordance with the Markets in Financial Instruments Directive (2014/65/EU) or applicable Swiss regulation. This means that this marketing communication (a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research (b) is not subject to any prohibition on dealing ahead of the dissemination of investment research.
© 2023 State Street Corporation.
All Rights Reserved.
ID1551551-3479888.7.2.GBL.RTL 0423 Exp. Date: 03/31/2024
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April 2023
Global Proxy Voting and Engagement Guidelines for Environmental and Social Factors
Information Classification: Limited Access
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Overview | Our primary fiduciary obligation to our clients is to maximize the long-term returns of their investments. It is our view that material sustainability considerations, including material environmental and social (E&S) issues, can present material risks and/or opportunities that impact long-term value creation. This philosophy provides the foundation for our value-based approach to Asset Stewardship. | |||
We regularly identify stewardship priorities that we believe are important for our portfolio companies to consider. | ||||
Our Approach to Assessing E&S Factors |
While we believe that E&S factors can expose companies to material risks as well as drive long-term value creation, the materiality of specific E&S factors varies across industries, markets, and specific companies. We leverage several inputs to inform our views on an E&S issue at a given company, including:
• Established frameworks, including The Sustainability Accounting Standards Board’s (SASB) Standards, the Task Force on Climate-related Financial Disclosures (TCFD) Framework, etc.
• Academic research and other expert insights
• Disclosure expectations required by regulation
• Market expectations for the sector and industry
We expect companies to disclose information regarding their approach to identifying and managing E&S-related risks and opportunities they have deemed to be material, as well as the board’s oversight of these risks and opportunities. | |||
Our Approach to E&S Factors Through Engagements | The Asset Stewardship team regularly identifies thematic stewardship priorities that will be addressed across different engagement meetings. We focus on priorities that we consider important to be considered by the portfolio companies in which we invest our clients’ assets. These engagements help us to establish disclosure expectations and to more fully understand the nuanced challenges that companies seek to address related to E&S factors. Establishing robust disclosure expectations allows us to monitor companies’ progress toward alignment with our relevant disclosure expectations, and contributes to our perspectives on our stewardship priority areas. | |||
Through engagement, we address a broad range of factors that align with our stewardship priorities and seek to foster constructive, long-term relationships with issuers. We view engagements as part of an ongoing dialogue, versus a series of one-off conversations. During conversations with issuers, we share expectations and perspectives on key dimensions of E&S factors, and seek to understand how companies and their boards manage and oversee related risks and opportunities. |
Information Classification: Limited Access
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The Use of R-Factor in Engagements | ||||
R-Factor™ is a scoring system created by State Street Global Advisors that measures the performance of a company’s business operations and governance as it relates to material ESG factors facing the company’s industry. SSGA uses R-Factor as a consideration when prioritizing engagements. State Street Global Advisors may also engage with a company regarding its R-Factor™ score at the request of the company. | ||||
Analyzing E&S Proposals |
When analyzing shareholder proposals related to E&S factors, we consider the following factors:
• The materiality of the E&S factors in the proposal to the company’s business and sector (see “Our Approach to Assessing Materiality and Relevance of E&S Factors” above)
• The content and intent of the proposal, including whether the adoption of such a proposal would provide information to allow investors to better understand risk and opportunities in the context of the company’s disclosure and practices
• The strength of board oversight of the company’s relevant sustainability practices, as well as responsiveness to engagement
• Binding nature or prescriptiveness of proposal
For proposal topics for which we have developed guidance, we leverage the specific guidance, found in the Appendix, as a benchmark to analyze a company’s disclosures relative to our expectations for the relevant E&S factor.
For proposal topics for which we have not published guidance, we evaluate the company’s determination of materiality of the proposal to the company’s business and operations and the company’s related disclosures and oversight. | |||
Voting on E&S Proposals |
Below is the approach we follow when voting on E&S proposals:
• FOR We will consider voting for proposals that we believe will lead to increased alignment with our expectations, including those set out in the attached Appendix;
• ABSTAIN We will consider voting abstain when we support some elements of a proposal’s request, or recognize a company’s commitment to implement related disclosure and/or oversight practices;
• AGAINST We will consider voting against proposals that we believe are immaterial, overly prescriptive, or would not further our disclosure and oversight expectations, including those set out in the Appendix. |
Information Classification: Limited Access
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Appendix |
Guidance on Common Environmental and Social Proposal Topics
The following provides an overview of State Street Global Advisors’ public guidance related to common environmental and social shareholder proposal topics. We leverage this to inform our analysis of relevant shareholder proposals as it applies to companies in our portfolios.
Climate Change
We expect all companies to provide public disclosures in accordance with the following four pillars of the Taskforce for Climate-related Financial Disclosures (TCFD) framework:
1. Governance;
2. Strategy;
3. Risk Management; and
4. Metrics and Targets. | |||
Additionally, we expect companies in carbon-intensive sectors to disclose: | ||||
Interim greenhouse gas emissions reduction targets to accompany long-term climate ambitions | ||||
Discussion of impacts of scenario-planning on strategy and financial planning Incorporation of climate considerations in capital allocation decisions | ||||
Scope 1, 2, and material categories of Scope 3 greenhouse gas emissions | ||||
For additional context on our expectations for relevant disclosures, please review our related guidance. | ||||
Diversity, Equity, and Inclusion | ||||
We expect all companies to provide public disclosure in the following key areas: | ||||
1. Board Oversight — Describe how the board executes its oversight role in risks and opportunities related to diversity and inclusion; 2. Strategy — Articulate the role diversity (of race, ethnicity, and gender, at minimum) plays in the company’s broader human capital management practices and long-term strategy; 3. Goals — Describe what diversity, equity, and inclusion-related goals exist, how these goals contribute to the company’s overall strategy, and how they are managed and progressing; |
Information Classification: Limited Access
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4. Metrics — Provide measures of the diversity of the company’s global employee base and board, including: | ||||
- Workforce — Employee diversity by race, ethnicity, and gender (at minimum). We expect to see this information to be broken down by industry-relevant employment categories or levels of seniority, for all full-time employees. In the US, companies are expected to at least use the disclosure framework set forth by the United States Equal Employment Opportunity Commission’s EEO-1 Survey. Non-US companies are encouraged to disclose this information in alignment with SASB guidance and nationally appropriate frameworks; and, | ||||
- Board — Diversity characteristics, including racial, ethnic, and gender makeup (at minimum) of the board of directors; and | ||||
5. Board Diversity — Articulate goals and strategy related to diverse representation at the board (including race, ethnicity, and gender, at minimum), including how the board reflects the diversity of the company’s workforce, community, customers, and other key stakeholders. | ||||
For additional context on our expectations for relevant disclosures, please review our related guidance. | ||||
Civil Rights Risks | ||||
We expect all companies in the US to provide public disclosure on: | ||||
1. Risks related to civil rights, including risks associated with products, practices, and services ;
2. Plans to manage and mitigate these risks; and
3. Processes at the board for overseeing such risks (e.g., committee responsible, frequency of discussions, etc.). | ||||
For additional context on our expectations for relevant disclosures, please review our related guidance. | ||||
Pay Equity | ||||
We expect all companies in the US and the UK to provide public disclosure on:
1. Adjusted pay gaps related to race and gender within the company (Disclosure of the unadjusted pay gap is also encouraged, but not expected outside of the UK market at this time);
2. Strategy to achieve and maintain pay equity; and
3. Role of the board in overseeing pay strategies as well as Diversity, Equity and Inclusion efforts. | ||||
For additional context on our expectations for relevant disclosures, please review our related guidance. |
Information Classification: Limited Access
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Human Rights | ||||
We expect companies to disclose whether they have established processes for identifying risks related to human rights. If any material human rights risks are identified, we expect further public disclosure describing:
1. Human rights-related risks the company considers most material; 2. Plans to manage and mitigate these risks; 3. Board oversight of these risks; and 4. Assessment of the effectiveness of the human rights risk management program. | ||||
For additional context on our expectations for relevant disclosures, please review our related guidance. | ||||
Human Capital Management | ||||
We expect all companies to provide public disclosure on: | ||||
1. Board oversight — Methods outlining how the board oversees human capital-related risks and opportunities; 2. Strategy — Approaches to human capital management and how these advance the long-term business strategy; 3. Compensation — Strategies throughout the organization that aim to attract and retain employees, and incentivize contribution to an effective human capital strategy; 4. Voice — Channels to ensure the concerns and ideas from workers are solicited and acted upon, and how the workforce is engaged and empowered in the organization; and 5. Diversity, equity, and inclusion — Efforts to advance diversity, equity, and inclusion (see our complementary Guidance on Diversity Disclosures & Practices for additional context). | ||||
For additional context on our expectations for relevant disclosures, please review our related guidance. | ||||
Environmental Impacts | ||||
If material risks related to adverse environmental impacts from company operations have been identified, we expect companies to disclose information related to:
1. Adverse environmental impacts the company considers most material, including relevant demographic data where applicable; 2. Management of material risks from company operations, including the role of stakeholders; and 3. Board oversight of such risks. |
Information Classification: Limited Access
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Deforestation-Intensive Companies | ||||
We expect companies that have determined deforestation is a material risk to their business and operations to disclose:
1. Strategy to assess and manage deforestation-related risks and opportunities for high-risk commodities in the company’s operations and/or business value chain (e.g., supply chain monitoring and engagement, greenhouse gas emissions linked to deforestation, product certifications, stakeholder engagement); 2. Quantitative and/or qualitative metrics and time-bound targets used to assess and manage risks and opportunities related to high deforestation-risk commodities in the company’s operations and/or business value chain; and 3. Board oversight and accountability for deforestation and/or land use-related risks. | ||||
For additional context on our expectations for relevant disclosures and leading practices, please review our related insights gained from engaging with our portfolio companies in deforestation-intensive sectors. | ||||
About State Street Global Advisors | For four decades, State Street Global Advisors has served the world’s governments, institutions and financial advisors. With a rigorous, risk-aware approach built on research, analysis and market-tested experience, we build from a breadth of index and active strategies to create cost-effective solutions. And, as pioneers in index, ETF, and ESG investing, we are always inventing new ways to invest. As a result, we have become the world’s fourth-largest asset manager* with US $3.62 trillion† under our care. | |||
* Pensions & Investments Research Center, as of December 31, 2021. | ||||
† This figure is presented as of March 31, 2023 and includes approximately $65.03 billion USD of assets with respect to SPDR products for which State Street Global Advisors Funds Distributors, LLC (SSGA FD) acts solely as the marketing agent. SSGA FD and State Street Global Advisors are affiliated. Please note all AUM is unaudited. |
Information Classification: Limited Access
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ssga.com
State Street Global Advisors
Marketing Communication
Worldwide Entities
Abu Dhabi: State Street Global Advisors Limited, ADGM branch is regulated by the Financial Services Regulatory Authority (FSRA). This document is intended for Professional Clients or Market Counterparties only as defined by the FSRA and no other person should act upon it. State Street Global Advisors Limited, ADGM Branch, Al Khatem Tower, Suite 42801, Level 28, ADGM Square, Al Maryah Island, P.O Box 76404, Abu Dhabi, United Arab Emirates. Regulated by the ADGM Financial Services Regulatory Authority. T: +971 2 245 9000. Australia: State Street Global Advisors, Australia, Limited (ABN 42 003 914 225) is the holder of an Australian Financial Services License (AFSL Number 238276). Registered office: Level 14, 420 George Street, Sydney, NSW 2000, Australia. T: +612 9240-7600. F: +612 9240-7611. Belgium: State Street Global Advisors Belgium, Chaussée de La Hulpe 185, 1170 Brussels, Belgium. T: +32 2 663 2036. State Street Global Advisors Belgium is a branch office of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir
John Rogerson’s Quay, Dublin 2. Canada: State Street Global Advisors, Ltd., 1981 McGill College Avenue, Suite 500, Montreal, Qc, H3A 3A8, T: +514 282 2400 and 30 Adelaide Street East Suite 800, Toronto, Ontario M5C 3G6. T: +647 775 5900. France: State Street Global Advisors Europe Limited, France Branch (“State Street Global Advisors France”) is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. State Street Global Advisors France is registered in France with company number RCS Nanterre 899 183 289, and its office is located at Coeur Défense — Tour A — La Défense 4, 33e étage, 100, Esplanade du Général de Gaulle, 92 931 Paris La Défense Cedex, France. T: +33 1 44 45 40 00. F: +33 1 44 45 41 92. Germany: State Street Global Advisors Europe Limited, Branch in Germany, Brienner Strasse 59, D-80333 Munich, Germany (“State Street Global Advisors Germany”). T: +49 (0)89 55878 400. State Street Global Advisors Germany is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. Hong Kong: State Street
Global Advisors Asia Limited, 68/F, Two International Finance Centre, 8 Finance Street, Central, Hong Kong. T: +852 2103-0288. F: +852 2103-0200. Ireland: State Street Global Advisors Europe Limited is regulated by the Central Bank of Ireland. Registered office address 78 Sir John Rogerson’s Quay, Dublin 2. Registered Number: 49934. T: +353 (0)1 776 3000. F: +353 (0)1 776 3300. Italy: State Street Global Advisors Europe Limited, Italy Branch (“State Street Global Advisors Italy”) is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. State Street Global Advisors Italy is registered in Italy with company number 11871450968 — REA: 2628603 and VAT number 11871450968, and its office is located at Via Ferrante Aporti, 10 - 20125 Milan, Italy. T: +39 02 32066 100. F: +39 02 32066 155. Japan: State Street Global Advisors (Japan) Co., Ltd., Toranomon Hills Mori Tower 25F 1-23-1 Toranomon, Minato-ku, Tokyo 105-6325 Japan. T: +81-3-4530-7380. Financial Instruments Business Operator, Kanto Local Financial Bureau (Kinsho #345), Membership: Japan Investment Advisers Association, The Investment Trust Association, Japan, Japan Securities Dealers’ Association. Netherlands: State Street Global Advisors
Netherlands, Apollo Building 7th floor, Herikerbergweg 29, 1101 CN Amsterdam, Netherlands. T: +31 20 7181 000. State Street Global Advisors Netherlands is a branch office of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. Singapore: State Street Global Advisors Singapore Limited, 168, Robinson Road, #33-01 Capital Tower, Singapore 068912 (Company Reg. No: 200002719D, regulated by the Monetary Authority of Singapore). T: +65 6826-7555. F: +65 6826-7501. Switzerland: State Street Global Advisors AG, Beethovenstr. 19, CH-8027 Zurich. Registered with the Register of Commerce Zurich CHE-105.078.458. T: +41 (0)44 245 70 00. F: +41 (0)44 245 70 16. South Africa: State Street Global Advisors Limited is regulated by the Financial Sector Conduct Authority in South Africa under license number 42670. United Kingdom: State Street Global Advisors Limited. Authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No. 2509928. VAT No. 5776591 81. Registered office: 20 Churchill Place, Canary Wharf, London, E14 5HJ. T: 020 3395 6000. F: 020 3395 6350. United States: State Street Global Advisors, 1 Iron Street, Boston, MA 02210-1641. T: +1 617 786 3000.
Information Classification: Limited Access
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Important Risk Information
The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without State Street Global Advisors’ express The views expressed in this material are the views of SSGA Asset Stewardship Team through the period ended May 26, 2023 and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.
Investing involves risk including the risk of loss of principal.
The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA’s express written consent.
All information is from SSGA unless otherwise noted and has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.
The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor.
The returns on a portfolio of securities which exclude companies that do not meet the portfolio’s specified ESG criteria may trail the returns on a portfolio of securities which include such companies. A portfolio’s ESG criteria may result in the portfolio investing
in industry sectors or securities which underperform the market as a whole.
This communication is directed at professional clients (this includes eligible counterparties as defined by the appropriate EU regulator who are deemed both knowledgeable and experienced in matters relating to investments. The products and services to which this communication relates are only available to such persons and persons of any other description (including retail clients) should not rely on this communication.
The trademarks and service marks referenced herein are the property of their respective owners. Third party data providers make no warranties or representations of any kind relating to the accuracy, completeness or timeliness of the data and have no liability for damages of any kind relating to the use of such data.
Responsible-Factor (R Factor) scoring is designed by State Street to reflect certain ESG characteristics and does not
represent investment performance. Results generated out of the scoring model is based on sustainability and corporate governance dimensions of a scored entity.
The information contained in this communication is not a research recommendation or ‘investment research’ and is classified as a ‘Marketing Communication’ in accordance with the Markets in Financial Instruments Directive (2014/65/EU) or applicable Swiss regulation. This means that this marketing communication (a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research (b) is not subject to any prohibition on dealing ahead of the dissemination of investment research.
© 2023 State Street Corporation.
All Rights Reserved.
ID1533400-3479887.5.1.GBL.RTL 0423
Exp. Date: 06/30/2024
Information Classification: Limited Access
C-21
March 2023
Conflicts Mitigation Guidelines Managing Conflicts of Interest Arising from State Street Global Advisors’ Proxy Voting and Engagement Activity
State Street Corporation has a comprehensive standalone Conflicts of Interest Policy and other policies that address a range of identified conflicts of interests. In addition, State Street Global Advisors, the asset management business of State Street Corporation, maintains a conflicts register that identifies key conflicts and describes systems in place to mitigate the conflicts. This document* is designed to act in conjunction with related policies and practices employed by other groups within the organization. Further, it complements those policies and practices
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by providing information about managing the conflicts of interests that may arise through State Street Global Advisors’ proxy voting and engagement activities.
* |
These Managing Conflicts of Interest Arising From State Street Global Advisors’ Proxy Voting and Engagement Activity Guidelines are also applicable to SSGA Funds Management, Inc. SSGA Funds Management, Inc. is an SEC-registered investment adviser. SSGA Funds Management, Inc., State Street Global Advisors Trust Company, and other advisory affiliates of State Street make up State Street Global Advisors, the investment management arm of State Street Corporation. |
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Managing Conflicts of Interest Related to Proxy Voting and Engagement |
State Street Global Advisors has implemented processes designed to prevent undue influence on State Street Global Advisors’ voting and engagement activities that may arise from relationships between proxy issuers or companies and State Street Corporation, State Street Global Advisors,
State Street Global Advisors affiliates, State Street Global Advisors Funds, or State Street Global Advisors Fund affiliates. State Street Global Advisors assigns sole responsibility for the implementation of proxy voting guidelines to members of its Asset Stewardship Team, a team that is independent from other functions within the organization, such as sales and marketing, investment, or client facing teams. Proxy voting is undertaken in accordance with the Global Proxy Voting and Engagement Principles, Global Proxy Voting and Engagement Guidelines for Environmental and Social Factors, regional proxy voting and engagement guidelines and guidance published thereunder by State Street Global Advisors from time to time (the “Voting Policy”), which are reviewed and overseen by the State Street Global Advisors’ ESG Committee (the “ESG Committee”). Any changes to the Voting Policy are communicated to Asset Stewardship Team employees in a timely manner to ensure that they understand the potential impact to their proxy voting activities. In rare circumstances where nuances within specific proxy proposals fall outside of the scope of the Voting Policy, requiring case-by-case analysis, such proposals are escalated to the head of Asset Stewardship and reported to the ESG Committee. Voting consistently with the Voting Policy helps mitigate potential conflicts of interest, as the Voting Policy is determined without reference to any specific entities or relationship.
Members of the Asset Stewardship Team may from time to time discuss views on proxy voting matters, company performance, strategy, etc. with other State Street Corporation or State Street Global Advisors employees, including portfolio managers, senior executives, and relationship managers. However, final voting decisions are made solely by the Asset Stewardship Team, in accordance with the Voting Policy and in a manner consistent with the best interest of its clients, taking into account various perspectives on risks and opportunities with the goal of maximizing the value of client assets. Except in certain jurisdictions where proxy voting decisions are regularly disclosed prior to voting pursuant to local custom, Asset Stewardship Team employees are generally prohibited from disclosing State Street Global Advisors’ voting decisions prior to the meetings. In addition, State Street Global Advisors generally exercises a single voting decision for each ballot item across the client accounts for which it is responsible for proxy voting regardless of investment strategy.1 In certain cases, where a material conflict of interest is identified, the matter may be referred to the ESG Committee for review.
Other protocols designed to help mitigate potential conflicts of interest include: | |||
1 Exceptions to this unified voting policy are where: (1) State Street Global Advisors has made proxy voting choices (i.e., the State Street Global Advisors proxy voting program) available to investors within a pooled investment vehicle, in which case a pro rata portion of shares held by the fund attributable to investors who choose to participate in the proxy voting program would be voted consistent with the third-party proxy voting policies selected by the investors, and (2) in limited circumstances, certain pooled investment vehicles for which State Street Global Advisors acts as investment manager may, pursuant to their governing documents, utilize proxy voting guidelines developed by third-party advisors. |
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Types of Potential Conflict
|
Stewardship Conflict of Interest Description
|
Typical Conflict Mitigation Protocols That
We
| ||
Business relationships | A conflict of interest may arise where, for example, we hold investments in companies with which we, or our affiliates, have material business relationships. |
Assigning sole responsibility for the implementation of proxy voting guidelines to members of Asset Stewardship Team and voting in accordance with the Voting Policy are our primary conflict mitigation protocols. Furthermore, the voting rationale is recorded to provide transparency.
Additional mitigation steps may be implemented on a case-by-case basis. This may include, for example, blackout periods for communications with issuers/clients. | ||
Equity investments | A conflict of interest may arise where client accounts and/ or State Street Global Advisors pooled funds, where State Street Global Advisors acts as trustee, may hold shares in State Street Corporation or other State Street Global Advisors affiliated entities, such as mutual funds affiliated with SSGA Funds Management, Inc. | Mitigants may include, for example, outsourcing voting decisions relating to a shareholder meeting of State Street Corporation or other State Street Global Advisors affiliated entities to independent outside third parties. In such cases, delegated third parties exercise voting decisions based upon State Street Global Advisors’ Voting Policy. | ||
Outside business interest | A conflict of interest may arise where an Asset Stewardship Team employee or a key employee in the firm has an outside business interest (such as a director role in a company we invest in, or in the same industry as we invest). |
State Street Global Advisors maintains an Outside Activities Policy and employees must submit a request requiring approval before undertaking any outside activities that are captured by the Outside Activities Policy. The request will be reviewed by the employee’s manager and the Conduct Risk Management Office to ensure compliance with applicable policies and procedures (such as the Global Anti-Corruption Policy and the Standard of Conduct) and ensure potential conflicts are mitigated.
Additional mitigation steps may be implemented on a case-by-case basis. This may include, for example, retaining an independent fiduciary to make a voting decision where State Street Global Advisors believes it may be conflicted from voting due to an employee’s outside business interest. | ||
Other personal conflicts | A conflict of interest may arise where a family member or other personal contact of an employee is employed by a company in which we invest. | Mitigation steps may be implemented for personal conflicts on a case-by-case basis. This may include, for example, filing a Personal Conflicts declaration with a mitigation strategy to document how the conflict will be avoided. Such strategies may include, for example, a member of the Asset Stewardship Team with a conflict recusing him/herself from voting and participating in engagement activities at the relevant company, and implementing blackout periods for communications with issuers/clients. | ||
Securities lending | We may lend securities that we hold in one of our portfolios to another financial counterparty. This may create a conflict of interest regarding whether to recall those securities to enable us to vote on behalf of the portfolio in a shareholder resolution, which may impact the intended securities lending income. | Our approach to securities lending recall, and any potential conflicts that may be created through our securities lending recall activity, is governed by the Securities Lending Recall for Proxy Voting Procedure, which is co-owned by the Asset Stewardship Team, Securities Lending Team and Proxy Operations Group. The conflict mitigation protocols include predefining criteria to systematically recall shares, periodic review of the recall procedure by relevant stakeholders, and periodic reporting of recall activities and associated forgone lending income to the relevant internal governance bodies. |
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About State Street Global Advisors |
For four decades, State Street Global Advisors has served the world’s governments, institutions and financial advisors. With a rigorous, risk-aware approach built on research, analysis and market-tested experience, we build from a breadth of index and active strategies to create cost-effective solutions. And, as pioneers in index, ETF, and ESG investing, we are always inventing new ways to invest. As a result, we have become the world’s fourth-largest asset manager* with US $3.48 trillion† under our care.
| |||
* Pensions & Investments Research Center, as of December 31, 2021. | ||||
† This figure is presented as of December 31, 2022 and includes approximately $58.60 billion USD of assets with respect to SPDR products for which State Street Global Advisors Funds Distributors, LLC (SSGA FD) acts solely as the marketing agent. SSGA FD and State Street Global Advisors are affiliated. Please note all AUM is unaudited. |
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ssga.com
Marketing communication
State Street Global Advisors Worldwide Entities
Abu Dhabi: State Street Global Advisors Limited, ADGM branch is regulated by the Financial Services Regulatory Authority (FSRA). This document is intended for Professional Clients or Market Counterparties only as defined by the FSRA and no other person should act upon it. State Street Global Advisors Limited, ADGM Branch, Al Khatem Tower, Suite 42801, Level 28, ADGM Square, Al Maryah Island, P.O Box 76404, Abu Dhabi, United Arab Emirates. Regulated by the ADGM Financial Services Regulatory Authority. T: +971 2 245 9000. Australia: State Street Global Advisors, Australia, Limited (ABN 42 003 914 225) is the holder of an Australian Financial Services License (AFSL Number 238276). Registered office: Level 14, 420 George Street, Sydney, NSW 2000, Australia. T: +612 9240-7600. F: +612 9240-7611. Belgium: State Street Global Advisors Belgium, Chaussée de La Hulpe 185, 1170 Brussels, Belgium. T: +32 2 663 2036. State Street Global Advisors Belgium is a branch office of State Street Global Advisors Europe Limited, registered in Ireland with company number
49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. Canada: State Street Global Advisors, Ltd., 1981 McGill College Avenue, Suite 500, Montreal, Qc, H3A 3A8, T: +514 282 2400 and 30 Adelaide Street East Suite 800, Toronto, Ontario M5C 3G6. T: +647 775 5900. France: State Street Global Advisors Europe Limited, France Branch (“State Street Global Advisors France”) is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. State Street Global Advisors France is registered in France with company number RCS Nanterre 899 183 289, and its office is located at Coeur Défense — Tour A — La Défense 4, 33e étage, 100, Esplanade du Général de Gaulle, 92 931 Paris La Défense Cedex, France. T: +33 1 44 45 40 00. F: +33 1 44 45 41 92. Germany: State Street Global Advisors Europe Limited, Branch in Germany, Brienner Strasse 59, D-80333 Munich, Germany (“State Street Global Advisors Germany”). T: +49 (0)89 55878 400. State Street Global Advisors Germany is a branch
of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. Hong Kong: State Street Global Advisors Asia Limited, 68/F, Two International Finance Centre, 8 Finance Street, Central, Hong Kong. T: +852 2103-0288. F: +852 2103-0200. Ireland: State Street Global Advisors Europe Limited is regulated by the Central Bank of Ireland. Registered office address 78 Sir John Rogerson’s Quay, Dublin 2. Registered Number: 49934. T: +353 (0)1 776 3000. F: +353 (0)1 776 3300. Italy: State Street Global Advisors Europe Limited, Italy Branch (“State Street Global Advisors Italy”) is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. State Street Global Advisors Italy is registered in Italy with company number 11871450968 — REA: 2628603 and VAT number 11871450968, and its office is located at Via Ferrante Aporti, 10 - 20125 Milan, Italy. T: +39 02 32066 100. F: +39 02 32066 155. Japan: State Street Global Advisors (Japan)
Co., Ltd., Toranomon Hills Mori Tower 25F 1-23-1 Toranomon, Minato-ku, Tokyo 105-6325 Japan. T: +81-3-4530-7380. Financial Instruments Business Operator, Kanto Local Financial Bureau (Kinsho #345), Membership: Japan Investment Advisers Association, The Investment Trust Association, Japan, Japan Securities Dealers’ Association. Netherlands: State Street Global Advisors Netherlands, Apollo Building 7th floor, Herikerbergweg 29, 1101 CN Amsterdam, Netherlands. T: +31 20 7181 000. State Street Global Advisors Netherlands is a branch office of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. Singapore: State Street Global Advisors Singapore Limited, 168, Robinson Road, #33-01 Capital Tower, Singapore 068912 (Company Reg. No: 200002719D, regulated by the Monetary Authority of Singapore). T: +65 6826-7555. F: +65 6826-7501. Switzerland: State Street Global Advisors AG, Beethovenstr. 19, CH-8027 Zurich. Registered with the Register of Commerce Zurich CHE-105.078.458. T: +41 (0)44 245 70 00. F: +41 (0)44 245 70 16. United Kingdom: State Street Global Advisors Limited. Authorised and
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regulated by the Financial Conduct Authority. Registered in England. Registered No. 2509928. VAT No. 5776591 81. Registered office: 20 Churchill Place, Canary Wharf, London, E14 5HJ. T: 020 3395 6000. F: 020 3395 6350. United States: State Street Global Advisors, 1 Iron Street, Boston, MA 02210-1641. T: +1 617 786 3000.
The views expressed in this material are the views of SSGA Asset Stewardship Team through the period ended March 23, 2023 and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.
Investing involves risk including the risk of loss of principal.
The whole or any part of this work may not be reproduced, copied or transmitted or any of
its contents disclosed to third parties without SSGA’s express written consent.
All information is from SSGA unless otherwise noted and has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.
The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor.
The returns on a portfolio of securities which exclude companies that do not meet the portfolio’s specified ESG criteria may trail the returns on a portfolio of securities which include such companies.
A portfolio’s ESG criteria may result in the portfolio investing in industry sectors or securities which underperform the market as a whole.
This communication is directed at professional clients (this includes eligible counterparties as defined by the appropriate EU regulator who are deemed both knowledgeable and experienced in matters relating to investments. The products and services to which this communication relates are only available to such persons and persons of any other description (including retail clients) should not rely on this communication.
The trademarks and service marks referenced herein are the property of their respective owners. Third party data providers make no warranties or representations of any kind relating to the accuracy, completeness or timeliness of the data and have no liability for damages of any kind relating to the use of such data.
Responsible-Factor (R Factor) scoring is designed by State Street to reflect certain ESG characteristics and does not
represent investment performance. Results generated out of the scoring model is based on sustainability and corporate governance dimensions of a scored entity.
The information contained in this communication is not a research recommendation or ‘investment research’ and is classified as a
‘Marketing Communication’ in accordance with the Markets in Financial Instruments Directive (2014/65/EU) or applicable Swiss regulation. This means that this marketing communication (a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research (b) is not subject to any prohibition on dealing ahead of the dissemination of investment research.
© 2023 State Street Corporation.
All Rights Reserved.
ID1482714-3479898.4.1.GBL.RTL 0323 Exp. Date: 03/31/2024
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March 2023
State Street Global Advisors’ Global Issuer and Stakeholder Engagement Guidelines
State Street Global Advisors has developed engagement guidelines to increase transparency around our engagement philosophy, approach, and processes. These guidelines are designed to communicate with our investee companies regarding the objectives of our engagement activities and to facilitate a better understanding of our preferred terms of engagement. The guidelines also outline our approach to engaging with activist investors and shareholder proposal proponents.
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State Street Global Advisors’ engagement activities are driven exclusively by our goal to maximize and protect the long-term value of our clients’ assets. | ||||
State Street Global Advisors’ Methodology for Developing its Annual Engagement Strategy | While we would like to maintain a dialogue with all of our portfolio companies, we recognize the need to focus our engagement efforts where we believe we will have maximum impact. Each year, as part of its strategic review process, the Asset Stewardship Team develops an annual engagement strategy, and it accordingly identifies a priority list of companies that we intend to engage with during the year. We focus on priorities that we consider important to be considered by the portfolio companies in which we invest our clients’ assets. | |||
The intensity and type of engagement with a company is determined by State Street Global Advisors’ relative and absolute holdings in that company. In addition, we factor in geographic diversity in our engagement efforts to reflect the level of economic exposure to various markets. Finally, we also consider the engagement culture in a market or geographic region when developing our engagement priority list and approach. | ||||
State Street Global Advisors meets with companies through in-person and virtual meetings. We prefer virtual meetings as we believe this is cost effective for our clients and investee companies. This also helps us minimize our global carbon footprint. | ||||
Helpful Information to Include in Engagement Request Emails to State Street Global Advisors |
To help expedite the review of engagement requests, please include the following information in engagement request emails to State Street Global Advisors:
• Company name and identifier (i.e. ticker)
• Topics the issuer is interested in discussing
• Upcoming meeting date, if applicable
• Issuer attendees and their titles
All requests for engagement should be sent to the Asset Stewardship Team at [email protected]. | |||
Guidelines for Engaging with Investee Companies |
• During the ‘proxy season’, we prioritize conversations related to companies’ shareholder meetings. In the ‘off-season’, we discuss our focus areas and stewardship priorities with companies for whom these topics are most material. |
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• We believe that as a long-term shareholder with substantial holdings, it is important to establish a relationship and have a direct communication channel with independent directors in our investee companies. Therefore, as part of our engagement process, we prefer to meet with the non-executive chairperson/lead independent director and/or representative of key board committees. Such meetings help us assess the quality and effectiveness of the board, the extent of the oversight of management, and the board’s perspectives on key issues, such as strategy, risk, capital allocation, and compensation. It also allows us to escalate matters to the board’s attention if management has been unresponsive to suggestions discussed during prior engagements. | ||||
• After our initial meeting with members of the board, the frequency of desired follow-up meetings is determined by the nature of the issues discussed. We will outline expectations and timelines for subsequent meetings during the discussion. We follow similar guidelines for meeting requests with C-suite management representatives at companies. | ||||
• Typically, we allow additional capacity for reactive engagement in Q2 for markets such as the US, UK, EU, and Japan (Q4 for Australian companies) where the majority of the companies have general meetings between the months of April and June. | ||||
• We reserve the Q1, Q3, and Q4 time periods to conduct the majority of our active engagements with some room for reactive engagement with companies that have experienced a significant event or are seeking approval for a corporate transaction, board transition, or other material concern. | ||||
• Instances in which we are likely to accept engagement requests include instances when: | ||||
– We have concerns about a ballot item; and | ||||
– We believe that engagement will better inform our voting decision; and/or | ||||
– We want to discuss material risks with a company | ||||
• Instances in which we are likely to decline engagement requests include instances when: | ||||
– We do not have any immediate concerns about a ballot item | ||||
– We believe we have adequate information to make an informed voting decision on a ballot item | ||||
– Our position on a ballot item is addressed in our public policy statement | ||||
– We have actively engaged with the company on matters pertaining to the ballot proposal outside the ‘proxy season’ | ||||
– We believe that the matter is best discussed outside the vote solicitation period |
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• If we have provided feedback during the vote solicitation period, we believe that any follow-up discussion with the company should focus on the board or company’s response to our feedback | ||||
• We track all feedback provided to investee companies and routinely conduct follow-up engagements to assess the progress made by a company toward the incorporation of our feedback | ||||
• We welcome written submission of changes made by the board to the company’s governance or remuneration policies and practices
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Guidelines for Engaging with Other Investors Soliciting State Street Global Advisors’ Votes in Connection with Vote-No Campaigns or Shareholder Proposals | We believe it is good practice for us to speak to other investors that are running proxy contests, putting forth vote-no campaigns, or proposing shareholder proposals at investee companies. However, we generally limit such discussions with investors to one engagement unless we believe that it is necessary for us to have a follow-up call. We welcome the opportunity to review materials sent in advance of the proposed discussion. To the extent possible, we review all materials made publicly available by the investor or the company on a contested ballot item before making a voting decision. Our primary purpose of engaging with investors is: | |||
• To gain a better understanding of their position or concerns at investee companies. | ||||
• In proxy contest situations: | ||||
– To assess possible director candidates where investors are seeking board representation in proxy contest situations | ||||
– To understand the investor’s proposed strategy for the company and investment time horizon to assess their alignment with State Street Global Advisors’ views and interests as a long-term shareholder | ||||
All requests for engagement should be sent to [email protected].
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Investor Engagement Protocol | ||||
State Street Global Advisors encourages boards of directors to develop an investor engagement protocol or plan that establishes policies and mechanisms through which independent directors communicate with and receive feedback from institutional investors. The protocol would help foster strong relationships between a company’s directors and its investors, while promoting transparency, responsibility, and accountability of the board.
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The protocol should identify key independent directors (such as a non-executive chairman, lead independent director, or a representative of a key board committee), who would be mandated to engage with shareholders on a range of topics that are of interest to State Street Global Advisors and/or other institutional investors. A robust engagement protocol would also develop a crisis communication plan for the board when institutional investors and the market-at- large need to communicate with independent directors, in a timely manner, about their oversight and response to a developing concern facing the company.
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Requesting R-Factor™ Scores | Companies interested in receiving their R-Factor™ scores should submit an email request to [email protected] including the following information: | |||
• Company’s legal name | ||||
• Ticker | ||||
• ISIN | ||||
• Company’s headquarter location | ||||
• Contact name | ||||
• Contact’s Title at Company | ||||
• Contact email address (must be an official company email address) | ||||
• Contact phone# | ||||
Please note that R-Factor™ scores will be provided only to employees affiliated with a company’s Investor Relations, Chief Financial Officer, ESG/Sustainability Leadership or General Secretary’s organizations. Please include attestation in your email stating that you are affiliated with one of these functions. | ||||
About State Street Global Advisors | For four decades, State Street Global Advisors has served the world’s governments, institutions and financial advisors. With a rigorous, risk-aware approach built on research, analysis and market-tested experience, we build from a breadth of index and active strategies to create cost-effective solutions. And, as pioneers in index, ETF, and ESG investing, we are always inventing new ways to invest. As a result, we have become the world’s fourth-largest asset manager* with US $3.48 trillion† under our care. | |||
* Pensions & Investments Research Center, as of December 31, 2021. | ||||
† This figure is presented as of December 31, 2022 and includes approximately $58.60 billion USD of assets with respect to SPDR products for which State Street Global Advisors Funds Distributors, LLC (SSGA FD) acts solely as the marketing agent. SSGA FD and State Street Global Advisors are affiliated. Please note all AUM is unaudited. |
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Marketing communication
State Street Global Advisors Worldwide Entities
Abu Dhabi: State Street Global Advisors Limited, ADGM branch is regulated by the Financial Services Regulatory Authority (FSRA). This document is intended for Professional Clients or Market Counterparties only as defined by the FSRA and no other person should act upon it. State Street Global Advisors Limited, ADGM Branch, Al Khatem Tower, Suite 42801, Level 28, ADGM Square, Al Maryah Island, P.O Box 76404, Abu Dhabi, United Arab Emirates. Regulated by the ADGM Financial Services Regulatory Authority. T: +971 2 245 9000. Australia: State Street Global Advisors, Australia, Limited (ABN 42 003 914 225) is the holder of an Australian Financial Services License (AFSL Number 238276). Registered office: Level 14, 420 George Street, Sydney, NSW 2000, Australia. T: +612 9240-7600. F: +612 9240-7611. Belgium: State Street Global Advisors Belgium, Chaussée de La Hulpe 185, 1170 Brussels, Belgium. T: +32 2 663 2036. State Street Global Advisors Belgium is a branch office of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir
John Rogerson’s Quay, Dublin 2. Canada: State Street Global Advisors, Ltd., 1981 McGill College Avenue, Suite 500, Montreal, Qc, H3A 3A8, T: +514 282 2400 and 30 Adelaide Street East Suite 800, Toronto, Ontario M5C 3G6. T: +647 775 5900. France: State Street Global Advisors Europe Limited, France Branch (“State Street Global Advisors France”) is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. State Street Global Advisors France is registered in France with company number RCS Nanterre 899 183 289, and its office is located at Coeur Défense — Tour A — La Défense 4, 33e étage, 100, Esplanade du Général de Gaulle, 92 931 Paris La Défense Cedex, France. T: +33 1 44 45 40 00. F: +33 1 44 45 41 92. Germany: State Street Global Advisors Europe Limited, Branch in Germany, Brienner Strasse 59, D-80333 Munich, Germany (“State Street Global Advisors Germany”). T: +49 (0)89 55878 400. State Street Global Advisors Germany is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin
2. Hong Kong: State Street Global Advisors Asia Limited, 68/F, Two International Finance Centre, 8 Finance Street, Central, Hong Kong. T: +852 2103-0288. F: +852 2103-0200. Ireland: State Street Global Advisors Europe Limited is regulated by the Central Bank of Ireland. Registered office address 78 Sir John Rogerson’s Quay, Dublin 2. Registered Number: 49934. T: +353 (0)1 776 3000. F: +353 (0)1 776 3300. Italy: State Street Global Advisors Europe Limited, Italy Branch (“State Street Global Advisors Italy”) is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. State Street Global Advisors Italy is registered in Italy with company number 11871450968 — REA: 2628603 and VAT number 11871450968, and its office is located at Via Ferrante Aporti, 10 - 20125 Milan, Italy. T: +39 02 32066 100. F: +39 02 32066 155. Japan: State Street Global Advisors (Japan) Co., Ltd., Toranomon Hills Mori Tower 25F 1-23-1 Toranomon, Minato-ku, Tokyo 105-6325 Japan. T: +81-3-4530-7380. Financial Instruments Business Operator, Kanto Local Financial Bureau (Kinsho #345), Membership: Japan Investment Advisers Association, The Investment Trust Association, Japan,
Japan Securities Dealers’ Association. Netherlands: State Street Global Advisors Netherlands, Apollo Building 7th floor, Herikerbergweg 29, 1101 CN Amsterdam, Netherlands. T: +31 20 7181 000. State Street Global Advisors Netherlands is a branch office of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. Singapore: State Street Global Advisors Singapore Limited, 168, Robinson Road, #33-01 Capital Tower, Singapore 068912 (Company Reg. No: 200002719D, regulated by the Monetary Authority of Singapore). T: +65 6826-7555. F: +65 6826-7501. Switzerland: State Street Global Advisors AG, Beethovenstr. 19, CH-8027 Zurich. Registered with the Register of Commerce Zurich CHE-105.078.458. T: +41 (0)44 245 70 00. F: +41 (0)44 245 70 16. United Kingdom: State Street Global Advisors Limited. Authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No. 2509928. VAT No. 5776591 81. Registered office: 20 Churchill Place, Canary Wharf, London, E14 5HJ. T: 020 3395 6000. F: 020 3395 6350. United States: State Street Global Advisors, 1 Iron Street, Boston, MA 02210-1641. T: +1 617 786 3000.
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The views expressed in this material are the views of SSGA Asset Stewardship Team through the period ended March 23, 2023 and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.
Investing involves risk including the risk of loss of principal.
The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA’s express written consent.
All information is from SSGA unless otherwise noted and has been obtained from sources believed to be reliable, but its accuracy is not guaranteed.
There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.
The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor.
The returns on a portfolio of securities which exclude companies that do not meet the portfolio’s specified ESG criteria may trail the returns on a portfolio of securities which include such companies. A portfolio’s ESG criteria may result in the portfolio investing in industry sectors or securities which underperform the market as a whole.
This communication is directed at professional clients (this includes eligible counterparties as defined by the appropriate EU regulator who are deemed both knowledgeable and experienced in matters relating to investments. The products and services to which this communication relates are only available to such persons and persons of any other description (including retail clients) should not rely on this communication.
The trademarks and service marks referenced herein are the property of their respective owners. Third party data providers make no warranties or representations of any kind relating to the accuracy, completeness or timeliness of the data and have no liability for damages of any kind relating to the use of such data.
Responsible-Factor (R Factor) scoring is designed by State Street to reflect certain ESG characteristics and does not represent investment
performance. Results generated out of the scoring model is based on sustainability and corporate governance dimensions of a scored entity.
The information contained in this communication is not a research recommendation or ‘investment research’ and is classified as a ‘Marketing Communication’ in accordance with the Markets in Financial Instruments Directive (2014/65/EU) or applicable Swiss regulation. This means that this marketing communication (a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research (b) is not subject to any prohibition on dealing ahead of the dissemination of investment research.
© 2023 State Street Corporation.
All Rights Reserved.
ID1482720-3479897.3.1.GBL.RTL 0323 Exp. Date: 03/31/2024
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March 2023
Australia and New Zealand
Proxy Voting and Engagement Guidelines
State Street Global Advisors’ Proxy Voting and Engagement Guidelinesi for Australia and New Zealand outline our approach to voting and engaging with companies listed on stock exchanges in Australia and New Zealand. These Guidelines complement and should be read in conjunction with State Street Global Advisors’ Global Proxy Voting and Engagement Principles, which outline our overall approach to voting and engaging with companies, and State Street Global Advisors’ Conflicts Mitigation Guidelines, which provide information about managing the conflicts of interests that may arise through State Street Global Advisors’ proxy voting and engagement activities.
i |
These Proxy Voting and Engagement Guidelines (the “Guidelines”) are also applicable to SSGA Funds Management, Inc., State Street Global Advisors Trust Company, and other advisory affiliates of State Street Corporation. Additionally, State Street Global Advisors maintains Proxy Voting and Engagement Guidelines for select markets, including: Australia, continental Europe, Japan, New Zealand, North America (Canada and the US), the UK and Ireland, and emerging markets. International markets not covered by our market-specific guidelines are reviewed and voted in a manner that is consistent with the Global Proxy Voting and Engagement Principles; however, State Street Global Advisors also endeavors to show sensitivity to local market practices when voting in these various markets. |
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State Street Global Advisors’ Proxy Voting and Engagement Guidelines for Australia and New Zealand address our market-specific approaches to topics including directors and boards, accounting and audit-related issues, capital structure, reorganization and mergers, remuneration, and other governance-related issues. | ||||
When voting and engaging with companies in global markets, we consider market-specific nuances in the manner that we believe will most likely protect and promote the long-term economic value of client investments. We expect companies to observe the relevant laws and regulations of their respective markets as well as country-specific best practice guidelines and corporate governance codes. We may hold companies in some markets to our global standards when we feel that a country’s regulatory requirements do not address some of the key philosophical principles that we believe are fundamental to our global voting principles. | ||||
In our analysis and research into corporate governance issues in Australia and New Zealand, we expect all companies at a minimum to comply with the ASX Corporate Governance Principles or the NZX Corporate Governance Code, based on their locations. Consistent with the ‘comply or explain’ expectations established by the Principles and the Code, we encourage companies to proactively disclose their level of compliance with the Principles or the Code. In instances of non-compliance, and when companies cannot explain the nuances of their governance structure effectively, either publicly or through engagement, we may vote against the independent board leader. | ||||
State Street Global Advisors’ Proxy Voting and Engagement Philosophy | In our view, corporate governance and sustainability issues are an integral part of the investment process. The Asset Stewardship Team consists of investment professionals with expertise in corporate governance, remuneration, accounting, and environmental and social issues. We have established robust corporate governance principles and practices that are backed with extensive analytical expertise in order to understand the complexities of the corporate governance landscape. We engage with companies to provide insight on the principles and practices that drive our voting decisions. We also conduct proactive engagement to address significant shareholder concerns and issues in a manner consistent with maximizing shareholder value. | |||
The team works alongside members of State Street Global Advisors’ Active Fundamental and Asia-Pacific (“APAC”) investment teams, collaborating on issuer engagements and providing input on company-specific fundamentals. |
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Directors and Boards | Principally, a board acts on behalf of shareholders by protecting their interests and preserving their rights. In order to carry out their primary responsibilities, directors have to undertake activities that range from setting strategy and providing guidance on strategic matters, overseeing executive management, to selecting the CEO and other senior executives, creating a succession plan for the board and management, and providing effective risk oversight, including of risks related to sustainability issues. Further, we believe good corporate governance necessitates the existence of effective internal controls and risk management systems, which should be governed by the board. | |||
State Street Global Advisors believes that a well-constituted board of directors with a good balance of skills, expertise, and independence provides the foundations for a well-governed company. We view board quality as a measure of director independence, director succession planning, board diversity, evaluations and refreshment, and company governance practices. We vote for the (re-)election of directors on a case-by-case basis after considering various factors including board quality, general market practice, and availability of information on director skills and expertise. | ||||
In our analysis of boards, we consider whether board members have adequate skills to provide effective oversight of corporate strategy, operations, and risks, including environmental and social 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 may also consider board performance and directors who appear to be remiss in the performance of their oversight responsibilities when analyzing their suitability for reappointment (e.g. fraud, criminal wrongdoing and breach of fiduciary responsibilities). | ||||
Board Independence | In principle, we believe independent directors are crucial to robust corporate governance and help management establish sound corporate governance policies and practices. We believe a sufficiently independent board will most effectively monitor management and perform oversight functions necessary to protect shareholder interests. | |||
We expect boards of ASX 300 and New Zealand listed companies to be comprised of at least a majority of independent directors. At all other Australian listed companies, we expect boards to be comprised of at least one-third independent directors. | ||||
Our broad criteria for director independence in Australia and New Zealand include factors such as: | ||||
• Participation in related-party transactions and other business relations with the company | ||||
• Employment history with company |
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• Relations with controlling shareholders | ||||
• Family ties with any of the company’s advisers, directors, or senior employees | ||||
Separation Chair/CEO | While we are generally supportive of having the roles of chairman and CEO separated in the Australian and New Zealand markets, we assess the division of responsibilities between chairman and CEO on a case-by-case basis, giving consideration to factors such as company-specific circumstances, overall level of independence on the board and general corporate governance standards in the company. Similarly, we will monitor for circumstances in which a combined chairman/CEO is appointed or where a former CEO becomes chairman. | |||
Director Time Commitments | When voting on the election or re-election of a director, we also consider the number of outside board directorships that a non-executive and an executive may undertake. Thus, State Street Global Advisors may take voting action against a director who exceeds the number of board mandates listed below: | |||
• Named Executive Officers (NEOs) of a public company who sit on more than two public company boards | ||||
• Non-executive board chairs or lead independent directors who sit on more than three public company boards | ||||
• Director nominees who sit on more than four public company boards | ||||
For non-executive board chairs/lead independent directors and director nominees who hold excessive commitments, as defined above, we may consider waiving our policy and vote in support of a director if a company discloses its director commitment policy in a publicly available manner (e.g., corporate governance guidelines, proxy statement, company website). This policy or associated disclosure must include: | ||||
• A numerical limit on public company board seats a director can serve on | ||||
— This limit cannot exceed our policy by more than one seat | ||||
• Consideration of public company board leadership positions (e.g., Committee Chair) | ||||
• Affirmation that all directors are currently compliant with the company policy | ||||
• Description of an annual policy review process undertaken by the Nominating Committee to evaluate outside director time commitments | ||||
If a director is imminently leaving a board and this departure is disclosed in a written, time-bound and publicly-available manner, we may consider waiving our withhold vote when evaluating the director for excessive time commitments. |
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Service on a mutual fund board, the board of a UK investment trust or a Special Purpose Acquisition Company (SPAC) board is not considered when evaluating directors for excessive commitments. However, we do expect these roles to be considered by nominating committees when evaluating director time commitments. | ||||
Director Attendance at Board Meetings | We also consider attendance at board meetings and may withhold votes from directors who attend less than 75 percent of board meetings without appropriate explanation or providing reason for their failure to meet the attendance threshold. In addition, we monitor other factors that may influence the independence of a non-executive director, such as performance-related pay, cross-directorships, significant shareholdings, and tenure. We support the annual election of directors and encourage Australian and New Zealand companies to adopt this practice. | |||
Board Committees | We believe companies should have committees for audit, remuneration, and nomination oversight. The audit committee is responsible for monitoring the integrity of the financial statements of the company, appointing external auditors, monitoring their qualifications and independence, and their effectiveness and resource levels. ASX Corporate Governance Principles requires listed companies to have an audit committee of at least three members all of whom are non-executive directors and a majority of whom are independent directors. It also requires that the committee be chaired by an independent director who is not the chair of the board. We hold Australian and New Zealand companies to our global standards for developed financial markets by requiring that all members of the audit committee be independent directors. | |||
The nomination committee is responsible for evaluating and reviewing the balance of skills, knowledge, and experience of the board. It also ensures that adequate succession plans are in place for directors and the CEO. We may vote against the re-election of members of the nomination committee if the board has failed to address concerns over board structure or succession. | ||||
Board Gender Diversity | We expect boards of all listed companies to have at least one female board member and the boards of ASX 300 companies to be composed of at least 30 percent women directors. 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. Additionally, 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. | |||
We may waive this voting guideline if a company engages with State Street Global Advisors and provides a specific, timebound plan for either reaching the 30-percent threshold (ASX 300) or for adding a woman director (non-ASX 300). |
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Board Responsiveness to High Dissent Against Pay Proposals | Executive pay is another important aspect of corporate governance. We believe that executive pay should be determined by the board of directors. We expect companies to have in place remuneration committees to provide independent oversight over executive pay. ASX Corporate Governance Principles require listed companies to have a remuneration committee of at least three members all of whom are non-executive directors and a majority of whom are independent directors. Similarly, the NZX Corporate Governance Code recommends that at least a majority of remuneration committee members be independent. | |||
Since Australia has a non-binding vote on pay with a two-strike rule requiring a board spill vote in the event of a second strike, we believe that the vote provides investors a mechanism to address concerns they may have on the quality of oversight provided by the board on remuneration issues. Accordingly, our voting guidelines accommodate local market practice. | ||||
We believe poorly structured executive compensation plans pose increasing reputational risk to companies. Ongoing high level of dissent against a company’s compensation proposals may indicate that the company is not receptive to investor concerns. If the level of dissent against a company’s remuneration report and/or remuneration policy is consistently high, and we have determined that a vote against a pay-related proposal is warranted in the third consecutive year, we may vote against the Chair of the remuneration committee. | ||||
Climate-related Disclosure |
State Street Global Advisors finds that the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD) provide the most effective framework for disclosure of climate-related risks and opportunities.
As such, we may take voting action against companies in the ASX 200 that fail to provide sufficient disclosure regarding climate-related risks and opportunities related to that company, or board oversight of climate related risks and opportunities, in accordance with the TCFD framework. | |||
Indemnification and Limitations on Liability | Generally, State Street Global Advisors supports proposals to limit directors’ liability and/or expand indemnification and liability protection up to the limit provided by law, if he or she has not acted in bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of his or her office. |
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Shareholder Rights
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Virtual/Hybrid Shareholder Meetings |
As a result of the COVID-19 pandemic, companies are increasingly conducting their shareholder meetings in a virtual or hybrid format. While we are encouraged by the success of virtual and hybrid shareholder meetings, companies and shareholders must remain vigilant in continuing to improve their virtual shareholder meeting practices.
Recognizing the success of virtual and hybrid shareholder meetings and a shifting regulatory environment, we will 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 of any of the criteria above, we may vote against the Chair of the nominating committee. | ||||
Accounting and Audit- Related Issues | Companies should have robust internal audit and internal control systems designed for effective management of any potential and emerging risks to company operations and strategy. The responsibility of setting out an internal audit function lies with the audit committee, which should have independent non-executive directors designated as members. | |||
Appointment of External Auditors | State Street Global Advisors believes that a company’s auditor is an essential feature of an effective and transparent system of external supervision. Shareholders should be given the opportunity to vote on their appointment or to re-appoint at the annual meeting. When appointing external auditors and approving audit fees, we will take into consideration the level of detail in company disclosures. We will generally not support resolutions if adequate breakdown is not provided and if non-audit fees are more than 50 percent of audit fees. In addition, we may vote against members of the audit committee if we have concerns with audit-related issues or if the level of non-audit fees to audit fees is significant. In certain circumstances, we may consider auditor tenure when evaluating the audit process. |
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Approval of Financial Statements | We believe the disclosure and availability of reliable financial statements in a timely manner is imperative for the investment process. We expect external auditors to provide assurance of a company’s financial condition. Hence, we may vote against the approval of financial statements if i) they have not been disclosed or audited; ii) the auditor opinion is qualified/adverse, or the auditor has issued a disclaimer of opinion; or iii) the auditor opinion is not disclosed. | |||
Capital Structure, Reorganization, and Mergers
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Share Issuances | The ability to raise capital is critical for companies to carry out strategy, to grow, and to achieve returns above their cost of capital. The approval of capital raising activities is fundamental to shareholders’ ability to monitor the returns and to ensure capital is deployed efficiently. State Street Global Advisors supports capital increases that have sound business reasons and are not excessive relative to a company’s existing capital base. | |||
Pre-emption rights are a fundamental right for shareholders to protect their investment in a company. Where companies seek to issue new shares without pre-emption rights, we may vote against if such authorities are greater than 20 percent of the issued share capital. We may also vote against resolutions seeking authority to issue capital with pre-emption rights if the aggregate amount allowed seems excessive and is not justified by the board. Generally, we are against capital issuance proposals greater than 100 percent of the issued share capital when the proceeds are not intended for specific purpose. | ||||
Share Repurchase Programs | We generally support proposals to repurchase shares, unless the issuer does not clearly state the business purpose for the program, a definitive number of shares to be repurchased, and the timeframe for the repurchase. We may vote against share repurchase requests that allow share repurchases during a takeover period. | |||
Dividends | We generally support dividend payouts that constitute 30 percent or more of net income. We may vote against a dividend payout if the dividend payout ratio has been consistently below 30 percent without adequate explanation. We may also vote against if the payout is excessive given the company’s financial position. Particular attention will be warranted when the payment may damage the company’s long-term financial health. |
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Mergers and Acquisitions | Mergers or reorganization of the company structure often involve proposals relating to reincorporation, restructurings, liquidations, and other major changes to the corporation. Proposals that are in the best interests of shareholders, demonstrated by enhancing share value or improving the effectiveness of the company’s operations, will be supported. In general, provisions that are not viewed as financially sound or are thought to be destructive to shareholders’ rights are not supported. We will generally support transactions that maximize shareholder value. Some of the considerations include: | |||
• Offer premium | ||||
• Strategic rationale | ||||
• Board oversight of the process for the recommended transaction, including, director and/or management conflicts of interest | ||||
• Offers made at a premium and where there are no other higher bidders | ||||
• Offers in which the secondary market price is substantially lower than the net asset value | ||||
We may vote against a transaction considering the following: | ||||
• Offers with potentially damaging consequences for minority shareholders because of illiquid stock | ||||
• Offers where we believe there is a reasonable prospect for an enhanced bid or other bidders | ||||
• The current market price of the security exceeds the bid price at the time of voting | ||||
Anti-Takeover Measures | We oppose anti-takeover defenses, such as authorities for the board to issue warrants convertible into shares to existing shareholders during a hostile takeover. |
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Remuneration
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Executive Pay | There is a simple underlying philosophy that guides State Street Global Advisors’ analysis of executive pay; there should be a direct relationship between remuneration and company performance over the long term. Shareholders should have the opportunity to assess whether pay structures and levels are aligned with business performance. When assessing remuneration reports, we consider various factors, such as adequate disclosure of different remuneration elements, absolute and relative pay levels, peer selection and benchmarking, the mix of long-term and short-term incentives, alignment of pay structures with shareholder interests as well as with corporate strategy and performance. We may oppose remuneration reports in which there seems to be a misalignment between pay and shareholders’ interests and where incentive policies and schemes have a re-test option or feature. We may also vote against the re-election of members of the remuneration committee if we have serious concerns about remuneration practices and if the company has not been responsive to shareholder pressure to review its approach. | |||
Equity Incentive Plans | We may not support proposals on equity-based incentive plans where insufficient information is provided on matters, such as grant limits, performance metrics, performance, and vesting periods and overall dilution. Generally, we do not support options under such plans being issued at a discount to market price nor plans that allow for re-testing of performance metrics. | |||
Non-Executive Director Pay | Authorities that seek shareholder approval for non-executive directors’ fees generally are not controversial. We generally support resolutions regarding directors’ fees unless disclosure is poor and we are unable to determine whether the fees are excessive relative to fees paid by other comparable companies. We will evaluate any non-cash or performance-related pay to non-executive directors on a company-by-company basis. | |||
Risk Management and Oversight | State Street Global Advisors believes that risk management is a key function of the board, which is responsible for setting the overall risk appetite of a company and for providing oversight on the risk management process established by senior executives at a company. We allow boards to have discretion over the ways in which they provide oversight in this area. However, we expect companies to disclose how the board provides oversight on its risk management system and risk identification. Boards should also review existing and emerging risks that evolve in tandem with the political and economic landscape or as companies diversify or expand their operations into new areas. |
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As responsible stewards, we believe in the importance of effective risk management and oversight of issues that are material to a company. To effectively assess the risk of our clients’ portfolios and the broader market, we expect our portfolio companies to manage risks and opportunities that are material and industry-specific and that have a demonstrated link to long-term value creation, and to provide high-quality disclosure of this process to shareholders. | ||||
Consistent with this perspective, we may seek to engage with our portfolio companies to better understand how their boards are overseeing risks and opportunities the company has deemed to be material to its business or operations. If we believe a company has failed to implement and communicate effective oversight of these risks, we may consider voting against the directors responsible. | ||||
Environmental and Social Issues | As a fiduciary, State Street Global Advisors takes a comprehensive approach to engaging with our portfolio companies about material environmental and social factors. Our Asset Stewardship program prioritization process allows us to proactively identify companies for engagement and voting in order to mitigate sustainability risks in our portfolio. Through engagement, we aim to build long-term relationships with the issuers in which we invest on behalf of our clients and to address a broad range of topics relating to the promotion of long-term shareholder value creation. When voting, we fundamentally consider whether the adoption of a shareholder proposal addressing an environmental or social topic material to the company would promote long-term shareholder value in the context of the company’s existing practices and disclosures as well as existing market practice. | |||
For more information on our approach to environmental and social issues, please see our Global Proxy Voting and Engagement Guidelines for Environmental and Social Factors, available at ssga.com/about-us/asset-stewardship.html. | ||||
About State Street Global Advisors | For four decades, State Street Global Advisors has served the world’s governments, institutions and financial advisors. With a rigorous, risk-aware approach built on research, analysis and market-tested experience, we build from a breadth of index and active strategies to create cost-effective solutions. And, as pioneers in index, ETF, and ESG investing, we are always inventing new ways to invest. As a result, we have become the world’s fourth-largest asset manager* with US $3.48 trillion† under our care. . | |||
* Pensions & Investments Research Center, as of December 31, 2021. | ||||
† This figure is presented as of December 31, 2022 and includes approximately $58.60 billion USD of assets with respect to SPDR products for which State Street Global Advisors Funds Distributors, LLC (SSGA FD) acts solely as the marketing agent. SSGA FD and State Street Global Advisors are affiliated. Please note all AUM is unaudited. |
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ssga.com
Marketing communication
State Street Global Advisors Worldwide Entities
Abu Dhabi: State Street Global Advisors Limited, ADGM branch is regulated by the Financial Services Regulatory Authority (FSRA). This document is intended for Professional Clients or Market Counterparties only as defined by the FSRA and no other person should act upon it. State Street Global Advisors Limited, ADGM Branch, Al Khatem Tower, Suite 42801, Level 28, ADGM Square, Al Maryah Island, P.O Box 76404, Abu Dhabi, United Arab Emirates. Regulated by the ADGM Financial Services Regulatory Authority. T: +971 2 245 9000. Australia: State Street Global Advisors, Australia, Limited (ABN 42 003 914 225) is the holder of an Australian Financial Services License (AFSL Number 238276). Registered office: Level 14, 420 George Street, Sydney, NSW 2000, Australia. T: +612 9240-7600. F: +612 9240-7611. Belgium: State Street Global Advisors Belgium, Chaussée de La Hulpe 185, 1170 Brussels, Belgium. T: +32 2 663 2036. State Street Global Advisors Belgium is a branch office of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and
regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. Canada: State Street Global Advisors, Ltd., 1981 McGill College Avenue, Suite 500, Montreal, Qc, H3A 3A8, T: +514 282 2400 and 30 Adelaide Street East Suite 800, Toronto, Ontario M5C 3G6. T: +647 775 5900. France: State Street Global Advisors Europe Limited, France Branch (“State Street Global Advisors France”) is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. State Street Global Advisors France is registered in France with company number RCS Nanterre 899 183 289, and its office is located at Coeur Défense —Tour A —La Défense 4, 33e étage, 100, Esplanade du Général de Gaulle, 92 931 Paris La Défense Cedex, France. T: +33 1 44 45 40 00. F: +33 1 44 45 41 92. Germany: State Street Global Advisors Europe Limited, Branch in Germany, Brienner Strasse 59, D-80333 Munich, Germany (“State Street Global Advisors Germany”). T: +49 (0)89 55878 400. State Street Global Advisors Germany is a branch of State Street Global Advisors Europe Limited, registered in
Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. Hong Kong: State Street Global Advisors Asia Limited, 68/F, Two International Finance Centre, 8 Finance Street, Central, Hong Kong. T: +852 2103-0288. F: +852 2103-0200. Ireland: State Street Global Advisors Europe Limited is regulated by the Central Bank of Ireland. Registered office address 78 Sir John Rogerson’s Quay, Dublin 2. Registered Number: 49934. T: +353 (0)1 776 3000. F: +353 (0)1 776 3300. Italy: State Street Global Advisors Europe Limited, Italy Branch (“State Street Global Advisors Italy”) is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. State Street Global Advisors Italy is registered in Italy with company number 11871450968 —REA: 2628603 and VAT number 11871450968, and its office is located at Via Ferrante Aporti, 10 - 20125 Milan, Italy. T: +39 02 32066 100. F: +39 02 32066 155. Japan: State Street Global Advisors (Japan) Co., Ltd., Toranomon Hills Mori Tower 25F 1-23-1 Toranomon, Minato-ku, Tokyo 105-6325
Japan. T: +81-3-4530-7380. Financial Instruments Business Operator, Kanto Local Financial Bureau (Kinsho #345), Membership: Japan Investment Advisers Association, The Investment Trust Association, Japan, Japan Securities Dealers’ Association. Netherlands: State Street Global Advisors Netherlands, Apollo Building 7th floor, Herikerbergweg 29, 1101 CN Amsterdam, Netherlands. T: +31 20 7181 000. State Street Global Advisors Netherlands is a branch office of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. Singapore: State Street Global Advisors Singapore Limited, 168, Robinson Road, #33-01 Capital Tower, Singapore 068912 (Company Reg. No: 200002719D, regulated by the Monetary Authority of Singapore). T: +65 6826-7555. F: +65 6826-7501. Switzerland: State Street Global Advisors AG, Beethovenstr. 19, CH-8027 Zurich. Registered with the Register of Commerce Zurich CHE-105.078.458. T: +41 (0)44 245 70 00. F: +41 (0)44 245 70 16. United Kingdom: State Street Global Advisors Limited. Authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No.
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2509928. VAT No. 5776591 81. Registered office: 20 Churchill Place, Canary Wharf, London, E14 5HJ. T: 020 3395 6000. F: 020 3395 6350. United States: State Street Global Advisors, 1 Iron Street, Boston, MA 02210-1641. T: +1 617 786 3000.
The views expressed in this material are the views of SSGA Asset Stewardship Team through the period ended March 23, 2023 and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.
Investing involves risk including the risk of loss of principal.
The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA’s express written consent.
All information is from SSGA
unless otherwise noted and has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.
The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor.
The returns on a portfolio of securities which exclude companies that do not meet the portfolio’s specified ESG criteria may trail the returns on a portfolio of securities which include such companies. A portfolio’s ESG criteria may result in the portfolio investing in industry sectors or securities
which underperform the market as a whole.
This communication is directed at professional clients (this includes eligible counterparties as defined by the appropriate EU regulator who are deemed both knowledgeable and experienced in matters relating to investments. The products and services to which this communication relates are only available to such persons and persons of any other description (including retail clients) should not rely on this communication.
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Responsible-Factor (R Factor) scoring is designed by State Street to reflect certain ESG characteristics and does not
represent investment performance. Results generated out of the scoring model is based on sustainability and corporate governance dimensions of a scored entity.
The information contained in this communication is not a research recommendation or ‘investment research’ and is classified as a ‘Marketing Communication’ in accordance with the Markets in Financial Instruments Directive (2014/65/EU) or applicable Swiss regulation. This means that this marketing communication (a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research (b) is not subject to any prohibition on dealing ahead of the dissemination of investment research.
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Exp. Date: 03/31/2024
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March 2023
Continental Europe
Proxy Voting and Engagement Guidelines
State Street Global Advisors’ Proxy Voting and Engagement Guidelinesi for Continental Europe outline our approach to voting and engaging with companies listed on stock exchanges in European markets, excluding the United Kingdom and Ireland. These Guidelines complement and should be read in conjunction with State Street Global Advisors’ Global Proxy Voting and Engagement Principles, which outline our overall approach to voting and engaging with companies, and State Street Global Advisors’ Conflicts Mitigation Guidelines, which provide information about managing the conflicts of interests that may arise through State Street Global Advisors’ proxy voting and engagement activities.
i |
These Proxy Voting and Engagement Guidelines (the “Guidelines”) are also applicable to SSGA Funds Management, Inc., State Street Global Advisors Trust Company, and other advisory affiliates of State Street Corporation. Additionally, State Street Global Advisors maintains Proxy Voting and Engagement Guidelines for select markets, including: Australia, continental Europe, Japan, New Zealand, North America (Canada and the US), the UK and Ireland, and emerging markets. International markets not covered by our market-specific guidelines are reviewed and voted in a manner that is consistent with the Global Proxy Voting and Engagement Principles; however, State Street Global Advisors also endeavors to show sensitivity to local market practices when voting in these various markets. |
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State Street Global Advisors’ Proxy Voting and Engagement Guidelines for Continental Europe address our market-specific approaches to topics including directors and boards, accounting and audit-related issues, capital structure, reorganization and mergers, remuneration, and other governance-related issues. | ||||
When voting and engaging with companies in European markets, we consider market-specific nuances in the manner that we believe will most likely protect and promote the long-term economic value of client investments. We expect companies to observe the relevant laws and regulations of their respective markets, as well as country-specific best practice guidelines and corporate governance codes. We may hold companies in some markets to our global standards when we feel that a country’s regulatory requirements do not address some of the key philosophical principles that we believe are fundamental to our global voting principles. | ||||
In our analysis and research into corporate governance issues at European companies, we expect all companies at a minimum to comply with guidance issued by the European Commission and country-specific governance codes. Consistent with the “comply-or-explain” expectations commonly established by guidance and codes, we encourage companies to proactively disclose their level of compliance with applicable provisions and requirements. In cases of non-compliance, and when companies cannot explain the nuances of their governance structures effectively, either publicly or through engagement, we may vote against the independent board leader.
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State Street Global Advisors’ Proxy Voting and Engagement Philosophy |
In our view, corporate governance and sustainability issues are an integral part of the investment process. The Asset Stewardship Team consists of investment professionals with expertise in corporate governance, remuneration, accounting, and environmental and social issues. We have established robust corporate governance principles and practices that are backed with extensive analytical expertise in order to understand the complexities of the corporate governance landscape. We engage with companies to provide insight on the principles and practices that drive our voting decisions. We also conduct proactive engagements to address significant shareholder concerns and issues in a manner consistent with maximizing shareholder value.
The team works alongside members of State Street Global Advisors’ Active Fundamental and Europe, Middle East and Africa (“EMEA”) investment teams, collaborating on issuer engagements and providing input on company-specific fundamentals.
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Directors and Boards | Principally, a board acts on behalf of shareholders by protecting their interests and preserving their rights. In order to carry out their primary responsibilities, directors have to undertake activities that range from setting strategy and providing guidance on strategic matters, overseeing executive management, to selecting the CEO and other senior executives, creating a succession plan for the board and management, and providing effective risk oversight, including of risks related to sustainability issues. Further, we believe good corporate governance necessitates the existence of effective internal controls and risk management systems, which should be governed by the board. |
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We believe that a well-constituted board of directors with a balance of skills, expertise and independence, provides the foundations for a well-governed company. We view board quality as a measure of director independence, director succession planning, board diversity, evaluations and refreshment, and company governance practices. We vote for the (re-)election of directors on a case-by-case basis after considering various factors, including board quality, general market practice, and availability of information on director skills and expertise.
In our analysis of boards, we consider whether board members have adequate skills to provide effective oversight of corporate strategy, operations, and risks, including environmental and social 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 may also consider factors such as board performance and directors who appear to be remiss in the performance of their oversight responsibilities (e.g. fraud, criminal wrongdoing and/or breach of fiduciary responsibilities). | ||||
Board Independence |
In principle, we believe independent directors are crucial to robust corporate governance and help management establish sound corporate governance policies and practices. We believe a sufficiently independent board will most effectively monitor management and perform oversight functions necessary to protect shareholder interests.
Our broad criteria for director independence in European companies include factors such as: | |||
• Participation in related-party transactions and other business relations with the company | ||||
• Employment history with the company | ||||
• Relations with controlling shareholders | ||||
• Family ties with any of the company’s advisers, directors or senior employees | ||||
• Serving as an employee or government representative | ||||
• Overall average board tenure and individual director tenure at issuers with classified and de-classified boards, respectively, and | ||||
• Company classification of a director as non-independent | ||||
While overall board independence requirements and board structures differ from market to market, we consider voting against directors we deem non-independent if overall board independence is below 33 percent or if overall independence level is below 50 percent after excluding employee representatives and/or directors elected in accordance with local laws who are not elected by shareholders. We may withhold support for a proposal to discharge the board if a company does not meet adequate governance standards or board level independence. |
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Separation Chair/CEO | We also assess the division of responsibilities between chair and CEO on a case-by-case basis, giving consideration to factors such as overall level of independence on the board and general corporate governance standards in the company. However, we may take voting action against the chair or members of the nominating committee at the STOXX Europe 600 companies that have combined the roles of chair and CEO and have not appointed an independent deputy chair or a lead independent director. | |||
Director Time Commitments | When voting on the election or re-election of a director, we also consider the number of outside board directorships a non-executive and an executive may undertake. Thus, State Street Global Advisors may take voting action against a director who exceeds the number of board mandates listed below: | |||
• Named Executive Officers (NEOs) of a public company who sit on more than two public company boards | ||||
• Non-executive board chairs or lead independent directors who sit on more than three public company boards | ||||
• Director nominees who sit on more than four public company boards | ||||
For non-executive board chairs/lead independent directors and director nominees who hold excessive commitments, as defined above, we may consider waiving our policy and vote in support of a director if a company discloses its director commitment policy in a publicly available manner (e.g., corporate governance guidelines, proxy statement, company website). This policy or associated disclosure must include: | ||||
• A numerical limit on public company board seats a director can serve on | ||||
– This limit cannot exceed our policy by more than one seat | ||||
• Consideration of public company board leadership positions (e.g., Committee Chair) | ||||
• Affirmation that all directors are currently compliant with the company policy | ||||
• Description of an annual policy review process undertaken by the Nominating Committee to evaluate outside director time commitments | ||||
If a director is imminently leaving a board and this departure is disclosed in a written, time-bound and publicly-available manner, we may consider waiving our withhold vote when evaluating the director for excessive time commitments. | ||||
Service on a mutual fund board, the board of a UK investment trust or a Special Purpose Acquisition Company (SPAC) board is not considered when evaluating directors for excessive commitments. However, we do expect these roles to be considered by nominating committees when evaluating director time commitments. |
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Director Attendance at Board Meetings |
We also consider attendance at board meetings and may withhold votes from directors who attend less than 75 percent of board meetings without appropriate explanation or providing reason for their failure to meet the attendance threshold. In addition, we monitor other factors that may influence the independence of a non-executive director, such as performance-related pay, cross-directorships and significant shareholdings. Moreover, we may vote against the election of a director whose biographical disclosures are insufficient to assess his or her role on the board and/or independence.
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Board Gender Diversity |
We expect boards of all listed companies to have at least one female board member and the boards of STOXX 600 companies to be composed of at least 30 percent women directors. 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. Additionally, 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.
We may waive this voting guideline if a company engages with State Street Global Advisors and provides a specific, timebound plan for either reaching the 30-percent threshold (STOXX 600) or for adding a woman director (non-STOXX 600).
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Length of Board Terms |
Although we generally are in favour of the annual election of directors, we recognise that director terms vary considerably in different European markets. We may vote against article/bylaw changes that seek to extend director terms. In addition, we may vote against directors in certain markets if their terms extend beyond four years.
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Board Committees |
We believe companies should have relevant board level committees for audit, remuneration and nomination oversight. The audit committee is responsible for monitoring the integrity of the financial statements of the company, appointing external auditors, monitoring their qualifications and independence, and assessing effectiveness and resource levels. Similarly, executive pay is an important aspect of corporate governance, and it should be determined by the board of directors. We expect companies to have remuneration committees to provide independent oversight of executive pay. We may vote against nominees who are executive members of audit or remuneration committees.
In certain European markets, it is not uncommon for the election of directors to be presented in a single slate. In these cases, where executives serve on the audit or the remuneration committees, we may vote against the entire slate.
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Board Responsiveness to High Dissent Against Pay Proposals | Poorly-structured executive remuneration plans pose increasing reputational risk to companies. Ongoing high levels of dissent against a company’s remuneration proposals may indicate that the company is not receptive to investor concerns. If the level of dissent against a company’s remuneration report and/or remuneration policy is consistently high, and we have determined that a vote against a remuneration-related proposal is warranted in the third consecutive year, we may vote against the Chair of the remuneration committee. |
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Climate-related Disclosure |
State Street Global Advisors finds that the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) provide the most effective framework for disclosure of climate-related risks and opportunities.
As such, we may take voting action against companies in the STOXX 600 that fail to provide sufficient disclosure regarding climate-related risks and opportunities related to that company, or board oversight of climate-related risks and opportunities, in accordance with the TCFD framework. | |||
Indemnification and Limitations on Liability |
Generally, we support proposals to limit directors’ liability and/or expand indemnification and liability protection up to the limit provided by law if a director has not acted in bad faith, with gross negligence, or with reckless disregard of the duties involved in the conduct of his or her office.
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Shareholder Rights | ||||
Virtual/Hybrid Shareholder Meetings |
As a result of the COVID-19 pandemic, companies are increasingly conducting their shareholder meetings in a virtual or hybrid format. While we are encouraged by the success of virtual and hybrid shareholder meetings, companies and shareholders must remain vigilant in continuing to improve their virtual shareholder meeting practices.
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Recognizing the success of virtual and hybrid shareholder meetings and a shifting regulatory environment, we will 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 of any of the criteria above, we may vote against the Chair of the nominating committee. | ||||
Accounting and Audit-Related Issues | Companies should have robust internal audit and internal control systems designed for effective management of any potential and emerging risks to company operations and strategy. The responsibility of setting up an internal audit function lies with the audit committee, which should have as members independent non-executive directors. |
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Appointment of External Auditors |
We believe that a company’s auditor is an essential feature of an effective and transparent system of external supervision. Shareholders should be given the opportunity to vote on their appointment or re-appoint them at the annual meeting. When appointing external auditors and approving audit fees, we consider the level of detail in company disclosures; we will generally not support such resolutions if adequate breakdown is not provided and if non-audit fees are more than 50 percent of audit fees. In addition, we may vote against members of the audit committee if we have concerns with audit-related issues or if the level of non-audit fees to audit fees is significant. We may consider auditor tenure when evaluating the audit process in certain circumstances.
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Limit Legal Liability of External Auditors |
We generally oppose limiting the legal liability of audit firms as we believe this could create a negative impact on the quality of the audit function.
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Approval of Financial Statements |
We believe the disclosure and availability of reliable financial statements in a timely manner is imperative for the investment process. We expect external auditors to provide assurance of a company’s financial condition. Hence, we may vote against the approval of financial statements if i) they have not been disclosed or audited; ii) the auditor opinion is qualified/adverse, or the auditor has issued a disclaimer of opinion; or iii) the auditor opinion is not disclosed.
Capital Structure, Reorganization, and Mergers In some European markets, differential voting rights continue to exist. State Street Global Advisors supports the one-share, one-vote policy and favors a share structure where all shares have equal voting rights. We believe pre-emption rights should be introduced for shareholders in order to provide adequate protection from excessive dilution from the issuance of new shares or convertible securities to third parties or a small number of select shareholders. | |||
Unequal Voting Rights | We generally oppose proposals authorizing the creation of new classes of common stock with superior voting rights. We will generally oppose the creation of new classes of preferred stock with unspecified voting, conversion, dividend distribution and other rights. In addition, we will not support capitalization changes that add classes of stock with undefined voting rights or classes that may dilute the voting interests of existing shareholders. We support proposals to abolish voting caps and capitalization changes that eliminate other classes of stock and/or unequal voting rights. | |||
Increase in Authorized Capital | The ability to raise capital is critical for companies to carry out strategy, to grow, and to achieve returns above their cost of capital. The approval of capital raising activities is fundamental to shareholders’ ability to monitor returns and to ensure capital is deployed efficiently. We support capital increases that have sound business reasons and are not excessive relative to a company’s existing capital base. |
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Pre-emption rights are a fundamental right for shareholders to protect their investment in a company. Where companies seek to issue new shares whilst disapplying pre-emption rights, we may vote against if such authorities are greater than 20 percent of the issued share capital. We may also vote against resolutions that seek authority to issue capital with pre-emption rights if the aggregate amount allowed seems excessive and is not justified by the board. Generally, we oppose capital issuance proposals greater than 100 percent of the issued share capital when the proceeds are not intended for a specific purpose. | ||||
Share Repurchase Programs | We typically support proposals to repurchase shares; however, there are exceptions in some cases. We do not support repurchases if the issuer does not clearly state the business purpose for the program, a definitive number of shares to be repurchased, the range of premium/discount to market price at which the company can repurchase shares, and the timeframe for the repurchase. We may vote against share repurchase requests that allow share repurchases during a takeover period. | |||
Dividends | We generally support dividend payouts that constitute 30 percent or more of net income. We may vote against the dividend payouts if the dividend payout ratio has been consistently below 30 percent without adequate explanation or the payout is excessive given the company’s financial position. Particular attention will be paid to cases in which the payment may damage the company’s long-term financial health. | |||
Related-Party Transactions | Some companies in European markets have a controlled ownership structure and complex cross-shareholdings between subsidiaries and parent companies (“related companies”). Such structures may result in the prevalence of related-party transactions between the company and its various stakeholders, such as directors and management, subsidiaries and shareholders. In markets where shareholders are required to approve such transactions, we expect companies to provide details of the transaction, such as the nature, the value and the purpose of such a transaction. We also encourage independent directors to ratify such transactions. Further, we encourage companies to describe the level of independent board oversight and the approval process, including details of any independent valuations provided by financial advisors on related-party transactions. | |||
Mergers and Acquisitions | Mergers or restructurings often involve proposals relating to reincorporation, restructurings, mergers, liquidation and other major changes to the corporation. Proposals will be supported if they are in the best interest of the shareholders, which is demonstrated by enhancing share value or improving the effectiveness of the company’s operations. In general, provisions that are not viewed as financially sound or are thought to be destructive to shareholders’ rights are not supported. |
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We will generally support transactions that maximize shareholder value. Some of the considerations include: | ||||
• Offer premium | ||||
• Strategic rationale | ||||
• Board oversight of the process for the recommended transaction, including director and/or management conflicts of interest | ||||
• Offers made at a premium and where there are no other higher bidders | ||||
• Offers in which the secondary market price is substantially lower than the net asset value | ||||
We may vote against a transaction considering the following: | ||||
• Offers with potentially damaging consequences for minority shareholders because of illiquid stock | ||||
• Offers where we believe there is a reasonable prospect for an enhanced bid or other bidders | ||||
• The current market price of the security exceeds the bid price at the time of voting. | ||||
Anti-Takeover Measures | European markets have diverse regulations concerning the use of share issuances as takeover defenses, with legal restrictions lacking in some markets. We support the one-share, one-vote policy. For example, dual-class capital structures entrench certain shareholders and management, insulating them from possible takeovers. We oppose unlimited share issuance authorizations because they can be used as anti-takeover devices. They have the potential for substantial voting and earnings dilution. We also monitor the duration of time for authorities to issue shares, as well as whether there are restrictions and caps on multiple issuance authorities during the specified time periods. We oppose antitakeover defenses, such as authorities for the board when subject to a hostile takeover to issue warrants convertible into shares to existing shareholders. | |||
Remuneration
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Executive Pay | Despite the differences among the various types of plans and awards, there is a simple underlying philosophy that guides our analysis of executive pay: there should be a direct relationship between remuneration and company performance over the long term. |
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Shareholders should have the opportunity to assess whether pay structures and levels are aligned with business performance. When assessing remuneration reports, we consider factors such as adequate disclosure of remuneration elements, absolute and relative pay levels, peer selection and benchmarking, the mix of long-term and short-term incentives, alignment of pay structures with shareholder interests, corporate strategy and performance. We may oppose remuneration reports where pay seems misaligned with shareholders’ interests. We may also vote against the re-election of members of the remuneration committee if we have serious concerns about remuneration practices and if the company has not been responsive to shareholder pressure to review its approach. | ||||
Equity Incentives Plans | We may not support proposals regarding equity-based incentive plans where insufficient information is provided on matters, including grant limits, performance metrics, performance and vesting periods, and overall dilution. Generally, we do not support options under such plans being issued at a discount to market price or plans that allow for retesting of performance metrics. | |||
Non-Executive Director Pay | In European markets, proposals seeking shareholder approval for non-executive directors’ fees are generally not controversial. We typically support resolutions regarding directors’ fees unless disclosure is poor and we are unable to determine whether the fees are excessive relative to fees paid by comparable companies. We will evaluate any non-cash or performance-related pay to non-executive directors on a company-by-company basis. | |||
Risk Management |
We believe that risk management is a key function of the board, which is responsible for setting the overall risk appetite of a company and for providing oversight on the risk management process established by senior executives at a company. We allow boards to have discretion regarding the ways in which they provide oversight in this area. However, we expect companies to disclose how the board provides oversight on its risk management system and risk identification. Boards should also review existing and emerging risks that evolve in tandem with the political and economic landscape or as companies diversify or expand their operations into new areas.
As responsible stewards, we believe in the importance of effective risk management and oversight of issues that are material to a company. To effectively assess the risk of our clients’ portfolios and the broader market, we expect our portfolio companies to manage risks and opportunities that are material and industry-specific and that have a demonstrated link to long-term value creation, and to provide high-quality disclosure of this process to shareholders.
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Consistent with this perspective, we may seek to engage with our portfolio companies to better understand how their boards are overseeing risks and opportunities the company has deemed to be material to its business or operations. If we believe a company has failed to implement and communicate effective oversight of these risks, we may consider voting against the directors responsible. | ||||
Environmental and Social Issues |
As a fiduciary, State Street Global Advisors takes a comprehensive approach to engaging with our portfolio companies about material environmental and social factors. Our Asset Stewardship program prioritization process allows us to proactively identify companies for engagement and voting in order to mitigate sustainability risks in our portfolio. Through engagement, we aim to build long-term relationships with the issuers in which we invest on behalf of our clients and to address a broad range of topics relating to the promotion of long-term shareholder value creation. When voting, we fundamentally consider whether the adoption of a shareholder proposal addressing an environmental or social topic material to the company would promote long-term shareholder value in the context of the company’s existing practices and disclosures as well as existing market practice.
For more information on our approach to environmental and social issues, please see our Global Proxy Voting and Engagement Guidelines for Environmental and Social Factors, available at ssga.com/about-us/asset-stewardship.html. | |||
About State Street Global Advisors | For four decades, State Street Global Advisors has served the world’s governments, institutions and financial advisors. With a rigorous, risk-aware approach built on research, analysis and market-tested experience, we build from a breadth of index and active strategies to create cost-effective solutions. And, as pioneers in index, ETF, and ESG investing, we are always inventing new ways to invest. As a result, we have become the world’s fourth-largest asset manager* with US $3.48 trillion† under our care. | |||
* Pensions & Investments Research Center, as of December 31, 2021. | ||||
† This figure is presented as of December 31, 2022 and includes approximately $58.60 billion USD of assets with respect to SPDR products for which State Street Global Advisors Funds Distributors, LLC (SSGA FD) acts solely as the marketing agent. SSGA FD and State Street Global Advisors are affiliated. Please note all AUM is unaudited. |
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ssga.com
Marketing communication
State Street Global Advisors Worldwide Entities
Abu Dhabi: State Street Global Advisors Limited, ADGM branch is regulated by the Financial Services Regulatory Authority (FSRA). This document is intended for Professional Clients or Market Counterparties only as defined by the FSRA and no other person should act upon it. State Street Global Advisors Limited, ADGM Branch, Al Khatem Tower, Suite 42801, Level 28, ADGM Square, Al Maryah Island, P.O Box 76404, Abu Dhabi, United Arab Emirates. Regulated by the ADGM Financial Services Regulatory Authority. T: +971 2 245 9000. Australia: State Street Global Advisors, Australia, Limited (ABN 42 003 914 225) is the holder of an Australian Financial Services License (AFSL Number 238276). Registered office: Level 14, 420 George Street, Sydney, NSW 2000, Australia. T: +612 9240-7600. F: +612 9240-7611. Belgium: State Street Global Advisors Belgium, Chaussée de La Hulpe 185, 1170 Brussels, Belgium. T: +32 2 663 2036. State Street Global
Advisors Belgium is a branch office of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s
Quay, Dublin 2. Canada: State Street Global Advisors, Ltd., 1981 McGill College Avenue, Suite 500, Montreal, Qc, H3A 3A8, T: +514 282 2400 and 30 Adelaide Street East Suite 800, Toronto, Ontario M5C 3G6. T: +647 775 5900. France: State Street Global Advisors Europe Limited, France Branch (“State Street Global Advisors France”) is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of
Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2.
State Street Global Advisors France is registered in France with company number RCS Nanterre 899 183 289, and its office is located at Coeur Défense — Tour A — La Défense 4, 33e étage,100, Esplanade du Général de Gaulle, 92 931 Paris La Défense Cedex, France. T: +33 1 44 45 40 00. F: +33 1 44 45 41 92.
Germany: State Street Global Advisors Europe Limited, Branch in Germany, Brienner Strasse 59, D-80333 Munich, Germany (“State Street Global Advisors Germany”). T: +49 (0)89 55878 400. State Street Global Advisors Germany is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of
Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2.
Hong Kong: State Street Global Advisors Asia Limited,
68/F, Two International Finance Centre, 8 Finance Street, Central, Hong Kong. T: +852 2103-0288. F: +852 2103-0200. Ireland: State Street Global Advisors Europe Limited is regulated by the Central Bank of Ireland.
Registered office address 78 Sir John Rogerson’s Quay, Dublin 2. Registered Number: 49934. T: +353 (0)1 776 3000. F: +353 (0)1 776 3300. Italy: State Street Global Advisors Europe Limited, Italy Branch (“State Street Global Advisors Italy”) is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. State Street Global Advisors Italy is registered in Italy with company number 11871450968 —REA: 2628603 and VAT number 11871450968, and its office is located at Via Ferrante Aporti, 10 - 20125 Milan, Italy. T: +39 02 32066 100. F: +39 02 32066 155. Japan: State Street Global Advisors (Japan) Co., Ltd., Toranomon Hills Mori Tower 25F 1-23-1 Toranomon, Minato-ku, Tokyo 105-6325 Japan. T: +81-3-4530-7380. Financial Instruments Business Operator, Kanto Local Financial Bureau (Kinsho #345), Membership: Japan Investment Advisers Association, The Investment Trust Association, Japan, Japan Securities
Dealers’ Association. Netherlands: State Street
Global Advisors Netherlands,
Apollo Building 7th floor, Herikerbergweg
29, 1101 CN Amsterdam, Netherlands. T: +31 20 7181 000. State Street Global
Advisors Netherlands is a branch office of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of
Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. Singapore: State Street Global Advisors Singapore Limited, 168, Robinson Road, #33-01 Capital Tower, Singapore 068912 (Company Reg. No: 200002719D, regulated by the Monetary Authority of Singapore). T: +65 6826-7555. F: +65 6826-7501. Switzerland: State Street Global Advisors AG, Beethovenstr. 19, CH-8027 Zurich. Registered with the Register of Commerce Zurich CHE-105.078.458. T: +41 (0)44 245 70 00. F: +41 (0)44 245 70 16. United Kingdom: State Street Global Advisors Limited. Authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No. 2509928. VAT No. 5776591 81. Registered office: 20 Churchill Place, Canary Wharf, London, E14 5HJ. T: 020 3395 6000. F: 020 3395 6350. United States: State Street Global Advisors, 1 Iron Street, Boston, MA 02210-1641. T: +1 617 786 3000.
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The views expressed in this material are the views of SSGA Asset Stewardship Team through the period ended March 23, 2023 and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.
Investing involves risk including the risk of loss of principal.
The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA’s express written consent.
All information is from SSGA unless otherwise noted and has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of,
nor liability for, decisions based on such information and it should not be relied on as such.
The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor.
The returns on a portfolio of securities which exclude companies that do not meet the portfolio’s specified ESG criteria may trail the returns on a portfolio of securities which include such companies. A portfolio’s ESG criteria may result in the portfolio investing in industry sectors or securities which underperform the market as a whole.
This communication is directed at professional clients (this includes eligible counterparties as defined by the appropriate EU regulator
who are deemed both knowledgeable and experienced in matters relating to investments. The products and services to which this communication relates are only available to such persons and persons of any other description (including retail clients) should not rely on this communication.
The trademarks and service marks referenced herein are the property of their respective owners. Third party data providers make no warranties or representations of any kind relating to the accuracy, completeness or timeliness of the data and have no liability for damages of any kind relating to the use of such data.
Responsible-Factor (R Factor) scoring is designed by State Street to reflect certain ESG characteristics and does not represent investment performance. Results generated out of the scoring model is based on sustainability and corporate governance dimensions of a scored entity.
The information contained in this communication is not a research recommendation or ‘investment research’ and is classified as a Marketing Communication’ in accordance with the Markets in Financial Instruments Directive (2014/65/EU) or applicable Swiss regulation. This means that this marketing communication (a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research (b) is not subject to any prohibition on dealing ahead of the dissemination of investment research.
© 2023 State Street Corporation.
All Rights Reserved.
ID1482701-3479909.3.1.GBL.RTL 0323 Exp. Date: 03/31/2024
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March 2023
Japan
Proxy Voting and Engagement Guidelines
State Street Global Advisors’ Proxy Voting and Engagement Guidelinesi for Japan outline our approach to voting and engaging with companies listed on stock exchanges in Japan. These Guidelines complement and should be read in conjunction with State Street Global Advisors’ Global Proxy Voting and Engagement Principles, which outline our overall approach to voting and engaging with companies, and State Street Global Advisors’ Conflicts Mitigation Guidelines, which provide information about managing the conflicts of interests that may arise through State Street Global Advisors’ proxy voting and engagement activities.
i |
These Proxy Voting and Engagement Guidelines are also applicable to SSGA Funds Management, Inc.. SSGA Funds Management, Inc.is an SEC-registered investment adviser. SSGA Funds Management, Inc., State Street Global Advisors Trust Company, and other advisory affiliates of State Street make up State Street Global Advisors, the investment management arm of State Street Corporation. |
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State Street Global Advisors’ Proxy Voting and Engagement Guidelines for Japan address our market-specific approaches to topics including directors and boards, accounting and audit-related issues, capital structure, remuneration and mergers, compensation, and other governance-related issues. When voting and engaging with companies in global markets, we consider market-specific nuances in the manner that we believe will most likely protect and promote the long-term economic value of client investments. We expect all companies to observe the relevant laws and regulations of their respective markets, as well as any country-specific best practice guidelines and corporate governance codes. We may hold companies in some markets to our global standards when we feel that a country’s regulatory requirements do not address some of the key philosophical principles that we believe are fundamental to our global voting principles.
With companies in Japan, State Street Global Advisors takes into consideration the unique aspects of Japanese corporate governance structures. We recognize that under Japanese corporate law, companies may choose between three structures of corporate governance: the statutory auditor system, the committee structure and the hybrid structure.
Most Japanese boards predominantly consist of executives and non-independent outsiders affiliated through commercial relationships or cross-shareholdings. Nonetheless, when evaluating companies, State Street Global Advisors expects the boards of Japanese companies to address conflicts of interest and risk management, and to demonstrate an effective process for monitoring management.
Regardless of the corporate governance structure a company adopts, we expect all companies at a minimum to comply with Japan’s Corporate Governance Code (the “Code”). Consistent with the ‘comply or explain’ expectations established by the Code, we encourage companies to proactively disclose their level of compliance with the Code. In instances of non-compliance, and when companies cannot explain the nuances of their governance structure effectively, either publicly or through engagement, we may vote against the board leader.
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State Street Global Advisors’ Proxy Voting and Engagement Philosophy |
In our view, corporate governance and sustainability issues are an integral part of the investment process. The Asset Stewardship Team consists of investment professionals with expertise in corporate governance, remuneration, accounting, and environmental and social issues. We have established robust corporate governance principles and practices that are backed with extensive analytical expertise to understand the complexities of the corporate governance landscape. We engage with companies to provide insight on the principles and practices that drive our voting decisions. We also conduct proactive engagement to address significant shareholder concerns and issues in a manner consistent with maximizing shareholder value.
The team works alongside members of State Street Global Advisors’ Active Fundamental and Asia-Pacific (“APAC”) Investment Teams, collaborating on issuer engagements and providing input on company-specific fundamentals. |
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Directors and Boards | Principally, a board acts on behalf of shareholders by protecting their interests and preserving their rights. In order to carry out their primary responsibilities, directors have to undertake activities that range from setting strategy and providing guidance on strategic matters, overseeing executive management, to selecting the CEO and other senior executives, creating a succession plan for the board and management, and providing effective risk oversight, including of risks related to sustainability issues. Further, we believe good corporate governance necessitates the existence of effective internal controls and risk management systems, which should be governed by the board. | |||
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. We view board quality as a measure of director independence, director succession planning, board diversity, evaluations and refreshment, and company governance practices. We vote for the (re-)election of directors on a case-by-case basis after considering various factors, including board quality, general market practice, and availability of information on director skills and expertise. | ||||
Japanese companies have the option of having a traditional board of directors with statutory auditors, a board with a committee structure, or a hybrid board with a board level audit committee. We will generally support companies that seek shareholder approval to adopt a committee or hybrid board structure. | ||||
Most Japanese issuers prefer the traditional statutory auditor structure. Statutory auditors act in a quasi-compliance role, as they are not involved in strategic decision-making, nor are they part of the formal management decision process. Statutory auditors attend board meetings, but do not have voting rights at the board; however, they have the right to seek an injunction and conduct broad investigations of unlawful behavior in the company’s operations. | ||||
State Street Global Advisors will support the election of statutory auditors unless the outside statutory auditor nominee is regarded as non-independent based on our criteria, the outside statutory auditor has attended less than 75 percent of meetings of the board of directors or the board of statutory auditors during the year under review, or the statutory auditor has been remiss in the performance of their oversight responsibilities (fraud, criminal wrongdoing, and breach of fiduciary responsibilities). | ||||
Board Independence | ||||
In principle, we believe independent directors are crucial to robust corporate governance and help management establish sound corporate governance policies and practices. A sufficiently independent board will most effectively monitor management and perform oversight functions that are necessary to protect shareholder interests. | ||||
We believe that boards of TOPIX 500 companies should have at least three independent directors and be at least one-third independent. Otherwise, we may oppose the board leader who is responsible for the director nomination process. |
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For non-TOPIX 500 companies, we may oppose the board leader if the board does not have at least two independent directors. For companies with a committee structure or a hybrid board structure, we also take into consideration the overall independence level of the committees. | ||||
In determining director independence, we consider the following factors:
• Participation in related-party transactions and other business relations with the company
• Past employment with the company
• Professional services provided to the company
• Family ties with the company
Regardless of board structure, we may oppose the election of a director for the following reasons:
• Failure to attend board meetings
• In instances of egregious actions related to a director’s service on the board
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Board Gender Diversity |
We expect boards of all listed companies to have at least one female board member. If a company does not meet this 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. Additionally, if a company does not meet this 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.
We may waive this voting guideline if a company engages with State Street Global Advisors and provides a specific, timebound plan for adding at least one woman to its board.
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Climate-related Disclosures |
State Street Global Advisors finds that the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD) provide the most effective framework for disclosure of climate-related risks and opportunities.
As such, we take voting action against companies in the TOPIX 100 that fail to provide sufficient disclosure regarding climate-related risks and opportunities related to that company, or board oversight of climate-related risks and opportunities, in accordance with the TCFD framework.
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Indemnification and Limitations on Liability | Generally, State Street Global Advisors supports proposals to limit directors’ and statutory auditors’ liability and/or expand indemnification and liability protection up to the limit provided by law, if he or she has not acted in bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office. We believe limitations and indemnification are necessary to attract and retain qualified directors. |
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Shareholder Rights
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Virtual/Hybrid Shareholder Meetings | As a result of the COVID-19 pandemic, companies are increasingly conducting their shareholder meetings in a virtual or hybrid format. While we are encouraged by the success of virtual and hybrid shareholder meetings, companies and shareholders must remain vigilant in continuing to improve their virtual shareholder meeting practices. | |||
Recognizing the success of virtual and hybrid shareholder meetings and a shifting regulatory environment, we will 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 of any of the criteria above, we may vote against the Chair of the nominating committee.
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Accounting and Audit- Related Issues | State Street Global Advisors believes that a company’s auditor is an essential feature of an effective and transparent system of external supervision. Shareholders should have the opportunity to vote on the appointment of the auditor at the annual meeting. | |||
Ratifying External Auditors | We generally support the appointment of external auditors unless the external auditor is perceived as being non-independent and there are concerns about the accounts presented and the audit procedures followed. | |||
Approval of Financial Statements | We believe the disclosure and availability of reliable financial statements in a timely manner is imperative for the investment process. We expect external auditors to provide assurance of a company’s financial condition. Hence, we may vote against the approval of financial statements if i) they have not been disclosed or audited; ii) the auditor opinion is qualified/adverse, or the auditor has issued a disclaimer of opinion; or iii) the auditor opinion is not disclosed. | |||
Limiting Legal Liability of External Auditors | We generally oppose limiting the legal liability of audit firms as we believe this could create a negative impact on the quality of the audit function. |
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Capital Structure, Reorganization, and Mergers | ||||
Unequal Voting Rights | State Street Global Advisors supports the “one-share, one-vote” policy and favors a share structure where all shares have equal voting rights. We support proposals to abolish voting caps or multiple voting rights and will oppose measures to introduce these types of restrictions on shareholder rights. | |||
We generally oppose proposals authorizing the creation of new classes of common stock with superior voting rights. We will generally oppose new classes of preferred stock with unspecified voting, conversion, dividend distribution, and other rights. In addition, we will not support capitalization changes that add classes of stock with undefined voting rights or classes that may dilute the voting interests of existing shareholders. | ||||
However, we will support capitalization changes that eliminate other classes of stock and/ or unequal voting rights. | ||||
Share Capital Increases | We believe pre-emption rights should be introduced for shareholders. This can provide adequate protection from excessive dilution due to the issuance of new shares or convertible securities to third parties or a small number of select shareholders. | |||
Increase in Authorized Capital | We generally support increases in authorized capital where the company provides an adequate explanation for the use of shares. In the absence of an adequate explanation, we may oppose the request if the increase in authorized capital exceeds 100 percent of the currently authorized capital. Where share issuance requests exceed our standard threshold, we will consider the nature of the specific need, such as mergers, acquisitions and stock splits. | |||
Dividends | We generally support dividend payouts that constitute 30 percent or more of net income. We may vote against a dividend payout if the dividend payout ratio has been consistently below 30 percent without adequate explanation or if the payout is excessive given the company’s financial position. Particular attention will be paid where the payment may damage the company’s long-term financial health. | |||
Share Repurchase Programs | Companies are allowed under Japan Corporate Law to amend their articles to authorize the repurchase of shares at the board’s discretion. We will oppose such amendments. We believe the company should seek shareholder approval for a share repurchase program at each year’s AGM, providing shareholders the right to evaluate the terms of the repurchase. |
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We generally support proposals to repurchase shares, unless the issuer does not clearly state the business purpose for the program, a definitive number of shares to be repurchased and the timeframe for the repurchase. We may vote against share repurchase requests that allow share repurchases during a takeover period.
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Mergers and Acquisitions | Mergers or reorganizing the structure of a company often involve proposals relating to reincorporation, restructurings, mergers, liquidations and other major changes to the corporation. We will support proposals that are in the best interests of shareholders, demonstrated by enhancing share value or improving the effectiveness of the company’s operations. In general, provisions that are deemed to be destructive to shareholders’ rights or financially detrimental will not be supported. | |||
We evaluate mergers and structural reorganizations on a case-by-case basis. We will generally support transactions that we believe will maximize shareholder value. Some of the considerations include, but are not limited to, the following: | ||||
• Offer premium | ||||
• Strategic rationale | ||||
• Board oversight of the process for the recommended transaction, including director and/ or management conflicts of interest | ||||
• Offers made at a premium and where there are no other higher bidders | ||||
• Offers in which the secondary market price is substantially lower than the net asset value | ||||
We may vote against a transaction considering the following: | ||||
• Offers with potentially damaging consequences for minority shareholders because of illiquid stock | ||||
• Offers where we believe there is a reasonable prospect for an enhanced bid or other bidders | ||||
• Offers in which the current market price of the security exceeds the bid price at the time of voting
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Anti-Takeover Measures | In general, State Street Global Advisors believes that adoption of poison pills that have been structured to protect management and to prevent takeover bids from succeeding is not in shareholders’ interest. A shareholder rights plan may lead to management entrenchment. It may also discourage legitimate tender offers and acquisitions. Even if the premium paid to companies with a shareholder rights plan is higher than that offered to unprotected firms, a company’s chances of receiving a takeover offer in the first place may be reduced by the presence of a shareholder rights plan. |
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Proposals that reduce shareholders’ rights or have the effect of entrenching incumbent management will not be supported. | ||||
Proposals that enhance the right of shareholders to make their own choices as to the desirability of a merger or other proposal are supported.
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Shareholder Rights Plans |
In evaluating the adoption or renewal of a Japanese issuer’s shareholder rights plans (“poison pill”), we consider the following conditions: (i) release of proxy circular with details of the proposal with adequate notice in advance of meeting, (ii) minimum trigger of over 20 percent, (iii) maximum term of three years, (iv) sufficient number of independent directors, (v) presence of an independent committee, (vi) annual election of directors, and (vii) lack of protective or entrenchment features. Additionally, we consider the length of time that a shareholder rights plan has been in effect.
In evaluating an amendment to a shareholder rights plan (“poison pill”), in addition to the conditions above, we will also evaluate and consider supporting proposals where the terms of the new plan are more favorable to shareholders’ ability to accept unsolicited offers. | |||
“Cross-shareholdings” |
“Cross-Shareholdings” are a long-standing feature of the balance sheets of many Japanese companies, but, in our view, can be detrimental for corporate governance practices and ultimately shareholder returns.
Therefore, State Street Global Advisors may vote against the board leader at those TOPIX 500 companies where the “cross-shareholdings” (strategic listed shares) held by a company exceed 30 percent of the company’s net assets (as in the securities report disclosed for the previous fiscal year).
We may waive the guideline if a company engages with State Street Global Advisors and provides a specific, timebound, and publicly available plan for reducing its exposure to “cross-shareholdings”: | |||
• To less than 30% by 2025; or | ||||
• By 50% of current level by 2025
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Compensation | In Japan, excessive compensation is rarely an issue. Rather, the problem tends to be the lack of connection between pay and performance. Fixed salaries and cash retirement bonuses tend to comprise a significant portion of the compensation structure while performance-based pay is generally a small portion of the total pay. State Street Global Advisors, where possible, seeks to encourage the use of performance-based compensation in Japan as an incentive for executives and as a way to align interests with shareholders. |
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Adjustments to Aggregate Compensation Ceiling for Directors | Remuneration for directors in Japan is generally reasonable. Typically, each company sets the director compensation parameters as an aggregate, thereby limiting the total pay to all directors. When requesting a change, a company must disclose the last time the ceiling was adjusted, and management provides the rationale for the ceiling increase. We will generally support proposed increases to the ceiling if the company discloses the rationale for the increase. We may oppose proposals to increase the ceiling if there has been corporate malfeasance or sustained poor performance. | |||
Annual Bonuses for Directors/Statutory Auditors | In Japan, since there are no legal requirements that mandate companies to seek shareholder approval before awarding a bonus, we believe that existing shareholder approval of the bonus should be considered best practice. As a result, we support management proposals on executive compensation where there is a strong relationship between executive pay and performance over a five-year period. | |||
Retirement Bonuses for Directors/Statutory Auditors | While many companies in Japan have abolished the practice where retirement bonuses, based upon tenure, make up a sizeable portion of directors and auditors’ lifetime compensation, there remain many proposals seeking shareholder approval for the total amounts paid to directors and statutory auditors as a whole. In general, we support these payments unless the recipient is an outsider or in instances where the amount is not disclosed. | |||
Stock Plans | Most option plans in Japan are conservative, particularly at large companies. Japanese corporate law requires companies to disclose the monetary value of the stock options for directors and/or statutory auditors. Some companies do not disclose the maximum number of options that can be issued per year and shareholders are unable to evaluate the dilution impact. In this case, we cannot calculate the dilution level and, therefore, we may oppose such plans due to poor disclosure. We also oppose plans that allow for the repricing of options. | |||
Deep Discount Options | As Japanese companies move away from the retirement bonus system, deep discount options plans have become more popular. Typically, the exercise price is set at JPY 1 per share. We evaluate deep discount options using the same criteria used to evaluate stock options and consider the vesting period. | |||
Risk Management | We believe that risk management is a key function of the board, which is responsible for setting the overall risk appetite of a company and for providing oversight on the risk management process established by senior executives at a company. We allow boards to have discretion regarding the ways in which they provide oversight in this area. However, we expect companies to disclose how the board provides oversight on its risk management system and risk identification. Boards should also review existing and emerging risks that evolve in tandem with the changing political and economic landscape or as companies diversify or expand their operations into new areas. |
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As responsible stewards, we believe in the importance of effective risk management and oversight of issues that are material to a company. To effectively assess the risk of our clients’ portfolios and the broader market, we expect our portfolio companies to manage risks and opportunities that are material and industry-specific and that have a demonstrated link to long-term value creation, and to provide high-quality disclosure of this process to shareholders.
Consistent with this perspective, we may seek to engage with our portfolio companies to better understand how their boards are overseeing risks and opportunities the company has deemed to be material to its business or operations. If we believe a company has failed to implement and communicate effective oversight of these risks, we may consider voting against the directors responsible. | ||||
Environmental and Social Issues |
As a fiduciary, State Street Global Advisors takes a comprehensive approach to engaging with our portfolio companies about material environmental and social factors. Our Asset Stewardship program prioritization process allows us to proactively identify companies for engagement and voting in order to mitigate sustainability risks in our portfolio. Through engagement, we aim to build long-term relationships with the issuers in which we investon behalf of our clients and to address a broad range of topics relating to the promotion of long-term shareholder value creation. When voting, we fundamentally consider whether the adoption of a shareholder proposal addressing an environmental or social topic material to the company would promote long-term shareholder value in the context of the company’s existing practices and disclosures as well as existing market practice.
For more information on our approach to environmental and social issues, please see our Global Proxy Voting and Engagement Guidelines for Environmental and Social Factors, available at ssga.com/about-us/asset-stewardship.html. | |||
General/Routine | ||||
Expansion of Business Activities |
Japanese companies’ articles of incorporation strictly define the types of businesses in which a company is permitted to engage. In general, State Street Global Advisors views proposals that expand and diversify the company’s business activities as routine and non-contentious. We will monitor instances in which there has been an inappropriate acquisition and diversification away from the company’s main area of competence that resulted in a decrease of shareholder value. |
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About State Street Global Advisors | For four decades, State Street Global Advisors has served the world’s governments, institutions and financial advisors. With a rigorous, risk-aware approach built on research, analysis and market-tested experience, we build from a breadth of index and active strategies to create cost-effective solutions. And, as pioneers in index, ETF, and ESG investing, we are always inventing new ways to invest. As a result, we have become the world’s fourth-largest asset manager* with US $3.48 trillion† under our care. | |||
* Pensions & Investments Research Center, as of December 31, 2021. | ||||
† This figure is presented as of December 31, 2022 and includes approximately $58.60 billion USD of assets with respect to SPDR products for which State Street Global Advisors Funds Distributors, LLC (SSGA FD) acts solely as the marketing agent. SSGA FD and State Street Global Advisors are affiliated. Please note all AUM is unaudited. |
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Marketing communications
State Street Global Advisors Worldwide Entities
Abu Dhabi: State Street Global Advisors Limited, ADGM branch is regulated by the Financial Services Regulatory Authority (FSRA). This document is intended for Professional Clients or Market Counterparties only as defined by the FSRA and no other person should act upon it. State Street Global Advisors Limited, ADGM Branch, Al Khatem Tower, Suite 42801, Level 28, ADGM Square, Al Maryah Island, P.O Box 76404, Abu Dhabi, United Arab Emirates. Regulated by the ADGM Financial Services Regulatory Authority. T: +971 2 245 9000. Australia: State Street Global Advisors, Australia, Limited (ABN 42 003 914 225) is the holder of an Australian Financial Services License (AFSL Number 238276). Registered office: Level 14, 420 George Street, Sydney, NSW 2000, Australia. T: +612 9240-7600. F: +612 9240-7611. Belgium: State Street Global Advisors Belgium, Chaussée de La Hulpe 185, 1170 Brussels, Belgium. T: +32 2 663 2036. State Street Global Advisors Belgium is a branch office of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central
Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. Canada: State Street Global Advisors, Ltd., 1981 McGill College Avenue, Suite 500, Montreal, Qc, H3A 3A8, T: +514 282 2400 and 30 Adelaide Street East Suite 800, Toronto, Ontario M5C 3G6. T: +647 775 5900. France: State Street Global Advisors Europe Limited, France Branch (“State Street Global Advisors France”) is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. State Street Global Advisors France is registered in France with company number RCS Nanterre 899 183 289, and its office is located at Coeur Défense — Tour A — La Défense 4, 33e étage, 100, Esplanade du Général de Gaulle, 92 931 Paris La Défense Cedex, France. T: +33 1 44 45 40 00. F: +33 1 44 45 41 92. Germany: State Street Global Advisors Europe Limited, Branch in Germany, Brienner Strasse 59, D-80333 Munich, Germany (“State Street Global Advisors Germany”). T: +49 (0)89 55878 400. State Street Global Advisors Germany is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose
registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. Hong Kong: State Street Global Advisors Asia Limited, 68/F, Two International Finance Centre, 8 Finance Street, Central, Hong Kong. T: +852 2103-0288. F: +852 2103-0200. Ireland: State Street Global Advisors Europe Limited is regulated by the Central Bank of Ireland. Registered office address 78 Sir John Rogerson’s Quay, Dublin 2. Registered Number: 49934. T: +353 (0)1 776 3000. F: +353 (0)1 776 3300. Italy: State Street Global Advisors Europe Limited, Italy Branch (“State Street Global Advisors Italy”) is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. State Street Global Advisors Italy is registered in Italy with company number 11871450968 — REA: 2628603 and VAT number 11871450968, and its office is located at Via Ferrante Aporti, 10 - 20125 Milan, Italy. T: +39 02 32066 100. F: +39 02 32066 155. Japan: State Street Global Advisors (Japan) Co., Ltd., Toranomon Hills Mori Tower 25F 1-23-1 Toranomon, Minato-ku, Tokyo 105-6325 Japan. T: +81-3-4530-7380. Financial Instruments Business Operator, Kanto Local Financial Bureau (Kinsho #345), Membership: Japan Investment Advisers Association, The Investment
Trust Association, Japan, Japan Securities Dealers’ Association. Netherlands: State Street Global Advisors Netherlands, Apollo Building 7th floor, Herikerbergweg 29, 1101 CN Amsterdam, Netherlands. T: +31 20 7181 000. State Street Global Advisors Netherlands is a branch office of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. Singapore: State Street Global Advisors Singapore Limited, 168, Robinson Road, #33-01 Capital Tower, Singapore 068912 (Company Reg. No: 200002719D, regulated by the Monetary Authority of Singapore). T: +65 6826-7555. F: +65 6826-7501. Switzerland: State Street Global Advisors AG, Beethovenstr. 19, CH-8027 Zurich. Registered with the Register of Commerce Zurich CHE-105.078.458. T: +41 (0)44 245 70 00. F: +41 (0)44 245 70 16. United Kingdom: State Street Global Advisors Limited. Authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No. 2509928. VAT No. 5776591 81. Registered office: 20 Churchill Place, Canary Wharf, London, E14 5HJ. T: 020 3395 6000. F: 020 3395 6350. United States: State Street Global Advisors, 1 Iron Street, Boston, MA 02210-1641. T: +1 617 786 3000.
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The views expressed in this material are the views of SSGA Asset Stewardship Team through the period ended March 23, 2023 and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.
Investing involves risk including the risk of loss of principal.
The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA’s express written consent.
All information is from SSGA unless otherwise noted and has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty
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The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor.
The returns on a portfolio of securities which exclude companies that do not meet the portfolio’s specified ESG criteria may trail the returns on a portfolio of securities which include such companies. A portfolio’s ESG criteria may result in the portfolio investing in industry sectors or securities which underperform the market as a whole.
This communication is directed at professional clients (this includes eligible counterparties as defined by the appropriate EU regulator who are deemed both knowledgeable and experienced in matters relating to investments. The products and services to which this communication relates are only available to such persons and persons of any other description (including retail clients) should not rely on this communication.
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The information contained in this communication is not a research recommendation or ‘investment research’ and is classified as a ‘Marketing Communication’ in accordance with the Markets in Financial Instruments Directive (2014/65/EU) or applicable Swiss regulation. This means that this marketing communication (a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research (b) is not subject to any prohibition on dealing ahead of the dissemination of investment research.
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March 2023
North America (United States & Canada)
Proxy Voting and Engagement Guidelines
State Street Global Advisors’ Proxy Voting and Engagement Guidelinesi for North America outline our approach to voting and engaging with companies listed on stock exchanges in the United States and Canada. These Guidelines complement and should be read in conjunction with State Street Global Advisors’ Global Proxy Voting and Engagement Principles, which outline our overall approach to voting and engaging with companies, and State Street Global Advisors’ Conflicts Mitigation Guidelines, which provide information about managing the conflicts of interests that may arise through State Street Global Advisors’ proxy voting and engagement activities.
i |
These Proxy Voting and Engagement Guidelines (the “Guidelines”) are also applicable to SSGA Funds Management, Inc., State Street Global Advisors Trust Company, and other advisory affiliates of State Street Corporation. Additionally, State Street Global Advisors maintains Proxy Voting and Engagement Guidelines for select markets, including: Australia, continental Europe, Japan, New Zealand, North America (Canada and the US), the UK and Ireland, and emerging markets. International markets not covered by our market-specific guidelines are reviewed and voted in a manner that is consistent with the Global Proxy Voting and Engagement Principles; however, State Street Global Advisors also endeavors to show sensitivity to local market practices when voting in these various markets. |
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State Street Global Advisors’ Proxy Voting and Engagement Guidelines for North America (United States [“US”] and Canada) address our market-specific approaches to topics including directors and boards, accounting and audit related issues, capital structure, reorganization and mergers, compensation, and other governance-related issues. | ||||
When voting and engaging with companies in global markets, we consider market-specific nuances in the manner that we believe will most likely protect and promote the long-term economic value of client investments. We expect companies to observe the relevant laws and regulations of their respective markets, as well as country specific best practice guidelines and corporate governance codes. We may hold companies in some markets to our global standards when we feel that a country’s regulatory requirements do not address some of the key philosophical principles that we believe are fundamental to our global voting principles. | ||||
In our analysis and research into corporate governance issues in North America, we expect all companies to act in a transparent manner and to provide detailed disclosure on board profiles, related-party transactions, executive compensation, and other governance issues that impact shareholders’ long-term interests. Further, as a founding member of the Investor Stewardship Group (“ISG”), we proactively monitor companies’ adherence to the Corporate Governance Principles for US listed companies (the “Principles”). Consistent with the “comply-or-explain” expectations established by the Principles, we encourage companies to proactively disclose their level of compliance with the Principles. In instances of non-compliance, and when companies cannot explain the nuances of their governance structure effectively, either publicly or through engagement, we may vote against the independent board leader. | ||||
State Street Global Advisors’ Proxy Voting and Engagement Philosophy | In our view, corporate governance and sustainability issues are an integral part of the investment process. The Asset Stewardship Team consists of investment professionals with expertise in corporate governance, remuneration, accounting, and environmental and social issues. We have established robust corporate governance principles and practices that are backed with extensive analytical expertise to understand the complexities of the corporate governance landscape. We engage with companies to provide insight on the principles and practices that drive our voting decisions. We also conduct proactive engagements to address significant shareholder concerns and issues in a manner consistent with maximizing shareholder value. | |||
The team works alongside members of State Street Global Advisors’ Active Fundamental and various other investment teams, collaborating on issuer engagements and providing input on company-specific fundamentals. |
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Directors and Boards | Principally, a board acts on behalf of shareholders by protecting their interests and preserving their rights. In order to carry out their primary responsibilities, directors have to undertake activities that range from setting strategy and providing guidance on strategic matters, overseeing executive management, to selecting the CEO and other senior executives, creating a succession plan for the board and management, and providing effective risk oversight, including of risks related to sustainability issues. Further, good corporate governance necessitates the existence of effective internal controls and risk management systems, which should be governed by the board. | |||
State Street Global Advisors believes that a well-constituted board of directors, with a balance of skills, expertise, and independence, provides the foundations for a well-governed company. We view board quality as a measure of director independence, director succession planning, board diversity, evaluations and refreshment, and company governance practices. We vote for the (re-)election of directors on a case-by-case basis after considering various factors, including board quality, general market practice, and availability of information on director skills and expertise. | ||||
In our analysis of boards, we consider whether board members have adequate skills to provide effective oversight of corporate strategy, operations, and risks, including environmental and social 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. | ||||
In principle, we believe independent directors are crucial to robust corporate governance and help management establish sound corporate governance policies and practices. We believe a sufficiently independent board will most effectively monitor management and perform oversight functions necessary to protect shareholder interests. | ||||
Director-related proposals include issues submitted to shareholders that deal with the composition of the board or with members of a corporation’s board of directors. In deciding the director nominee to support, we consider numerous factors. | ||||
Director Elections | Our director election guideline focuses on companies’ governance profile to identify if a company demonstrates appropriate governance practices or if it exhibits negative governance practices. Factors we consider when evaluating governance practices include, but are not limited to the following: | |||
• Shareholder rights | ||||
• Board independence | ||||
• Board structure |
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If a company demonstrates appropriate governance practices, we believe a director should be classified as independent based upon the relevant listing standards or local market practice standards. In such cases, the composition of the key oversight committees of a board should meet the minimum standards of independence. Accordingly, we may vote against a nominee at a company with appropriate governance practices if the director is classified as non-independent under relevant listing standards or local market practice and serves on a key committee of the board (compensation, audit, nominating, or committees required to be fully independent by local market standards). | ||||
Conversely, if a company demonstrates negative governance practices, State Street Global Advisors believes the classification standards for director independence should be elevated. In such circumstances, we will evaluate all director nominees based upon the following classification standards: | ||||
• Is the nominee an employee of or related to an employee of the issuer or its auditor? | ||||
• Does the nominee provide professional services to the issuer? | ||||
• Has the nominee attended an appropriate number of board meetings? | ||||
• Has the nominee received non-board related compensation from the issuer? | ||||
In the US market where companies demonstrate negative governance practices, these stricter standards will apply not only to directors who are a member of a key committee but to all directors on the board as market practice permits. Accordingly, we may vote against a nominee (with the exception of the CEO) where the board has inappropriate governance practices and is considered not independent based on the above independence criteria. | ||||
Additionally, we may withhold votes from directors based on the following: | ||||
• 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 | ||||
• Directors attend less than 75 percent of board meetings without appropriate explanation or providing reason for their failure to meet the attendance threshold | ||||
• Directors of companies that have not been responsive to a shareholder proposal that received a majority shareholder support at the last annual or special meeting | ||||
• Consideration can be warranted if management submits the proposal(s) on the ballot as a binding management proposal, recommending shareholders vote for the particular proposal(s) |
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• Directors of companies have unilaterally adopted/ amended company bylaws that negatively impact our shareholder rights (such as fee-shifting, forum selection, and exclusion service bylaws) without putting such amendments to a shareholder vote | ||||
• Compensation committee members where there is a weak relationship between executive pay and performance over a five-year period | ||||
• Audit committee members if non-audit fees exceed 50 percent of total fees paid to the auditors | ||||
• Directors who appear to have been remiss in their duties | ||||
Board Gender Diversity | ||||
We expect boards of all listed companies to have at least one female board member and the boards of Russell 3000 companies to be composed of at least 30 percent women directors. 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. Additionally, 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. | ||||
We may waive this voting guideline if a company engages with State Street Global Advisors and provides a specific, timebound plan for either reaching the 30-percent threshold (Russell 3000) or for adding a woman director (non-Russell 3000). | ||||
Board Racial/Ethnic Diversity | ||||
We believe effective board oversight of a company’s long-term business strategy necessitates a diversity of perspectives, especially in terms of gender, race and ethnicity. If a company in the Russell 1000 does not disclose, at minimum, the gender, racial and ethnic composition of its board, we may vote against the Chair of the nominating committee. We may withhold support from the Chair of the nominating committee also when a company in the S&P 500 does not have at least one director from an underrepresented racial/ethnic community on its board. | ||||
Workforce Diversity | ||||
We may vote against the Chair of the compensation committee at companies in the S&P 500 that do not disclose their EEO-1 reports. Acceptable disclosures include: | ||||
• The original EEO-1 report response | ||||
• The exact content of the report translated into custom graphics |
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Director Time Commitments | ||||
When voting on the election or re-election of a director, we also consider the number of outside board directorships that a non-executive and an executive may undertake. Thus, State Street Global Advisors may take voting action against a director who exceeds the number of board mandates listed below: | ||||
• Named Executive Officers (NEOs) of a public company who sit on more than two public company boards | ||||
• Non-executive board chairs or lead independent directors who sit on more than three public company boards | ||||
• Director nominees who sit on more than four public company boards | ||||
For non-executive board chairs/lead independent directors and director nominees who hold excessive commitments, as defined above, we may consider waiving our policy and vote in support of a director if a company discloses its director commitment policy in a publicly available manner (e.g., corporate governance guidelines, proxy statement, company website). This policy or associated disclosure must include: | ||||
• A numerical limit on public company board seats a director can serve on | ||||
– This limit cannot exceed our policy by more than one seat | ||||
• Consideration of public company board leadership positions (e.g., Committee Chair) | ||||
• Affirmation that all directors are currently compliant with the company policy | ||||
• Description of an annual policy review process undertaken by the Nominating Committee to evaluate outside director time commitments | ||||
If a director is imminently leaving a board and this departure is disclosed in a written, time-bound and publicly-available manner, we may consider waiving our withhold vote when evaluating the director for excessive time commitments. | ||||
Service on a mutual fund board, the board of a UK investment trust or a Special Purpose Acquisition Company (SPAC) board is not considered when evaluating directors for excessive commitments. However, we do expect these roles to be considered by nominating committees when evaluating director time commitments. | ||||
Climate-related Disclosures | ||||
State Street Global Advisors finds that the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD) provide the most effective framework for disclosure of climate-related risks and opportunities. |
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As such, we may take voting action against companies in the S&P 500 and S&P/TSX Composite that fail to provide sufficient disclosure regarding climate-related risks and opportunities related to that company, or board oversight of climate-related risks and opportunities, in accordance with the TCFD framework. | ||||
Director-Related Proposals | We generally vote for the following director-related proposals: | |||
• Discharge of board members’ duties, in the absence of pending litigation, regulatory investigation, charges of fraud, or other indications of significant concern | ||||
• Proposals to restore shareholders’ ability in order to remove directors with or without cause | ||||
• Proposals that permit shareholders to elect directors to fill board vacancies | ||||
• Shareholder proposals seeking disclosure regarding the company, board, or compensation committee’s use of compensation consultants, such as company name, business relationship(s), and fees paid | ||||
We generally vote against the following director-related proposals: | ||||
• Requirements that candidates for directorships own large amounts of stock before being eligible to be elected | ||||
• Proposals that relate to the “transaction of other business as properly comes before the meeting,” which extend “blank check” powers to those acting as proxy | ||||
• Proposals requiring two candidates per board seat | ||||
Majority Voting | We will generally support a majority vote standard based on votes cast for the election of directors. | |||
We will generally vote to support amendments to bylaws that would require simple majority of voting shares (i.e. shares cast) to pass or to repeal certain provisions. | ||||
Annual Elections | We generally support the establishment of annual elections of the board of directors. Consideration is given to the overall level of board independence and the independence of the key committees, as well as the existence of a shareholder rights plan. | |||
Cumulative Voting | We do not support cumulative voting structures for the election of directors. |
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Separation Chair/CEO | We analyze proposals for the separation of Chair/CEO on a case-by-case basis taking into consideration numerous factors, including the appointment of and role played by a lead director, a company’s performance, and the overall governance structure of the company. | |||
However, we may take voting action against the chair or members of the nominating committee at S&P 500 companies that have combined the roles of chair and CEO and have not appointed a lead independent director. | ||||
Proxy Access | In general, we believe that proxy access is a fundamental right and an accountability mechanism for all long-term shareholders. We will consider proposals relating to proxy access on a case-by-case basis. We will support shareholder proposals that set parameters to empower long-term shareholders while providing management the flexibility to design a process that is appropriate for the company’s circumstances. | |||
We will review the terms of all other proposals and will support those proposals that have been introduced in the spirit of enhancing shareholder rights. | ||||
Considerations include the following:
• The ownership thresholds and holding duration proposed in the resolution
• The binding nature of the proposal
• The number of directors that shareholders may be able to nominate each year
• Company governance structure
• Shareholder rights
• Board performance
| ||||
Age/Term Limits | 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. | |||
Approve Remuneration of Directors | Generally, we will support directors’ compensation, provided the amounts are not excessive relative to other issuers in the market or industry. In making our determination, we review whether the compensation is overly dilutive to existing shareholders. |
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Indemnification | Generally, we support proposals to limit directors’ liability and/or expand indemnification and liability protection if he or she has not acted in bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of his or her office. | |||
Classified Boards | We generally support annual elections for the board of directors. | |||
Confidential Voting | We will support confidential voting. | |||
Board Size | We will support proposals seeking to fix the board size or designate a range for the board size and will vote against proposals that give management the ability to alter the size of the board outside of a specified range without shareholder approval. | |||
Board Responsiveness | We may vote against the re-election of members of the compensation committee if we have serious concerns about remuneration practices and if the company has not been responsive to shareholder pressure to review its approach. In addition, if the level of dissent against a management proposal on executive pay is consistently high, and we have determined that a vote against a pay-related proposal is warranted in the third consecutive year, we may vote against the Chair of the compensation committee. |
Shareholder Rights | ||||
Virtual/Hybrid Shareholder Meetings | As a result of the COVID-19 pandemic, companies are increasingly conducting their shareholder meetings in a virtual or hybrid format. While we are encouraged by the success of virtual and hybrid shareholder meetings, companies and shareholders must remain vigilant in continuing to improve their virtual shareholder meeting practices. | |||
Recognizing the success of virtual and hybrid shareholder meetings and a shifting regulatory environment, we will 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 |
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• Comply with local market laws and regulations relating to virtual and hybrid shareholder meeting practices | ||||
If a company breaches of any of the criteria above, we may vote against the Chair of the nominating committee. | ||||
Accounting and Audit-Related Issues |
||||
Ratifying Auditors and Approving Auditor Compensation | We support the approval of auditors and auditor compensation provided that the issuer has properly disclosed audit and non-audit fees relative to market practice and the audit fees are not deemed excessive. We deem audit fees to be excessive if the non-audit fees for the prior year constituted 50 percent or more of the total fees paid to the auditor. We will also support the disclosure of auditor and consulting relationships when the same or related entities are conducting both activities and will support the establishment of a selection committee responsible for the final approval of significant management consultant contract awards where existing firms are already acting in an auditing function. | |||
In circumstances where “other” fees include fees related to initial public offerings, bankruptcy emergence, and spin-offs, and the company makes public disclosure of the amount and nature of those fees which are determined to be an exception to the standard “non-audit fee” category, then such fees may be excluded from the non-audit fees considered in determining the ratio of non-audit to audit/audit-related fees/tax compliance and preparation for purposes of determining whether non-audit fees are excessive. | ||||
We will support the discharge of auditors and requirements that auditors attend the annual meeting of shareholders. | ||||
Approval of Financial Statements | ||||
We believe the disclosure and availability of reliable financial statements in a timely manner is imperative for the investment process. We expect external auditors to provide assurance of a company’s financial condition. Hence, we may vote against the approval of financial statements if i) they have not been disclosed or audited; ii) the auditor opinion is qualified/adverse, or the auditor has issued a disclaimer of opinion; or iii) the auditor opinion is not disclosed. | ||||
Capital Structure | Capital structure proposals include requests by management for approval of amendments to the certificate of incorporation that will alter the capital structure of the company. |
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The most common request is for an increase in the number of authorized shares of common stock, usually in conjunction with a stock split or dividend. Typically, we support requests that are not unreasonably dilutive or enhance the rights of common shareholders. In considering authorized share proposals, the typical threshold for approval is 100percent over current authorized shares. However, the threshold may be increased if the company offers a specific need or purpose (merger, stock splits, growth purposes, etc.). All proposals are evaluated on a case-by-case basis taking into account the company’s specific financial situation. | ||||
Increase in Authorized Common Shares | In general, we support share increases for general corporate purposes up to 100 percent of current authorized stock. | |||
We support increases for specific corporate purposes up to 100 percent of the specific need plus 50 percent of current authorized common stock for US and Canadian firms.
When applying the thresholds, we will also consider the nature of the specific need, such as mergers and acquisitions and stock splits. | ||||
Increase in Authorized Preferred Shares | We vote on a case-by-case basis on proposals to increase the number of preferred shares. | |||
Generally, we will vote for the authorization of preferred stock in cases where the company specifies the voting, dividend, conversion, and other rights of such stock and the terms of the preferred stock appear reasonable. | ||||
We will support proposals to create “declawed” blank check preferred stock (stock that cannot be used as a takeover defense). However, we may vote against proposals to increase the number of blank check preferred stock authorized for issuance when no shares have been issued or reserved for a specific purpose. | ||||
Unequal Voting Rights | We will not support proposals authorizing the creation of new classes of common stock with superior voting rights and may vote against new classes of preferred stock with unspecified voting, conversion, dividend distribution, and other rights. In addition, we will not support capitalization changes that add “blank check” classes of stock (i.e. classes of stock with undefined voting rights) or classes that dilute the voting interests of existing shareholders. | |||
However, we will support capitalization changes that eliminate other classes of stock and/ or unequal voting rights. | ||||
Reorganization and Mergers |
The reorganization of the structure of a company or mergers often involve proposals relating to reincorporation, restructurings, liquidations, and other major changes to the corporation. |
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Proposals that are in the best interests of the shareholders, demonstrated by enhancing share value or improving the effectiveness of the company’s operations, will be supported. | ||||
In general, provisions that are not viewed as economically sound or are thought to be destructive to shareholders’ rights are not supported. | ||||
We will generally support transactions that maximize shareholder value. Some of the considerations include the following: | ||||
• Offer premium | ||||
• Strategic rationale | ||||
• Board oversight of the process for the recommended transaction, including, director and/ or management conflicts of interest | ||||
• Offers made at a premium and where there are no other higher bidders | ||||
• Offers in which the secondary market price is substantially lower than the net asset value | ||||
We may vote against a transaction considering the following: | ||||
• Offers with potentially damaging consequences for minority shareholders because of illiquid stock, especially in some non-US markets | ||||
• Offers where we believe there is a reasonable prospect for an enhanced bid or other bidders | ||||
• The current market price of the security exceeds the bid price at the time of voting | ||||
Anti-Takeover Issues | Typically, these are proposals relating to requests by management to amend the certificate of incorporation or bylaws to add or to delete a provision that is deemed to have an anti-takeover effect. The majority of these proposals deal with management’s attempt to add some provision that makes a hostile takeover more difficult or will protect incumbent management in the event of a change in control of the company. | |||
Proposals that reduce shareholders’ rights or have the effect of entrenching incumbent management may not be supported. | ||||
Proposals that enhance the right of shareholders to make their own choices as to the desirability of a merger or other proposal are supported. |
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Shareholder Rights Plans | US: We will support mandates requiring shareholder approval of a shareholder rights plans (“poison pill”) and repeals of various anti-takeover related provisions. | |||
In general, we may vote against the adoption or renewal of a US issuer’s shareholder rights plan (“poison pill”). | ||||
We will vote for an amendment to a shareholder rights plan (“poison pill”) where the terms of the new plans are more favorable to shareholders’ ability to accept unsolicited offers (i.e. if one of the following conditions are met: (i) minimum trigger, flip-in or flip-over of 20 percent, (ii) maximum term of three years, (iii) no “dead hand,” “slow hand,” “no hand” nor similar feature that limits the ability of a future board to redeem the pill, and (iv) inclusion of a shareholder redemption feature (qualifying offer clause), permitting ten percent of the shares to call a special meeting or seek a written consent to vote on rescinding the pill if the board refuses to redeem the pill 90 days after a qualifying offer is announced). | ||||
Canada: We analyze proposals for shareholder approval of a shareholder rights plan (“poison pill”) on a case-by-case basis taking into consideration numerous factors, including but not limited to, whether it conforms to ‘new generation’ rights plans and the scope of the plan. | ||||
Special Meetings | We will vote for shareholder proposals related to special meetings at companies that do not provide shareholders the right to call for a special meeting in their bylaws if: | |||
• The company also does not allow shareholders to act by written consent | ||||
• The company allows shareholders to act by written consent but the ownership threshold for acting by written consent is set above 25 percent of outstanding shares | ||||
We will vote for shareholder proposals related to special meetings at companies that give shareholders (with a minimum 10 percent ownership threshold) the right to call for a special meeting in their bylaws if: | ||||
• The current ownership threshold to call for a special meeting is above 25 percent of outstanding shares | ||||
We will vote for management proposals related to special meetings. | ||||
Written Consent | We will vote for shareholder proposals on written consent at companies if: | |||
• The company does not have provisions in their bylaws giving shareholders the right to call for a special meeting |
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• The company allows shareholders the right to call for a special meeting, but the current ownership threshold to call for a special meeting is above 25percent of outstanding shares | ||||
• The company has a poor governance profile | ||||
We will vote management proposals on written consent on a case-by-case basis. | ||||
Super-Majority | We will generally vote against amendments to bylaws requiring super-majority shareholder votes to pass or repeal certain provisions. We will vote for the reduction or elimination of super-majority vote requirements, unless management of the issuer was concurrently seeking to or had previously made such a reduction or elimination. | |||
Compensation | Despite the differences among the types of plans and the awards possible there is a simple underlying philosophy that guides the analysis of all compensation plans; namely, the terms of the plan should be designed to provide an incentive for executives and/or employees to align their interests with those of the shareholders and thus work toward enhancing shareholder value. Plans that benefit participants only when the shareholders also benefit are those most likely to be supported. | |||
Advisory Vote on Executive Compensation and Frequency | State Street Global Advisors believes executive compensation plays a critical role in aligning executives’ interest with shareholders’, attracting, retaining and incentivizing key talent, and ensuring positive correlation between the performance achieved by management and the benefits derived by shareholders. We support management proposals on executive compensation where there is a strong relationship between executive pay and performance over a five-year period. We seek adequate disclosure of various compensation elements, absolute and relative pay levels, peer selection and benchmarking, the mix of long-term and short-term incentives, alignment of pay structures with shareholder interests as well as with corporate strategy, and performance. Further shareholders should have the opportunity to assess whether pay structures and levels are aligned with business performance on an annual basis. | |||
In Canada, where advisory votes on executive compensation are not commonplace, we will rely primarily upon engagement to evaluate compensation plans. | ||||
Employee Equity Award Plans |
We consider numerous criteria when examining equity award proposals. Generally we do not vote against plans for lack of performance or vesting criteria. Rather the main criteria that will result in a vote against an equity award plan are: |
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Excessive voting power dilution To assess the dilutive effect, we divide the number of shares required to fully fund the proposed plan, the number of authorized but unissued shares and the issued but unexercised shares by the fully diluted share count. We review that number in light of certain factors, such as the industry of the issuer. | ||||
Historical option grants Excessive historical option grants over the past three years. Plans that provide for historical grant patterns of greater than five to eight percent are generally not supported. | ||||
Repricing We may vote against any plan where repricing is expressly permitted. If a company has a history of repricing underwater options, the plan will not be supported. | ||||
Other criteria include the following: | ||||
• Number of participants or eligible employees | ||||
• The variety of awards possible | ||||
• The period of time covered by the plan | ||||
There are numerous factors that we view as negative. If combined they may result in a vote against a proposal. Factors include: | ||||
• Grants to individuals or very small groups of participants | ||||
• “Gun-jumping” grants which anticipate shareholder approval of a plan or amendment | ||||
• The power of the board to exchange “underwater” options without shareholder approval. This pertains to the ability of a company to reprice options, not the actual act of repricing described above | ||||
• Below market rate loans to officers to exercise their options | ||||
• The ability to grant options at less than fair market value; | ||||
• Acceleration of vesting automatically upon a change in control | ||||
• Excessive compensation (i.e. compensation plans which we deem to be overly dilutive) | ||||
Share Repurchases If a company makes a clear connection between a share repurchase program and its intent to offset dilution created from option plans and the company fully discloses the amount of shares being repurchased, the voting dilution calculation may be adjusted to account for the impact of the buy back. |
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Companies will not have any such repurchase plan factored into the dilution calculation if they do not (i) clearly state the intentions of any proposed share buy-back plan, (ii) disclose a definitive number of the shares to be bought back, (iii) specify the range of premium/discount to market price at which a company can repurchase shares, and (iv) disclose the time frame during which the shares will be bought back. | ||||
162(m) Plan Amendments If a plan would not normally meet our criteria described above, but was primarily amended to add specific performance criteria to be used with awards that were designed to qualify for performance-based exception from the tax deductibility limitations of Section 162(m) of the Internal Revenue Code, then we will support the proposal to amend the plan. | ||||
Employee Stock Option Plans | We generally vote for stock purchase plans with an exercise price of not less than 85 percent of fair market value. However, we take market practice into consideration. | |||
Compensation-Related Items | We generally support the following proposals: | |||
• Expansions to reporting of financial or compensation-related information within reason | ||||
• Proposals requiring the disclosure of executive retirement benefits if the issuer does not have an independent compensation committee | ||||
We generally vote against the following proposal: | ||||
• Retirement bonuses for non-executive directors and auditors | ||||
Miscellaneous/ Routine Items |
We generally support the following miscellaneous/routine governance items: | |||
• Reimbursement of all appropriate proxy solicitation expenses associated with the election when voting in conjunction with support of a dissident slate | ||||
• Opting-out of business combination provision | ||||
• Proposals that remove restrictions on the right of shareholders to act independently of management | ||||
• Liquidation of the company if the company will file for bankruptcy if the proposal is not approved | ||||
• Shareholder proposals to put option repricings to a shareholder vote | ||||
• General updating of, or corrective amendments to, charter and bylaws not otherwise specifically addressed herein, unless such amendments would reasonably be expected to diminish shareholder rights (e.g. extension of directors’ term limits, amending shareholder vote requirement to amend the charter documents, insufficient information provided as to the reason behind the amendment) |
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• Change in corporation name | ||||
• Mandates that amendments to bylaws or charters have shareholder approval | ||||
• Management proposals to change the date, time, and/or location of the annual meeting unless the proposed change is unreasonable
• Repeals, prohibitions or adoption of anti-greenmail provisions
• Management proposals to implement a reverse stock split when the number of authorized shares will be proportionately reduced and proposals to implement a reverse stock split to avoid delisting | ||||
• Exclusive forum provisions | ||||
State Street Global Advisors generally does not support the following miscellaneous/ routine governance items: | ||||
• Proposals requesting companies to adopt full tenure holding periods for their executives | ||||
• Reincorporation to a location that we believe has more negative attributes than its current location of incorporation | ||||
• Shareholder proposals to change the date, time, and/or location of the annual meeting unless the current scheduling or location is unreasonable | ||||
• Proposals to approve other business when it appears as a voting item | ||||
• Proposals giving the board exclusive authority to amend the bylaws | ||||
• Proposals to reduce quorum requirements for shareholder meetings below a majority of the shares outstanding unless there are compelling reasons to support the proposal | ||||
Risk Management | We believe that risk management is a key function of the board, which is responsible for setting the overall risk appetite of a company and for providing oversight on the risk management process established by senior executives at a company. We allow boards to have discretion regarding the ways in which they provide oversight in this area. However, we expect companies to disclose how the board provides oversight on its risk management system and risk identification. Boards should also review existing and emerging risks that evolve in tandem with the changing political and economic landscape or as companies diversify or expand their operations into new areas. | |||
As responsible stewards, we believe in the importance of effective risk management and oversight of issues that are material to a company. To effectively assess the risk of our clients’ portfolios and the broader market, we expect our portfolio companies to manage risks and opportunities that are |
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material and industry-specific and that have a demonstrated link to long-term value creation, and to provide high-quality disclosure of this process to shareholders.
Consistent with this perspective, we may seek to engage with our portfolio companies to better understand how their boards are overseeing risks and opportunities the company has deemed to be material to its business or operations. If we believe a company has failed to implement and communicate effective oversight of these risks, we may consider voting against the directors responsible. | ||||
Environmental and Social Issues | As a fiduciary, State Street Global Advisors takes a comprehensive approach to engaging with our portfolio companies about material environmental and social factors. Our Asset Stewardship program prioritization process allows us to proactively identify companies for engagement and voting in order to mitigate sustainability risks in our portfolio. Through engagement, we aim to build long-term relationships with the issuers in which we invest on behalf of our clients and to address a broad range of topics relating to the promotion of long-term shareholder value creation. When voting, we fundamentally consider whether the adoption of a shareholder proposal addressing an environmental or social topic material to the company would promote long-term shareholder value in the context of the company’s existing practices and disclosures as well as existing market practice. | |||
For more information on our approach to environmental and social issues, please see our Global Proxy Voting and Engagement Guidelines for Environmental and Social Factors, available at ssga.com/about-us/asset-stewardship.html. | ||||
About State Street Global Advisors | For four decades, State Street Global Advisors has served the world’s governments, institutions and financial advisors. With a rigorous, risk-aware approach built on research, analysis and market-tested experience, we build from a breadth of index and active strategies to create cost-effective solutions. And, as pioneers in index, ETF, and ESG investing, we are always inventing new ways to invest. As a result, we have become the world’s fourth-largest asset manager* with US $3.48 trillion† under our care. | |||
* Pensions & Investments Research Center, as of December 31, 2021. † This figure is presented as of December 31, 2022 and includes approximately $58.60 billion USD of assets with respect to SPDR products for which State Street Global Advisors Funds Distributors, LLC (SSGA FD) acts solely as the marketing agent. SSGA FD and State Street Global Advisors are affiliated. Please note all AUM is unaudited. |
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ssga.com
Marketing communications
State Street Global Advisors Worldwide Entities
Abu Dhabi: State Street Global Advisors Limited, ADGM branch is regulated by the Financial Services Regulatory Authority (FSRA). This document is intended for Professional Clients or Market Counterparties only as defined by the FSRA and no other person should act upon it. State Street Global Advisors Limited, ADGM Branch, Al Khatem Tower, Suite 42801, Level 28, ADGM Square, Al Maryah Island, P.O Box 76404, Abu Dhabi, United Arab Emirates. Regulated by the ADGM Financial Services Regulatory Authority. T: +971 2 245 9000. Australia: State Street Global Advisors, Australia, Limited (ABN 42 003 914 225) is the holder of an Australian Financial Services License (AFSL Number 238276). Registered office: Level 14, 420 George Street, Sydney, NSW 2000, Australia. T: +612 9240-7600. F: +612 9240-7611. Belgium: State Street Global Advisors Belgium, Chaussée de La Hulpe 185, 1170 Brussels, Belgium. T: +32 2 663 2036. State Street Global Advisors Belgium is a branch office of State Street Global Advisors Europe Limited, registered in Ireland with company
number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. Canada: State Street Global Advisors, Ltd., 1981 McGill College Avenue, Suite 500, Montreal, Qc, H3A 3A8, T: +514 282 2400 and 30 Adelaide Street East Suite 800, Toronto, Ontario M5C 3G6. T: +647 775 5900. France: State Street Global Advisors Europe Limited, France Branch (“State Street Global Advisors France”) is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. State Street Global Advisors France is registered in France with company number RCS Nanterre 899 183 289, and its office is located at Coeur Défense — Tour A — La Défense 4, 33e étage, 100, Esplanade du Général de Gaulle, 92 931 Paris La Défense Cedex, France. T: +33 1 44 45 40 00. F: +33 1 44 45 41 92. Germany: State Street Global Advisors Europe Limited, Branch in Germany, Brienner Strasse 59, D-80333 Munich, Germany (“State Street Global Advisors Germany”). T: +49 (0)89 55878 400. State Street Global Advisors Germany is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central
Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. Hong Kong: State Street Global Advisors Asia Limited, 68/F, Two International Finance Centre, 8 Finance Street, Central, Hong Kong. T: +852 2103-0288. F: +852 2103-0200. Ireland: State Street Global Advisors Europe Limited is regulated by the Central Bank of Ireland. Registered office address 78 Sir John Rogerson’s Quay, Dublin 2. Registered Number: 49934. T: +353 (0)1 776 3000. F: +353 (0)1 776 3300. Italy: State Street Global Advisors Europe Limited, Italy Branch (“State Street Global Advisors Italy”) is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. State Street Global Advisors Italy is registered in Italy with company number 11871450968 — REA: 2628603 and VAT number 11871450968, and its office is located at Via Ferrante Aporti, 10 - 20125 Milan, Italy. T: +39 02 32066 100. F: +39 02 32066 155. Japan: State Street Global Advisors (Japan) Co., Ltd., Toranomon Hills Mori Tower 25F 1-23-1 Toranomon, Minato-ku, Tokyo 105-6325 Japan. T: +81-3-4530-7380. Financial Instruments Business Operator, Kanto Local Financial Bureau (Kinsho #345), Membership: Japan Investment Advisers Association, The Investment
Trust Association, Japan, Japan Securities Dealers’ Association. Netherlands: State Street Global Advisors Netherlands, Apollo Building 7th floor, Herikerbergweg 29, 1101 CN Amsterdam, Netherlands. T: +31 20 7181 000. State Street Global Advisors Netherlands is a branch office of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. Singapore: State Street Global Advisors Singapore Limited, 168, Robinson Road, #33-01 Capital Tower, Singapore 068912 (Company Reg. No: 200002719D, regulated by the Monetary Authority of Singapore). T: +65 6826-7555. F: +65 6826-7501. Switzerland: State Street Global Advisors AG, Beethovenstr. 19, CH-8027 Zurich. Registered with the Register of Commerce Zurich CHE-105.078.458. T: +41 (0)44 245 70 00. F: +41 (0)44 245 70 16. United Kingdom: State Street Global Advisors Limited. Authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No. 2509928. VAT No. 5776591 81. Registered office: 20 Churchill Place, Canary Wharf, London, E14 5HJ. T: 020 3395 6000. F: 020 3395 6350. United States: State Street Global Advisors, 1 Iron Street, Boston, MA 02210-1641. T: +1 617 786 3000.
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The views expressed in this material are the views of SSGA Asset Stewardship Team through the period ended March 23, 2023 and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.
Investing involves risk including the risk of loss of principal.
The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA’s express written consent.
All information is from SSGA unless otherwise noted and has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy,
reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.
The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor.
The returns on a portfolio of securities which exclude companies that do not meet the portfolio’s specified ESG criteria may trail the returns on a portfolio of securities which include such companies. A portfolio’s ESG criteria may result in the portfolio
investing in industry sectors or securities which underperform the market as a whole.
This communication is directed at professional clients (this includes eligible counterparties as defined by
the appropriate EU regulator who are deemed both knowledgeable and experienced in matters relating to investments. The products and services to which this communication relates are only available to such persons and persons of any other description (including retail clients) should not rely on this communication.
The trademarks and service marks referenced herein are the property of their respective owners. Third party data providers make no warranties or representations of any kind relating to the accuracy, completeness or timeliness of the data and have no liability for damages of any kind relating to the use of such data.
Responsible-Factor (R Factor) scoring is designed by State Street to reflect certain ESG characteristics and does not represent investment performance. Results generated out of the scoring model is based on sustainability and corporate governance dimensions of a scored entity.
The information contained in this communication is not a research recommendation or ‘investment research’ and is classified as a
‘Marketing Communication’ in accordance with the Markets in Financial Instruments Directive (2014/65/EU) or applicable Swiss regulation. This means that this marketing communication (a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research (b) is not subject to any prohibition on dealing ahead of the dissemination of investment research.
© 2023 State Street Corporation.
All Rights Reserved. ID1482705-3479916.3.1.GBL.RTL 0323
Exp. Date: 03/31/2024
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March 2023
Rest of the World
Proxy Voting and Engagement Guidelines
State Street Global Advisors’ Proxy Voting and Engagement Guidelinesi for the Rest of the World outline our approach to voting and engaging with companies listed on stock exchanges in international markets not covered under specific country/regional Guidelines. These Guidelines complement and should be read in conjunction with State Street Global Advisors’ Global Proxy Voting and Engagement Principles, which outline our overall approach to voting and engaging with companies, and State Street Global Advisors’ Conflicts Mitigation Guidelines, which provide information about managing the conflicts of interests that may arise through State Street Global Advisors’ proxy voting and engagement activities.
i |
These Proxy Voting and Engagement Guidelines (the “Guidelines”) are also applicable to SSGA Funds Management, Inc., State Street Global Advisors Trust Company, and other advisory affiliates of State Street Corporation. Additionally, State Street Global Advisors maintains Proxy Voting and Engagement Guidelines for select markets, including: Australia, continental Europe, Japan, New Zealand, North America (Canada and the US), the UK and Ireland, and emerging markets. International markets not covered by our market-specific guidelines are reviewed and voted in a manner that is consistent with the Global Proxy Voting and Engagement Principles; however, State Street Global Advisors also endeavors to show sensitivity to local market practices when voting in these various markets. |
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At State Street Global Advisors, we recognize that markets not covered under specific country/regional guidelines, specifically emerging markets, are disparate in their corporate governance frameworks and practices. While they tend to pose broad common governance issues, such as concentrated ownership, poor disclosure of financial and related-party transactions, and weak enforcement of rules and regulation, our Guidelines are designed to identify and to address specific governance concerns across the markets. We also evaluate the various factors that contribute to the corporate governance framework of a country. These factors include, but are not limited to: (i) the macroeconomic conditions and broader political system in a country; (ii) quality of regulatory oversight, enforcement of property and shareholder rights; and (iii) the independence of judiciary. | ||||
When voting and engaging with companies in global markets, we consider market-specific nuances in the manner that we believe will most likely protect and promote the long-term economic value of client investments. We expect all companies to observe the relevant laws and regulations of their respective markets, as well as any country-specific best practice guidelines and corporate governance codes. We may hold companies in some markets to our global standards when we feel that a country’s regulatory requirements do not address some of the key philosophical principles that we believe are fundamental to our global voting principles. | ||||
State Street Global Advisors’ Proxy Voting and Engagement Guidelines for the Rest of the World address our approaches to topics including directors and boards, accounting and audit-related issues, capital structure, reorganization and mergers, remuneration, and other governance-related issues. | ||||
State Street Global Advisors’ Proxy Voting and Engagement Philosophy in Emerging Markets | State Street Global Advisors’ approach to proxy voting and issuer engagement in emerging markets is designed to increase the value of our clients’ investments through the mitigation of governance risks. The overall quality of the corporate governance framework in an emerging market country drives the level of governance risks investors assign to a country. Thus, improving the macro governance framework in a country may help to reduce governance risks and to increase the overall value of our clients’ holdings over time. In order to improve the overall governance framework and practices in a country, members of our Asset Stewardship Team endeavor to engage with representatives from regulatory agencies and stock markets to highlight potential concerns with the macro governance framework of a country. To help mitigate company-specific risk, the State Street Global Advisors Asset Stewardship Team works alongside members of the Active Fundamental and emerging market specialists to engage with emerging market companies on governance issues and address any specific concerns, or to get more information regarding shareholder items that are to be voted on at upcoming shareholder meetings. This integrated approach to engagement drives our proxy voting and engagement philosophy in emerging markets. |
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Directors and Boards | Principally, a board acts on behalf of shareholders by protecting their interests and preserving their rights. In order to carry out their primary responsibilities, directors have to undertake activities that range from setting strategy and providing guidance on strategic matters, overseeing executive management, to selecting the CEO and other senior executives, creating a succession plan for the board and management, and providing risk oversight, including of risks related to sustainability issues. Further, we believe good corporate governance necessitates the existence of effective internal controls and risk management systems, which should be governed by the board. | |||
We believe that a well-constituted board of directors, with a good balance of skills, expertise and independence, provides the foundation for a well-governed company. However, several factors, such as low overall independence level requirements by market regulators, poor biographical disclosure of director profiles, prevalence of related-party transactions, and the general resistance from controlling shareholders to increase board independence, render the election of directors as one of the most important fiduciary duties we perform in emerging market companies. | ||||
Board Independence | We vote for the (re-)election of directors on a case-by-case basis after considering various factors, including board quality, general market practice and availability of information on director skills and expertise. We expect companies to meet minimum overall board independence standards, as defined in a local corporate governance code or market practice. Therefore, in several countries, we may vote against certain non-independent directors if overall board independence levels do not meet market standards. | |||
Our broad criteria for director independence in emerging market companies include factors such as: | ||||
• Participation in related-party transactions | ||||
• Employment history with company | ||||
• Relations with controlling shareholders and employees | ||||
• Company classification of a director as non-independent | ||||
Board Committees | In some countries, market practice calls for the establishment of a board level audit committee. We believe an audit committee should be responsible for monitoring the integrity of the financial statements of a company and appointing external auditors. It should also monitor their qualifications, independence, effectiveness and resource levels. Based upon our desire to enhance the quality of financial and accounting oversight provided by independent directors, we expect that listed companies have an audit committee constituted of a majority of independent directors. |
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Board Gender Diversity | We expect boards of listed companies in all markets and indices to have at least one female board member. If a company does not meet this 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. Additionally, if a company does not meet this 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. | |||
We may waive this voting guideline if a company engages with State Street Global Advisors and provides a specific, timebound plan for adding at least one woman to its board. | ||||
Board Responsiveness to High Dissent against Pay Proposals | Poorly structured executive compensation plans pose increasing reputational risk to companies. Ongoing high level of dissent against a company’s compensation proposals may indicate that the company is not receptive to investor concerns. If the level of dissent against a company’s remuneration report and/or remuneration policy is consistently high, and we have determined that a vote against a pay-related proposal is warranted in the third consecutive year, we may vote against the Chair of the remuneration committee. | |||
Climate-related Disclosures | State Street Global Advisors finds that the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD) provide the most effective framework for disclosure of climate-related risks and opportunities. | |||
As such, we may take voting action against companies in the Hang Seng and Straits Times that fail to provide sufficient disclosure regarding climate-related risks and opportunities related to that company, or board oversight of climate-related risks and opportunities, in accordance with the TCFD framework. | ||||
Shareholder Rights
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Virtual/Hybrid Shareholder Meetings | As a result of the COVID-19 pandemic, companies are increasingly conducting their shareholder meetings in a virtual or hybrid format. While we are encouraged by the success of virtual and hybrid shareholder meetings, companies and shareholders must remain vigilant in continuing to improve their virtual shareholder meeting practices. | |||
Recognizing the success of virtual and hybrid shareholder meetings and a shifting regulatory environment, we will 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 |
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• 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 of any of the criteria above, we may vote against the Chair of the nominating committee. | ||||
Accounting and Audit-Related Issues | The disclosure and availability of reliable financial statements in a timely manner is imperative for the investment process. As a result, board oversight of internal controls and the independence of the audit process are essential if investors are to rely upon financial statements. We believe that audit committees provide the necessary oversight for the selection and appointment of auditors, the company’s internal controls and the accounting policies, and the overall audit process. | |||
Appointment of External Auditors | We believe that a company’s auditor is an essential feature of an effective and transparent system of external supervision. Shareholders should be given the opportunity to vote on their appointment or re-appointment at the annual meeting. We believe that it is imperative for audit committees to select outside auditors who are independent from management. | |||
Approval of Financial Statements | We believe the disclosure and availability of reliable financial statements in a timely manner is imperative for the investment process. We expect external auditors to provide assurance of a company’s financial condition. Hence, we may vote against the approval of financial statements if i) they have not been disclosed or audited; ii) the auditor opinion is qualified/adverse, or the auditor has issued a disclaimer of opinion; or iii) the auditor opinion is not disclosed. | |||
Capital Structure, Reorganization, and Mergers State Street Global Advisors believes that changes to a company’s capital structure, such as changes in authorized share capital, share repurchase and debt issuances, are critical decisions made by the board. We believe the company should have a business rationale that is consistent with corporate strategy and should not overly dilute its shareholders. | ||||
Related-Party Transactions | Most companies in emerging markets have a controlled ownership structure that often includes complex cross-shareholdings between subsidiaries and parent companies (“related companies”). As a result, there is a high prevalence of related-party transactions between the company and its various stakeholders, such as directors and management. In addition, inter-group loan and loan guarantees provided to related companies are some of the other |
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related-party transactions that increase the risk profile of companies. In markets where shareholders are required to approve such transactions, we expect companies to provide details about the transaction, such as its nature, value and purpose. This also encourages independent directors to ratify such transactions. Further, we encourage companies to describe the level of independent board oversight and the approval process, including details of any independent valuations provided by financial advisors on related-party transactions. | ||||
Share Repurchase Programs | With regard to share repurchase programs, we expect companies to clearly state the business purpose for the program and a definitive number of shares to be repurchased. | |||
Mergers and Acquisitions | Mergers or reorganization of the structure of a company often involve proposals relating to reincorporation, restructurings, liquidations and other major changes to the corporation. Proposals that are in the best interest of the shareholders, demonstrated by enhancing share value or improving the effectiveness of the company’s operations, will be supported. In general, provisions that are not viewed as financially sound or are thought to be destructive to shareholders’ rights are not supported. | |||
We evaluate mergers and structural reorganizations on a case-by-case basis. We generally support transactions that maximize shareholder value. Some of the considerations include, but are not limited to, the following: | ||||
• Offer premium | ||||
• Strategic rationale | ||||
• Board oversight of the process for the recommended transaction, including director and/ or management conflicts of interest | ||||
• Offers made at a premium and where there are no other higher bidders | ||||
• Offers in which the secondary market price is substantially lower than the net asset value | ||||
We may vote against a transaction considering the following: | ||||
• Offers with potentially damaging consequences for minority shareholders because of illiquid stock | ||||
• Offers where we believe there is a reasonable prospect for an enhanced bid or other bidders | ||||
• The current market price of the security exceeds the bid price at the time of voting |
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We will actively seek direct dialogue with the board and management of companies that we have identified through our screening processes. Such engagements may lead to further monitoring to ensure the company improves its governance or sustainability practices. In these cases, we believe the engagement process represents the most meaningful opportunity for State Street Global Advisors to protect long-term shareholder value from excessive risk due to poor governance and sustainability practices. | ||||
Compensation | We consider it to be the board’s responsibility to set appropriate levels of executive remuneration. Despite the differences among the types of plans and the potential awards, there is a simple underlying philosophy that guides our analysis of executive remuneration: there should be a direct relationship between executive compensation and company performance over the long term. In emerging markets, we encourage companies to disclose information on senior executive remuneration. | |||
Shareholders should have the opportunity to assess whether pay structures and levels are aligned with business performance. When assessing remuneration reports, we consider factors such as adequate disclosure of remuneration elements, absolute and relative pay levels, peer selection and benchmarking, the mix of long-term and short-term incentives, alignment of pay structures with shareholder interests, corporate strategy and performance. We may oppose remuneration reports where pay seems misaligned with shareholders’ interests. We may also vote against the re-election of members of the remuneration committee if we have serious concerns about remuneration practices and if the company has not been responsive to shareholder pressure to review its approach. With regard to director remuneration, we support director pay provided the amounts are not excessive relative to other issuers in the market or industry, and are not overly dilutive to existing shareholders. | ||||
Risk Management | We believe that risk management is a key function of the board, which is responsible for setting the overall risk appetite of a company and for providing oversight on the risk management process established by senior executives at a company. We allow boards to have discretion regarding the ways in which they provide oversight in this area. However, we expect companies to disclose how the board provides oversight on its risk management system and risk identification. Boards should also review existing and emerging risks that evolve in tandem with a changing political and economic landscape or as companies diversify or expand their operations into new areas. | |||
As responsible stewards, we believe in the importance of effective risk management and oversight of issues that are material to a company. To effectively assess the risk of our clients’ portfolios and the broader market, we expect our portfolio companies to manage risks and opportunities that are material and industry-specific and that have a demonstrated link to long-term value creation, and to provide high-quality disclosure of this process to shareholders. |
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Consistent with this perspective, we may seek to engage with our portfolio companies to better understand how their boards are overseeing risks and opportunities the company has deemed to be material to its business or operations. If we believe a company has failed to implement and communicate effective oversight of these risks, we may consider voting against the directors responsible. | ||||
Environmental and Social Issues | As a fiduciary, State Street Global Advisors takes a comprehensive approach to engaging with our portfolio companies about material environmental and social factors. Our Asset Stewardship program prioritization process allows us to proactively identify companies for engagement and voting in order to mitigate sustainability risks in our portfolio. Through engagement, we aim to build long-term relationships with the issuers in which we invest on behalf of our clients and to address a broad range of topics relating to the promotion of long-term shareholder value creation. When voting, we fundamentally consider whether the adoption of a shareholder proposal addressing an environmental or social topic material to the company would promote long-term shareholder value in the context of the company’s existing practices and disclosures as well as existing market practice. | |||
For more information on our approach to environmental and social issues, please see our Global Proxy Voting and Engagement Guidelines for Environmental and Social Factors, available at ssga.com/about-us/asset-stewardship.html. | ||||
General/Routine Issues | Some of the other issues that are routinely voted on in emerging markets include approving the allocation of income and accepting financial statements and statutory reports. For these voting items, our guidelines consider several factors, such as historical dividend payouts, pending litigation, governmental investigations, charges of fraud, or other indication of significant concerns. | |||
About State Street Global Advisors | For four decades, State Street Global Advisors has served the world’s governments, institutions and financial advisors. With a rigorous, risk-aware approach built on research, analysis and market-tested experience, we build from a breadth of index and active strategies to create cost-effective solutions. And, as pioneers in index, ETF, and ESG investing, we are always inventing new ways to invest. As a result, we have become the world’s fourth-largest asset manager* with US $3.48 trillion† under our care. | |||
* Pensions & Investments Research Center, as of December 31, 2021. | ||||
† This figure is presented as of December 31, 2022 and includes approximately $58.60 billion USD of assets with respect to SPDR products for which State Street Global Advisors Funds Distributors, LLC (SSGA FD) acts solely as the marketing agent. SSGA FD and State Street Global Advisors are affiliated. Please note all AUM is unaudited. |
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ssga.com
Marketing communication
State Street Global Advisors Worldwide Entities
Abu Dhabi: State Street Global Advisors Limited, ADGM branch is regulated by the Financial Services Regulatory Authority (FSRA). This document is intended for Professional Clients or Market Counterparties only as defined by the FSRA and no other person should act upon it. State Street Global Advisors Limited, ADGM Branch, Al Khatem Tower, Suite 42801, Level 28, ADGM Square, Al Maryah Island, P.O Box 76404, Abu Dhabi, United Arab Emirates. Regulated by the ADGM Financial Services Regulatory Authority. T: +971 2 245 9000. Australia: State Street Global Advisors, Australia, Limited (ABN 42 003 914 225) is the holder of an Australian Financial Services License (AFSL Number 238276). Registered office: Level 14, 420 George Street, Sydney, NSW 2000, Australia. T: +612 9240-7600. F: +612 9240-7611. Belgium: State Street Global Advisors Belgium, Chaussée de La Hulpe 185, 1170 Brussels, Belgium. T: +32 2 663 2036. State Street Global Advisors Belgium is a branch office of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose
registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. Canada: State Street Global Advisors, Ltd., 1981 McGill College Avenue, Suite 500, Montreal, Qc, H3A 3A8, T: +514 282 2400 and 30 Adelaide Street East Suite 800, Toronto, Ontario M5C 3G6. T: +647 775 5900. France: State Street Global Advisors Europe Limited, France Branch (“State Street Global Advisors France”) is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. State Street Global Advisors France is registered in France with company number RCS Nanterre 899 183 289, and its office is located at Coeur Défense — Tour A —La Défense 4, 33e étage, 100, Esplanade du Général de Gaulle, 92 931 Paris La Défense Cedex, France. T: +33 1 44 45 40 00. F: +33 1 44 45 41 92. Germany: State Street Global Advisors Europe Limited, Branch in Germany, Brienner Strasse 59, D-80333 Munich, Germany (“State Street Global Advisors Germany”). T: +49 (0)89 55878 400. State Street Global Advisors Germany is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay,
Dublin 2. Hong Kong: State Street Global Advisors Asia Limited, 68/F, Two International Finance Centre, 8 Finance Street, Central, Hong Kong. T: +852 2103-0288. F: +852 2103-0200. Ireland: State Street Global Advisors Europe Limited is regulated by the Central Bank of Ireland. Registered office address 78 Sir John Rogerson’s Quay, Dublin 2. Registered Number: 49934. T: +353 (0)1 776 3000. F: +353 (0)1 776 3300. Italy: State Street Global Advisors Europe Limited, Italy Branch (“State Street Global Advisors Italy”) is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. State Street Global Advisors Italy is registered in Italy with company number 11871450968 —REA: 2628603 and VAT number 11871450968, and its office is located at Via Ferrante Aporti, 10 - 20125 Milan, Italy. T: +39 02 32066 100. F: +39 02 32066 155. Japan: State Street Global Advisors (Japan) Co., Ltd., Toranomon Hills Mori Tower 25F 1-23-1 Toranomon, Minato-ku, Tokyo 105-6325 Japan. T: +81-3-4530-7380. Financial Instruments Business Operator, Kanto Local Financial Bureau (Kinsho #345), Membership: Japan Investment Advisers Association, The Investment Trust Association, Japan,
Japan Securities Dealers’ Association. Netherlands: State Street Global Advisors Netherlands, Apollo Building 7th floor, Herikerbergweg 29, 1101 CN Amsterdam, Netherlands. T: +31 20 7181 000. State Street Global Advisors Netherlands is a branch office of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. Singapore: State Street Global Advisors Singapore Limited, 168, Robinson Road, #33-01 Capital Tower, Singapore 068912 (Company Reg. No: 200002719D, regulated by the Monetary Authority of Singapore). T: +65 6826-7555. F: +65 6826-7501. Switzerland: State Street Global Advisors AG, Beethovenstr. 19, CH-8027 Zurich. Registered with the Register of Commerce Zurich CHE-105.078.458. T: +41 (0)44 245 70 00. F: +41 (0)44 245 70 16. United Kingdom: State Street Global Advisors Limited. Authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No. 2509928. VAT No. 5776591 81. Registered office: 20 Churchill Place, Canary Wharf, London, E14 5HJ. T: 020 3395 6000. F: 020 3395 6350. United States: State Street Global Advisors, 1 Iron Street, Boston, MA 02210-1641. T: +1 617 786 3000.
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The views expressed in this material are the views of SSGA Asset Stewardship Team through the period ended March 23, 2023 and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.
Investing involves risk including the risk of loss of principal.
The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA’s express written consent.
All information is from SSGA unless otherwise noted and has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness
of, nor liability for, decisions based on such information and it should not be relied on as such.
The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor.
The returns on a portfolio of securities which exclude companies that do not meet the portfolio’s specified ESG criteria may trail the returns on a portfolio of securities which include such companies. A portfolio’s ESG criteria may result in the portfolio investing in industry sectors or securities which underperform the market as a whole.
This communication is directed at professional clients (this includes eligible counterparties as defined by the appropriate
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Responsible-Factor (R Factor) scoring is designed by State Street to reflect certain ESG characteristics and does not represent investment performance. Results generated out of the scoring model is based on sustainability and corporate governance dimensions of a scored entity.
The information contained in this communication is not a research recommendation or ‘investment research’ and is classified as a ‘Marketing Communication’ in accordance with the Markets in Financial Instruments Directive (2014/65/EU) or applicable Swiss regulation. This means that this marketing communication (a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research (b) is not subject to any prohibition on dealing ahead of the dissemination of investment research.
© 2023 State Street Corporation.
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ID1482392-3479918.3.1.GBL.RTL 0323 Exp. Date: 03/31/2024
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March 2023
United Kingdom and Ireland
Proxy Voting and Engagement Guidelines
State Street Global Advisors’ Proxy Voting and Engagement Guidelinesi for the United Kingdom and Ireland outline our approach to voting and engaging with companies listed on stock exchanges in the United Kingdom and Ireland. These Guidelines complement and should be read in conjunction with State Street Global Advisors’ Global Proxy Voting and Engagement Principles, which outline our overall approach to voting and engaging with companies, and State Street Global Advisors’ Conflicts Mitigation Guidelines, which provide information about managing the conflicts of interests that may arise through State Street Global Advisors’ proxy voting and engagement activities.
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These Proxy Voting and Engagement Guidelines (the “Guidelines”) are also applicable to SSGA Funds Management, Inc., State Street Global Advisors Trust Company, and other advisory affiliates of State Street Corporation. Additionally, State Street Global Advisors maintains Proxy Voting and Engagement Guidelines for select markets, including: Australia, continental Europe, Japan, New Zealand, North America (Canada and the US), the UK and Ireland, and emerging markets. International markets not covered by our market-specific guidelines are reviewed and voted in a manner that is consistent with the Global Proxy Voting and Engagement Principles; however, State Street Global Advisors also endeavors to show sensitivity to local market practices when voting in these various markets. |
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State Street Global Advisors’ Proxy Voting and Engagement Guidelines for the United Kingdom (“UK”) and Ireland address our market-specific approach to topics including directors and boards, accounting and audit-related issues, capital structure, reorganization and mergers, remuneration, and other governance-related issues. | ||||
When voting and engaging with companies in global markets, we consider market-specific nuances in the manner that we believe will most likely protect and promote the long-term economic value of client investments. We expect companies to observe the relevant laws and regulations of their respective markets, as well as country-specific best practice guideliness and corporate governance codes. We may hold companies in some markets to our global standards when we feel that a country’s regulatory requirements do not address some of the key philosophical principles that we believe are fundamental to our global voting principles. | ||||
In our analysis and research into corporate governance issues in the UK and Ireland, we expect all companies that obtain a primary listing on the London Stock Exchange or the Irish Stock Exchange, regardless of domicile, to comply with the UK Corporate Governance Code (the “Code”), and proactively monitor companies’ adherence to the Code. Consistent with the ‘comply or explain’ expectations established by the Code, we encourage companies to proactively disclose their level of compliance with the Code. In instances of non-compliance in which companies cannot explain the nuances of their governance structure effectively, either publicly or through engagement, we may vote against the independent board leader. | ||||
State Street Global Advisors’ Proxy Voting and Engagement Philosophy | In our view, corporate governance and sustainability issues are an integral part of the investment process. The Asset Stewardship Team consists of investment professionals with expertise in corporate governance, remuneration, accounting, and environmental and social issues. We have established robust corporate governance principles and practices that are backed with extensive analytical expertise to understand the complexities of the corporate governance landscape. We engage with companies to provide insight on the principles and practices that drive our voting decisions. We also conduct proactive engagement to address significant shareholder concerns and issues in a manner consistent with maximizing shareholder value. | |||
The team works alongside members of State Street Global Advisors’ Active Fundamental and Europe, Middle East and Africa (“EMEA”) investment teams, collaborating on issuer engagements and providing input on company-specific fundamentals. |
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Directors and Boards | Principally, a board acts on behalf of shareholders by protecting their interests and preserving their rights. In order to carry out their primary responsibilities, directors have to undertake activities that range from setting strategy and providing guidance on strategic matters, overseeing executive management, to selecting the CEO and other senior executives, creating a succession plan for the board and management, and providing risk oversight, including of risks related to sustainability issues. Further, we believe good corporate governance necessitates the existence of effective internal controls and risk management systems, which should be governed by the board. | |||
We believe that a well-constituted board of directors, with a balance of skills, expertise and independence, provides the foundations for a well-governed company. We view board quality as a measure of director independence, director succession planning, board diversity, evaluations and refreshment, and company governance practices. We vote for the (re-)election of directors on a case-by-case basis after considering various factors, including board quality, general market practice, and availability of information on director skills and expertise. | ||||
We may also consider board performance and directors who appear to be remiss in the performance of their oversight responsibilities when analyzing their suitability for reappointment (e.g. fraud, criminal wrongdoing and breach of fiduciary responsibilities). | ||||
Board Independence | In principle, we believe independent directors are crucial to robust corporate governance and help management establish sound corporate governance policies and practices. We believe a sufficiently independent board will most effectively monitor management and perform oversight functions necessary to protect shareholder interests. | |||
Our broad criteria for director independence for UK companies include factors such as: | ||||
• Participation in related-party transactions and other business relations with the company | ||||
• Employment history with company | ||||
• Excessive tenure and a preponderance of long-tenured directors | ||||
• Relations with controlling shareholders | ||||
• Family ties with any of the company’s advisers, directors or senior employees | ||||
• Company classification of a director as non-independent |
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Director Attendance at Board Meetings |
We also consider attendance at board meetings and may withhold votes from directors who attend less than 75 percent of board meetings in a given year without appropriate explanation or providing reason for their failure to meet the attendance threshold. In addition, we monitor other factors that may influence the independence of a non-executive director, such as performance-related pay, cross-directorships and significant shareholdings.
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Classified Boards | We support the annual election of directors. | |||
Separation Chair/CEO | While we are generally supportive of having the roles of chair and CEO separated in the UK market, we assess the division of responsibilities between chair and CEO on a case-by-case basis, giving consideration to factors such as the company’s specific circumstances, overall level of independence on the board and general corporate governance standards in the company. Similarly, we monitor for circumstances in which a combined chair/CEO is appointed or a former CEO becomes chair. | |||
Board Committees | We believe companies should have committees for audit, remuneration and nomination oversight. The audit committee is responsible for monitoring the integrity of the financial statements of the company, the appointment of external auditors, auditor qualifications and independence, and effectiveness and resource levels. Similarly, executive pay is an important aspect of corporate governance, and it should be determined by the board of directors. We expect companies to have remuneration committees to provide independent oversight over executive pay. We may vote against nominees who are executive members of audit or remuneration committees. | |||
We consider whether board members have adequate skills to provide effective oversight of corporate strategy, operations and risks, including environmental and social 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. The nomination committee is responsible for evaluating and reviewing the balance of skills, knowledge, and experience of the board. It also ensures that adequate succession plans are in place for directors and the CEO. We may vote against the re-election of members of the nomination committee if, over time, the board has not addressed concerns over board structure or succession. | ||||
Poorly structured executive compensation plans pose increasing reputational risk to companies. Ongoing high level of dissent against a company’s compensation proposals may indicate that the company is not receptive to investor concerns. If the level of dissent against a company’s remuneration report and/or remuneration policy is consistently high, and we have determined that a vote against a pay-related proposal is warranted in the third consecutive year, we may vote against the Chair of the remuneration committee. |
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Board Gender Diversity | We expect boards of all listed companies to have at least one female board member and the boards of FTSE 350 companies to be composed of at least 30 percent women directors. 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. Additionally, 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. | |||
We may waive this voting guideline if a company engages with State Street Global Advisors and provides a specific, timebound plan for either reaching the 30-percent threshold (FTSE 350) or for adding a woman director (non-FTSE 350).
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Board Racial/Ethnic Diversity | Effective board oversight of a company’s long-term business strategy necessitates a diversity of perspectives, especially in terms of gender, race and ethnicity. If a company in the FTSE 350 does not disclose, at minimum, the gender, racial and ethnic composition of its board, we may vote against the Chair of the nominating committee. We may withhold support from the Chair of the nominating committee also when a company in the FTSE 100 does not have at least one director from an underrepresented racial and/or ethnic community on its board. | |||
Director Time Commitments | When voting on the election or re-election of a director, we also consider the number of outside board directorships a non-executive and an executive may undertake. Thus, State Street Global Advisors may take voting action against a director who exceeds the number of board mandates listed below: | |||
• Named Executive Officers (NEOs) of a public company who sit on more than two public company boards | ||||
• Non-executive board chairs or lead independent directors who sit on more than three public company boards | ||||
• Director nominees who sit on more than four public company boards | ||||
For non-executive board chairs/lead independent directors and director nominees who hold excessive commitments, as defined above, we may consider waiving our policy and vote in support of a director if a company discloses its director commitment policy in a publicly available manner (e.g., corporate governance guidelines, proxy statement, company website). This policy or associated disclosure must include: | ||||
• A numerical limit on public company board seats a director can serve on | ||||
– This limit cannot exceed our policy by more than one seat | ||||
• Consideration of public company board leadership positions (e.g., Committee Chair) |
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• Affirmation that all directors are currently compliant with the company policy | ||||
• Description of an annual policy review process undertaken by the Nominating Committee to evaluate outside director time commitments | ||||
If a director is imminently leaving a board and this departure is disclosed in a written, time-bound and publicly-available manner, we may consider waiving our withhold vote when evaluating the director for excessive time commitments. | ||||
Service on a mutual fund board, the board of a UK investment trust or a Special Purpose Acquisition Company (SPAC) board is not considered when evaluating directors for excessive commitments. However, we do expect these roles to be considered by nominating committees when evaluating director time commitments. | ||||
Climate-related Disclosures | State Street Global Advisors finds that the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD) provide the most effective framework for disclosure of climate-related risks and opportunities. | |||
As such, we may take voting action against companies in the FTSE 350 that fail to provide sufficient disclosure regarding climate-related risks and opportunities related to that company, or board oversight of climate-related risks and opportunities, in accordance with the TCFD framework. | ||||
Indemnification and Limitations on Liability | Generally, we support proposals to limit directors’ liability and/or expand indemnification and liability protection up to the limit provided by law. This holds if a director has not acted in bad faith, gross negligence, nor reckless disregard of the duties involved in the conduct of his or her office. | |||
Shareholder Rights | ||||
Virtual/Hybrid Shareholder Meetings | As a result of the COVID-19 pandemic, companies are increasingly conducting their shareholder meetings in a virtual or hybrid format. While we are encouraged by the success of virtual and hybrid shareholder meetings, companies and shareholders must remain vigilant in continuing to improve their virtual shareholder meeting practices. | |||
Recognizing the success of virtual and hybrid shareholder meetings and a shifting regulatory environment, we will 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 |
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• 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 of any of the criteria above, we may vote against the Chair of the nominating committee. | ||||
Accounting and Audit-Related Issues |
Companies should have robust internal audit and internal control systems designed for effective management of any potential and emerging risks to company operations and strategy. The responsibility of setting out an internal audit function lies with the audit committee, which should have as members independent non-executive directors. Appointment of External Auditors
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Appointment of External Auditors | State Street Global Advisors believes that a company’s auditor is an essential feature of an effective and transparent system of external supervision. Shareholders should be given the opportunity to vote on their appointment or re-appoint at the annual meeting. When appointing external auditors and approving audit fees, we take into consideration the level of detail in company disclosures and will generally not support such resolutions if an adequate breakdown is not provided and if non-audit fees are more than 50% of audit fees. In addition, we may vote against members of the audit committee if we have concerns with audit-related issues or if the level of non-audit fees to audit fees is significant. In certain circumstances, we may consider auditor tenure when evaluating the audit process. | |||
Limit Legal Liability of External Auditors | We generally oppose limiting the legal liability of audit firms because we believe this could create a negative impact on the quality of the audit function. | |||
Approval of Financial Statements | We believe the disclosure and availability of reliable financial statements in a timely manner is imperative for the investment process. We expect external auditors to provide assurance of a company’s financial condition. Hence, we may vote against the approval of financial statements if i) they have not been disclosed or audited; ii) the auditor opinion is qualified/adverse, or the auditor has issued a disclaimer of opinion; or iii) the auditor opinion is not disclosed. | |||
Capital Structure, Reorganization, and Mergers
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Share Issuances | The ability to raise capital is critical for companies to carry out strategy, to grow, and to achieve returns above their cost of capital. The approval of capital raising activities is essential to shareholders’ ability to monitor returns and to ensure capital is deployed efficiently. We support capital increases that have sound business reasons and are not excessive relative to a company’s existing capital base. |
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Pre-emption rights are a fundamental right for shareholders to protect their investment in a company. Where companies seek to issue new shares without pre-emption rights, we may vote against if such authorities are greater than 20% of the issued share capital. We may also vote against resolutions that seek authority to issue capital with pre-emption rights if the aggregate amount allowed seems excessive and is not justified by the board. Generally, we are against capital issuance proposals greater than 100% of the issued share capital when the proceeds are not intended for a specific purpose. | ||||
Share Repurchase Programs | We generally support a proposal to repurchase shares. However, this is not the case if the issuer does not clearly state the business purpose for the program, a definitive number of shares to be repurchased, the range of premium/discount to market price at which a company can repurchase shares, and the timeframe for the repurchase. We may vote against share repurchase requests that allow share repurchases during a takeover period. | |||
Dividends | We generally support dividend payouts that constitute 30% or more of net income. We may vote against the dividend payouts if the dividend payout ratio has been consistently below 30% without adequate explanation or the payout is excessive given the company’s financial position. Particular attention will be paid where the payment may damage the company’s long term financial health. | |||
Mergers and Acquisitions |
Mergers or reorganizing the structure of a company often involve proposals relating to reincorporation, restructurings, mergers, liquidations, and other major changes to the corporation. Proposals that are in the best interests of the shareholders, demonstrated by enhancing share value or improving the effectiveness of the company’s operations, will be supported. In general, provisions that are not viewed as financially sound or are thought to be destructive to shareholders’ rights and are not supported.
We will generally support transactions that maximize shareholder value. Some of the considerations include the following: | |||
• Offer premium | ||||
• Strategic rationale | ||||
• Board oversight of the process for the recommended transaction, including, director and/ or management conflicts of interest | ||||
• Offers made at a premium and where there are no other higher bidders | ||||
• Offers in which the secondary market price is substantially lower than the net asset value | ||||
We may vote against a transaction considering the following: | ||||
• Offers with potentially damaging consequences for minority shareholders because of illiquid stock |
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• Offers in which we believe there is a reasonable prospect for an enhanced bid or other bidders | ||||
• The current market price of the security exceeds the bid price at the time of voting
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Anti-Takeover Measures | We oppose anti-takeover defenses such as authorities for the board when subject to a hostile takeover to issue warrants convertible into shares to existing shareholders. | |||
Notice Period to Convene a General Meeting | We expect companies to give as much notice as is practicable when calling a general meeting. Generally, we are not supportive of authorizations seeking to reduce the notice period to 14 days. | |||
Remuneration
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Executive Pay |
Despite the differences among the types of plans and awards possible, there is a simple underlying philosophy that guides our analysis of executive pay: there should be a direct relationship between remuneration and company performance over the long term.
Shareholders should have the opportunity to assess whether pay structures and levels are aligned with business performance. When assessing remuneration policies and reports, we consider adequate disclosure of various remuneration elements, absolute and relative pay levels, peer selection and benchmarking, the mix of long-term and short-term incentives, alignment of pay structures with shareholder interests as well as with corporate strategy and performance. We may oppose remuneration reports where pay seems misaligned with shareholders’ interests. We may also vote against the re-election of members of the remuneration committee if we have serious concerns about remuneration practices or if the company has not been responsive to shareholder concerns. | |||
Equity Incentive Plans | We may not support proposals on equity-based incentive plans where insufficient information is provided on matters such as grant limits, performance metrics, performance, vesting periods, and overall dilution. Generally we do not support options under such plans being issued at a discount to market price or plans that allow for re-testing of performance metrics. | |||
Non-Executive Director Pay | Authorities that seek shareholder approval for non-executive directors’ fees are generally not controversial. We typically support resolutions regarding directors’ fees unless disclosure is poor and we are unable to determine whether they are excessive relative to fees paid by comparable companies. We will evaluate any non-cash or performance related pay to non-executive directors on a company- by-company basis. |
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Risk Management |
State Street Global Advisors believes that risk management is a key function of the board, which is responsible for setting the overall risk appetite of a company and for providing oversight of the risk management process established by senior executives at a company. We allow boards to have discretion over how they provide oversight in this area. However, we expect companies to disclose how the board provides oversight on its risk management system and risk identification. Boards should also review existing and emerging risks that evolve in tandem with the with a changing political and economic landscape or as companies diversify their operations into new areas.
As responsible stewards, we believe in the importance of effective risk management and oversight of issues that are material to a company. To effectively assess the risk of our clients’ portfolios and the broader market, we expect our portfolio companies to manage risks and opportunities that are material and industry-specific and that have a demonstrated link to long-term value creation, and to provide high-quality disclosure of this process to shareholders.
Consistent with this perspective, we may seek to engage with our portfolio companies to better understand how their boards are overseeing risks and opportunities the company has deemed to be material to its business or operations. If we believe a company has failed to implement and communicate effective oversight of these risks, we may consider voting against the directors responsible. | |||
Environmental and Social Issues |
As a fiduciary, State Street Global Advisors takes a comprehensive approach to engaging with our portfolio companies about material environmental and social factors. Our Asset Stewardship program prioritization process allows us to proactively identify companies for engagement and voting in order to mitigate sustainability risks in our portfolio. Through engagement, we aim to build long-term relationships with the issuers in which we invest on behalf of our clients and to address a broad range of topics relating to the promotion of long-term shareholder value creation. When voting, we fundamentally consider whether the adoption of a shareholder proposal addressing an environmental or social topic material to the company would promote long-term shareholder value in the context of the company’s existing practices and disclosures as well as existing market practice.
For more information on our approach to environmental and social issues, please see our Global Proxy Voting and Engagement Guidelines for Environmental and Social Factors, available at ssga.com/about-us/asset-stewardship.html. | |||
About State Street Global Advisors | For four decades, State Street Global Advisors has served the world’s governments, institutions and financial advisors. With a rigorous, risk-aware approach built on research, analysis and market-tested experience, we build from a breadth of index and active strategies to create cost-effective solutions. And, as pioneers in index, ETF, and ESG investing, we are always inventing new ways to invest. As a result, we have become the world’s fourth-largest asset manager* with US $3.48 trillion† under our care. | |||
* Pensions & Investments Research Center, as of December 31, 2021. | ||||
† This figure is presented as of December 31, 2022 and includes approximately $58.60 billion USD of assets with respect to SPDR products for which State Street Global Advisors Funds Distributors, LLC (SSGA FD) acts solely as the marketing agent. SSGA FD and State Street Global Advisors are affiliated. Please note all AUM is unaudited. |
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ssga.com
Marketing communication
State Street Global Advisors Worldwide Entities
Abu Dhabi: State Street Global Advisors Limited, ADGM branch is regulated by the Financial Services Regulatory Authority (FSRA). This document is intended for Professional Clients or Market Counterparties only as defined by the FSRA and no other person should act upon it. State Street Global Advisors Limited, ADGM Branch, Al Khatem Tower, Suite 42801, Level 28, ADGM Square, Al Maryah Island, P.O Box 76404, Abu Dhabi, United Arab Emirates. Regulated by the ADGM Financial Services Regulatory Authority. T: +971 2 245 9000. Australia: State Street Global Advisors, Australia, Limited (ABN 42 003 914 225) is the holder of an Australian Financial Services License (AFSL Number 238276). Registered office: Level 14, 420 George Street, Sydney, NSW 2000, Australia.
T: +612 9240-7600. F: +612 9240-7611. Belgium: State
Street Global Advisors Belgium, Chaussée de La Hulpe 185, 1170 Brussels, Belgium. T: +32 2 663 2036. State Street Global Advisors Belgium is a branch office of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. Canada: State Street Global Advisors, Ltd., 1981 McGill College Avenue, Suite 500, Montreal, Qc, H3A 3A8, T: +514 282 2400 and 30 Adelaide Street East Suite 800, Toronto, Ontario M5C 3G6. T: +647 775 5900. France: State Street Global Advisors Europe Limited, France Branch (“State Street Global Advisors France”) is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. State Street Global Advisors France is registered in France with
company number RCS Nanterre 899 183 289, and its office is located at Coeur Défense — Tour A —La Défense 4, 33e étage, 100, Esplanade du Général de Gaulle, 92 931 Paris La Défense Cedex, France. T: +33 1 44 45 40 00. F: +33 1 44 45 41 92. Germany: State Street Global Advisors Europe Limited, Branch in Germany, Brienner Strasse 59, D-80333 Munich, Germany (“State Street Global Advisors Germany”). T: +49 (0)89 55878 400. State Street Global Advisors Germany is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. Hong Kong: State Street Global Advisors Asia Limited, 68/F, Two International Finance Centre, 8 Finance Street, Central, Hong Kong. T: +852 2103-0288. F: +852 2103-0200. Ireland: State Street Global Advisors Europe
Limited is regulated by the Central Bank of Ireland. Registered office address 78 Sir John Rogerson’s Quay, Dublin 2. Registered
Number: 49934. T: +353 (0)1 776 3000. F: +353 (0)1 776 3300. Italy: State Street Global Advisors Europe Limited, Italy Branch (“State Street Global Advisors Italy”) is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. State Street Global Advisors Italy is registered in Italy with company number 11871450968 —REA: 2628603 and VAT number 11871450968, and its office is located at Via Ferrante Aporti, 10 - 20125 Milan, Italy. T: +39 02 32066 100. F: +39 02 32066 155. Japan: State Street Global Advisors (Japan) Co., Ltd., Toranomon Hills Mori Tower 25F 1-23-1 Toranomon, Minato-ku, Tokyo 105-6325 Japan. T: +81-3-4530-7380. Financial Instruments Business Operator, Kanto Local Financial Bureau (Kinsho #345), Membership: Japan Investment Advisers Association, The Investment Trust Association, Japan, Japan Securities Dealers’ Association. Netherlands: State Street Global Advisors
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Netherlands, Apollo Building 7th floor, Herikerbergweg 29, 1101 CN Amsterdam, Netherlands. T: +31 20 7181 000. State Street Global Advisors Netherlands is a branch office of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. Singapore: State Street Global Advisors Singapore Limited, 168, Robinson Road, #33-01 Capital Tower, Singapore 068912 (Company Reg. No: 200002719D, regulated by the Monetary Authority of Singapore). T: +65 6826-7555. F: +65 6826-7501. Switzerland: State Street Global Advisors AG, Beethovenstr. 19, CH-8027 Zurich. Registered with the Register of Commerce Zurich CHE-105.078.458. T: +41 (0)44 245 70 00. F: +41 (0)44 245 70 16. United Kingdom: State Street Global Advisors Limited. Authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No. 2509928. VAT No. 5776591 81. Registered office: 20 Churchill Place, Canary Wharf, London, E14 5HJ. T: 020 3395 6000. F: 020 3395 6350. United States: State Street Global Advisors, 1 Iron Street, Boston, MA 02210-1641. T: +1 617 786 3000.
The views expressed in this material are the views of SSGA Asset Stewardship Team through the period ended March 23, 2023 and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.
Investing involves risk including the risk of loss of principal.
The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA’s express written consent.
All information is from SSGA unless otherwise noted and has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.
The information provided does not constitute investment advice and it should not be relied on as such. It should not be
considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor.
The returns on a portfolio of securities which exclude companies that do not meet the portfolio’s specified ESG criteria may trail the returns on a portfolio of securities which include such companies. A portfolio’s ESG criteria may result in the portfolio investing in industry sectors or securities which underperform the market as a whole.
This communication is directed at professional clients (this includes eligible counterparties as defined by the appropriate EU regulator who are deemed both knowledgeable and experienced in matters relating to investments. The products and services to which this communication relates are only available to such persons and persons of any other description (including retail clients) should not rely on this communication.
The trademarks and service marks referenced herein are the property of their respective owners. Third party data providers make no warranties or representations of any kind
relating to the accuracy, completeness or timeliness of the data and have no liability for damages of any kind relating to the use of such data.
Responsible-Factor (R Factor) scoring is designed by State Street to reflect certain ESG characteristics and does not represent investment performance. Results generated out of the scoring model is based on sustainability and corporate governance dimensions of a scored entity.
The information contained in this communication is not a research recommendation or ‘investment research’ and is classified as a ‘Marketing Communication’ in accordance with the Markets in Financial Instruments Directive (2014/65/EU) or applicable Swiss regulation. This means that this marketing communication (a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research (b) is not subject to any prohibition on dealing ahead of the dissemination of investment research.
© 2023 State Street Corporation.
All Rights Reserved.
ID1482704-3479919.3.1.GBL.RTL 0323 Exp. Date: 03/31/2024
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Guidance Asset Stewardship
April 2023 |
Guidance on Managing Geopolitical Risk | |||
As asset stewards, we are aware of the financial risks associated with geopolitical risk, including risks arising from unexpected conflict between or among nations. Where appropriate, we may seek to mitigate relevant risks through engagements and proxy voting. | ||||
Below is our guidance and approach to stewardship in such instances in an effort to protect shareholder value. | ||||
Guidance for Impacted Companies |
We expect our portfolio companies that may be impacted by geopolitical risk to:
• Manage and mitigate risks related to operating in impacted markets, which may include financial, sanctions, regulatory, and/or reputational risks, among others;
• Strengthen board oversight of these efforts; and
• Describe these efforts in public disclosures.
In addition to these conflict-specific expectations, our existing Guidance on Human Rights Disclosures & Practices applies to all companies in our portfolio. | |||
Engagements | We may request engagements with portfolio companies that have been identified as having exposure to geopolitical risk. Our objective will be to understand how companies are disclosing and managing relevant sanctions, regulatory, reputational, human rights-related, and financial risks (e.g., disruptions to operations, supply chain, human capital management strategies), and to encourage alignment with our expectations. | |||
Proxy Voting | We may consider using proxy voting to hold boards accountable for insufficient oversight of relevant risks, in line with our existing oversight expectations for directors. | |||
Conclusion | This guidance is an example of the Asset Stewardship Team’s commitment to proactively managing risks to our portfolio in order to enhance long-term value for our clients. Please reach out to State Street Global Advisors’ Asset Stewardship Team at [email protected] to request an engagement on this topic. |
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About State Street Global Advisors |
Our clients are the world’s governments, institutions and financial advisors. To help them achieve their financial goals we live our guiding principles each and every day:
• Start with rigor • Build from breadth • Invest as stewards • Invent the future
For four decades, these principles have helped us be the quiet power in a tumultuous investing world. Helping millions of people secure their financial futures. This takes each of our employees in 29 offices around the world, and a firm-wide conviction that we can always do it better. As a result, we are the world’s fourth-largest asset manager* with US $3.62 trillion† under our care. | |||
* Pensions & Investments Research Center, as of December 31, 2021. † This figure is presented as of March 31, 2023 and includes approximately $65.03 billion USD of assets with respect to SPDR products for which State Street Global Advisors Funds Distributors, LLC (SSGA FD) acts solely as the marketing agent. SSGA FD and State Street Global Advisors are affiliated. Please note all AUM is unaudited. |
ssga.com
Marketing communications
State Street Global Advisors Worldwide Entities
Abu Dhabi: State Street Global Advisors Limited, ADGM branch is regulated by the Financial Services Regulatory Authority (FSRA).
This document is intended for Professional Clients or Market Counterparties only as defined by the FSRA and no other person should act upon it. State Street Global Advisors Limited, ADGM Branch, Al Khatem Tower, Suite 42801,
Level 28, ADGM Square, Al Maryah Island, P.O Box 76404, Abu Dhabi, United Arab Emirates. Regulated by the ADGM Financial Services Regulatory Authority. T: +971 2 245 9000. Australia: State Street Global Advisors, Australia, Limited (ABN
42 003 914 225) is the holder of an Australian Financial Services License (AFSL Number 238276). Registered office: Level 14, 420 George Street, Sydney, NSW 2000, Australia. T: +612 9240-7600. F: +612 9240-7611. Belgium: State Street Global Advisors Belgium, Chaussée de La Hulpe 185, 1170 Brussels, Belgium. T: +32 2 663 2036. State Street Global Advisors Belgium is a branch office of
State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. Canada: State Street Global Advisors, Ltd., 1981 McGill College Avenue, Suite 500, Montreal, Qc, H3A 3A8, T: +514 282 2400 and 30 Adelaide Street East Suite 800, Toronto, Ontario M5C 3G6. T: +647 775 5900. France: State Street Global Advisors Europe Limited, France Branch (“State Street Global Advisors France”) is a branch of State Street Global Advisors Europe Limited, registered in Ireland
with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. State Street Global Advisors France is registered in France with company number RCS Nanterre 899 183 289, and its office is located at Coeur Défense – Tour A – La Défense 4, 33e étage, 100, Esplanade du Général de Gaulle, 92 931 Paris La Défense Cedex, France. T: +33 1 44 45 40 00. F: +33 1 44 45 41
92. Germany: State Street Global Advisors Europe Limited, Branch in Germany, Brienner Strasse 59, D-80333 Munich, Germany (“State Street Global
|
Guidance on Managing Geopolitical Risk |
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Advisors Germany”). T: +49 (0)89 55878 400. State Street Global Advisors Germany is a branch of State Street Global
Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. Hong Kong: State Street Global Advisors Asia Limited, 68/F, Two International Finance Centre, 8 Finance Street, Central, Hong Kong. T: +852 2103-0288. F: +852 2103-0200. Ireland: State Street Global Advisors Europe Limited is regulated by the Central Bank of Ireland. Registered office address 78 Sir John Rogerson’s Quay, Dublin 2. Registered Number: 49934. T: +353 (0)1 776 3000. F: +353 (0)1 776 3300. Italy: State Street Global Advisors Europe Limited, Italy Branch (“State Street Global Advisors Italy”) is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number
49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. State Street Global Advisors Italy is registered in Italy with company number 11871450968 — REA: 2628603 and VAT number 11871450968, and its office is located at Via Ferrante Aporti, 10 - 20125 Milan, Italy. T: +39 02 32066 100. F: +39 02 32066 155. Japan: State Street Global Advisors (Japan) Co., Ltd., Toranomon Hills Mori Tower 25F 1-23-1 Toranomon, Minato-ku, Tokyo 105-6325 Japan. T: +81-3-4530-7380. Financial Instruments Business Operator, Kanto Local Financial Bureau (Kinsho #345), Membership: Japan Investment Advisers Association, The Investment Trust Association, Japan, Japan Securities Dealers’ Association. Netherlands: State Street Global Advisors Netherlands, Apollo Building 7th floor, Herikerbergweg 29, 1101 CN Amsterdam, Netherlands. T: +31 20 7181 000. State Street Global
Advisors Netherlands is a branch office of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. Singapore: State Street Global Advisors Singapore Limited, 168, Robinson Road, #33-01 Capital Tower, Singapore 068912 (Company Reg. No: 200002719D, regulated by the Monetary Authority of Singapore). T: +65 6826-7555. F: +65 6826-7501. Switzerland: State Street Global Advisors AG, Beethovenstr. 19, CH-8027 Zurich. Registered with the Register of Commerce Zurich CHE-105.078.458. T: +41 (0)44 245 70 00. F: +41 (0)44 245 70 16. United Kingdom: State Street Global Advisors Limited. Authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No. 2509928. VAT No. 5776591 81.
Registered office: 20 Churchill Place, Canary Wharf, London, E14 5HJ. T: 020 3395 6000. F: 020 3395 6350. United States: State Street Global Advisors, 1 Iron Street, Boston, MA 02210-1641. T: +1 617 786 3000.
The views expressed in this material are the views of SSGA Asset Stewardship Team through the period ended April 12, 2023 and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.
Investing involves risk including the risk of loss of principal.
The whole or any part of this work may not be reproduced, copied or
|
Guidance on Managing Geopolitical Risk |
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transmitted or any of its contents disclosed to third parties without SSGA’s express written consent.
All information is from SSGA unless otherwise noted and has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.
The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment
horizon. You should consult your tax and financial advisor.
The returns on a portfolio of securities which exclude companies that do not meet the portfolio’s specified ESG criteria may trail the returns on a portfolio of securities which include such companies. A portfolio’s ESG criteria may result in the portfolio investing in industry sectors or securities which underperform the market as a whole.
This communication is directed at professional clients (this includes eligible counterparties as defined by the appropriate EU regulator who are deemed both knowledgeable and experienced in matters relating to investments. The products and services to which this communication relates are only available to such persons and persons of any other description
(including retail clients) should not rely on this communication.
The trademarks and service marks referenced herein are the property of their respective owners. Third party data providers make no warranties or representations of any kind relating to the accuracy, completeness or timeliness of the data and have no liability for damages of any kind relating to the use of such data.
Responsible-Factor (R Factor) scoring is designed by State Street to reflect certain ESG characteristics and does not represent investment performance. Results generated out of the scoring model is based on sustainability and corporate governance dimensions of a scored entity.
The information contained in this communication is
not a research recommendation or ‘investment research’ and is classified as a ‘Marketing Communication’ in accordance with the Markets in Financial Instruments Directive (2014/65/EU) or applicable Swiss regulation. This means that this marketing communication (a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research (b) is not subject to any prohibition on dealing ahead of the dissemination of investment research.
© 2023 State Street Corporation.
All Rights Reserved.
ID1522578-4654606.2.1.GBL.RTL 0423 Exp. Date: 03/31/2024
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Insights Asset Stewardship
March 2023 |
Guidance on Climate-related Disclosures | |||||
At State Street Global Advisors, we believe that managing climate-related risks and opportunities is a key element in maximizing long-term risk-adjusted returns for our clients. As a result, we have a longstanding commitment to enhance investor-useful disclosure around this topic. We have encouraged our portfolio companies to report in accordance with recommendations of the Task Force for Climate-related Financial Disclosures (TCFD)1 since we first endorsed the framework in 2017. Since then, companies have improved the quality and quantity of climate-related disclosure and investors have matured their expectations. | ||||||
This guidance outlines our expectations with respect to the disclosure of climate-related risks and opportunities and our approach to voting and engagement on this important topic. We will continue to engage with portfolio companies to ensure investors receive the information needed to assess how companies are approaching climate-related risks and opportunities.
| ||||||
Our Expectations for Climate-related Disclosures | We expect all companies in our portfolios to offer public disclosures in accordance with the four pillars of the TCFD framework: Governance, Strategy, Risk Management, and Metrics and Targets. | |||||
1 | Governance The TCFD recommends companies describe the board’s oversight of, and management’s role in, assessing and managing climate-related risks and opportunities. | |||||
2 | Strategy The TCFD recommends companies describe identified climate-related risks and opportunities and the impact of these risks and opportunities on their businesses, strategy, and financial planning. | |||||
3 | Risk Management The TCFD recommends companies describe processes for identifying, assessing, and managing climate-related risks and describe how these processes are integrated into overall risk management. | |||||
4 |
Metrics and Targets The TCFD recommends companies disclose metrics and targets used to assess and manage climate-related risks and opportunities.
| |||||
Disclosure Expectations for Effective Climate Transition Plans |
We believe it is our responsibility to provide portfolio companies that have adopted a climate transition plan with clarity on our expectations for effective climate transition plan disclosure. |
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In developing our climate transition plan disclosure expectations, our asset stewardship team conducted an in-depth assessment of existing disclosure frameworks and standards for relevant disclosures. We considered several factors (e.g., market adoption, usefulness for decision-making, applicability across sectors) and selected a core set of disclosure expectations for companies that have adopted climate transition plans.
| ||||||
We recognize that there is no one-size-fits-all approach to reaching net-zero and that climate-related risks and opportunities can be highly nuanced across and within industries. The expectations set out below serve to provide transparency on the core criteria we expect companies that have adopted a climate transition plan to address in their related disclosures.
|
Figure 1 Key Areas of Climate Transition Disclosure |
Category |
Disclosure Expectations for Companies that Have Adopted a Climate Transition Plan
| ||||||
Ambition | • | Disclose what long-term climate ambition has been adopted by the company | ||||||
Targets | • | Disclose any interim GHG emissions reduction targets | ||||||
• | Disclose any commitment to align with temperature goals | |||||||
TCFD Disclosure | • | We promote adoption of TCFD-aligned disclosure | ||||||
• | Disclose any scenario analysis performed by the company | |||||||
• | Provide emissions reporting and assurance | |||||||
Decarbonization Strategy | • | Disclose how the company’s transition plan integrates into the company’s long-term strategy | ||||||
• | Discuss decarbonization actions | |||||||
• | Disclose carbon offsets utilization | |||||||
• | Discuss decarbonization across the value chain | |||||||
Capital Allocation Alignment | • | Disclose any integration of climate considerations into capital allocation decisions | ||||||
• | Disclose what capital expenditure is made on low carbon strategies | |||||||
• | Disclose the company’s approach to carbon pricing | |||||||
• | Disclose any investments in decarbonization | |||||||
Climate Policy Engagement | • | Disclose any climate change policies and positions | ||||||
• | Disclose any trade association review | |||||||
Climate Governance | • | Disclose board oversight of the climate transition plan | ||||||
• | Disclosure of management oversight of the climate transition plan | |||||||
Physical Risk | • | Disclose any physical risk assessment performed by the company | ||||||
• | Disclose the company’s physical risk management for identified risks | |||||||
Stakeholder Engagement | • | Disclose the company’s: | ||||||
– | Industry collaboration | |||||||
– | Investor engagement | |||||||
– | Climate expert engagement | |||||||
– | Internal engagement |
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Voting Incorporating Our Expectations into Our Proxy Voting Policies |
With respect to voting on climate-related disclosure issues, we will first engage with companies related to our climate-related disclosure expectations outlined herein, focusing on companies and industries with the greatest risk and opportunity. | |||
Director Elections |
Climate-related Disclosure Expectations
State Street Global Advisors has implemented the following proxy voting guidelines:
• We may take voting action against companies in the S&P 500, S&P/TSX Composite, FTSE 350, STOXX 600, and ASX 200 indices if companies fail to provide sufficient disclosure regarding climate-related risks and opportunities related to that company, or board oversight of climate related risks and opportunities, in accordance with the TCFD framework. |
Climate Transition Plan Disclosure Expectations for Significant Emitters As a complement to this director voting policy, we have launched an engagement campaign on climate transition plan disclosure targeting significant emitters in carbon-intensive sectors. Through our engagements, we will aim to better understand climate transition plans and strategies, and gain insight on each company’s unique set of climate-related risks and strategic opportunities presented by the transition. | ||||||
Shareholder Proposals | Climate-related Shareholder Proposals | |||||
Below is the approach when voting on climate-related shareholder proposals: | ||||||
• | FOR We will consider voting for shareholder proposals that we believe will lead to increased alignment with our expectations for climate-related disclosures; | |||||
• | ABSTAIN We will consider voting abstain when we support some elements of a proposal’s request, or recognize a company’s commitment to implement related disclosure and/or oversight practices; | |||||
• | AGAINST We will vote against shareholder proposals that we believe are immaterial, overly prescriptive, or would not further our disclosure and oversight expectations |
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Engagements Incorporating Our Expectations into Conversations with Companies | Climate continues to be a core stewardship priority for State Street Global Advisors. During engagement, we may ask companies one or more of the questions outlined below. | |||||
Governance
| ||||||
• | Where is the responsibility for climate oversight housed at the board level? How frequently does the board discuss the topic of climate change? | |||||
• | How is climate — and other ESG — experience considered in the board refreshment process? | |||||
• | How is the board incorporating key sustainability drivers into the performance evaluation of management? | |||||
• | How does management and the board utilize external expertise to stay abreast of the emerging areas of climate? | |||||
Strategy | ||||||
• | How does the company integrate climate considerations into business strategy and financial planning? | |||||
• | What actions are being considered to support efforts to reduce GHG emissions across the value chain, such as with suppliers and customers? | |||||
• | Where does the company identify the greatest opportunities for decarbonization in the short- and medium-term? | |||||
Risk Management | ||||||
• | How does the company consider climate-related risks as part of overall risk management? What is the board’s role? | |||||
• | Has the company assessed the potential impacts of physical risk on its assets and operations? | |||||
• | How does the company manage climate-related policy risks? Has the company conducted an assessment of its stated climate positions versus those of its trade and industry associations? | |||||
Metrics and Targets | ||||||
• | What metrics does the company utilize to track progress on achieving its climate goals? | |||||
• | What sources of GHG emissions contribute most significantly to the company’s carbon footprint? |
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• |
What are the biggest challenges facing the company in achieving its GHG emissions reduction targets?
| |||||
Conclusion |
We encourage companies in our portfolios to align their climate-related disclosures and practices with our expectations and at the same time we endeavor to communicate these expectations clearly to the market. Please reach out to our Asset Stewardship team at [email protected]. We look forward to engaging with you on this important topic.
| |||||
Endnotes |
1 https://fsb-tcfd.org/publications/. |
About State Street Global Advisors | For four decades, State Street Global Advisors has served the world’s governments, institutions and financial advisors. With a rigorous, risk-aware approach built on research, analysis and market-tested experience, we build from a breadth of index and active strategies to create cost-effective solutions. And, as pioneers in index, ETF, and ESG investing, we are always inventing new ways to invest. As a result, we have become the world’s fourth-largest asset manager* with US $3.48 trillion† under our care. | |||
* Pensions & Investments Research Center, as of December 31, 2021. † This figure is presented as of December 31, 2022 and includes approximately $58.60 billion USD of assets with respect to SPDR products for which State Street Global Advisors Funds Distributors, LLC (SSGA FD) acts solely as the marketing agent. SSGA FD and State Street Global Advisors are affiliated. Please note all AUM is unaudited. |
|
Guidance on Climate-related Disclosures |
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Marketing communication
State Street Global Advisors Worldwide Entities
Abu Dhabi: State Street Global Advisors Limited, ADGM branch is regulated by the Financial Services Regulatory Authority (FSRA). This document is intended for Professional Clients or Market Counterparties only as defined by the FSRA and no other person should act upon it. State Street Global Advisors Limited, ADGM Branch, Al Khatem Tower, Suite 42801, Level 28, ADGM Square, Al Maryah Island, P.O Box 76404, Abu Dhabi, United Arab Emirates. Regulated by the ADGM Financial Services Regulatory Authority. T: +971 2 245 9000. Australia: State Street Global Advisors, Australia, Limited (ABN 42 003 914 225) is the holder of an Australian Financial Services Licence (AFSL Number 238276). Registered office: Level 14, 420 George Street, Sydney, NSW 2000, Australia. T: +612 9240-7600. F: +612 9240-7611. Belgium: State Street Global Advisors Belgium, Chaussée de La Hulpe 185, 1170 Brussels, Belgium. T: +32 2 663 2036. State Street Global Advisors Belgium is a branch office of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at
78 Sir John Rogerson’s Quay, Dublin 2.
Canada: State Street Global Advisors, Ltd., 1981 McGill College Avenue, Suite 500 , Montreal, Quebec, H3A 3A8, T: +514 282 2400 and 30 Adelaide Street East Suite 800, Toronto, Ontario M5C 3G6. T: +647 775 5900. France: State Street Global Advisors Europe Limited, France Branch (“State Street Global Advisors France”) is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. State Street Global Advisors France is registered in France with company number RCS Nanterre 899 183 289, and its office is located at Coeur Défense — Tour A — La Défense 4, 33e étage, 100, Esplanade du Général de Gaulle, 92 931 Paris La Défense Cedex, France. T: +33 1 44 45 40 00. F: +33 1 44 45 41 92. Germany: State Street Global Advisors Europe Limited, Branch in Germany, Brienner Strasse 59, D-80333 Munich, Germany (“State Street Global Advisors Germany”). T +49 (0)89 55878 400. State Street Global Advisors Germany is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central
Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. Hong Kong: State Street Global Advisors Asia Limited, 68/F, Two International Finance Centre, 8 Finance Street, Central, Hong Kong. T: +852 2103-0288. F: +852 2103-0200. Ireland: State Street Global Advisors Europe Limited is regulated by the Central Bank of Ireland. Registered office address 78 Sir John Rogerson’s Quay, Dublin 2. Registered Number: 49934. T: +353 (0)1 776 3000. F: +353 (0)1 776 3300. Italy: State Street Global Advisors Europe Limited, Italy Branch (“State Street Global Advisors Italy”) is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. State Street Global Advisors Italy is registered in Italy with company number 11871450968 — REA: 2628603 and VAT number 11871450968, and its office is located at Via Ferrante Aporti, 10 - 20125 Milan, Italy. T: +39 02 32066 100. F: +39 02 32066 155. Japan: State Street Global Advisors (Japan) Co., Ltd., Toranomon Hills Mori Tower 25F 1-23-1 Toranomon, Minato-ku, Tokyo 105-6325 Japan. T: +81-3-4530-7380. Financial Instruments Business Operator, Kanto Local Financial Bureau (Kinsho #345), Membership: Japan
Investment Advisers Association, The Investment Trust Association, Japan, Japan Securities Dealers’ Association. Netherlands: State Street Global Advisors Netherlands, Apollo Building 7th floor, Herikerbergweg 29, 1101 CN Amsterdam, Netherlands. T: +31 20 7181 000. State Street Global Advisors Netherlands is a branch office of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. Singapore: State Street Global Advisors Singapore Limited, 168,Robinson Road, #33-01 Capital Tower, Singapore 068912 (Company Reg. No: 200002719D, regulated by the Monetary Authority of Singapore). T: +65 6826-7555. F: +65 6826-7501. Switzerland: State Street Global Advisors AG, Beethovenstr. 19, CH-8027 Zurich. Registered with the Register of Commerce Zurich CHE-105.078.458. T: +41 (0)44 245 70 00. F: +41 (0)44 245 70 16. United Kingdom: State Street Global Advisors Limited. Authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No. 2509928. VAT No. 5776591 81. Registered office: 20 Churchill Place, Canary Wharf, London, E14 5HJ. T: 020 3395 6000. F: 020 3395 6350. United States: State Street Global Advisors, 1 Iron Street, Boston, MA 02210-1641.
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Guidance on Climate-related Disclosures |
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The views expressed in this material are the views of SSGA Asset Stewardship Team through the period ended March 23, 2023 and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.
Investing involves risk including the risk of loss of principal.
The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA’s express written consent.
All information is from SSGA unless otherwise noted and has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy,
reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.
The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor.
The returns on a portfolio of securities which exclude companies that do not meet the portfolio’s specified ESG criteria may trail the returns on a portfolio of securities which include such companies. A portfolio’s ESG criteria may result in the portfolio investing in industry sectors or securities which underperform the market as a whole.
This communication is directed at professional
clients (this includes eligible counterparties as defined by the appropriate EU regulator) who are deemed both knowledgeable and experienced in matters relating to investments. The products and services to which this communication relates are only available to such persons and persons of any other description (including retail clients) should not rely on this communication.
The trademarks and service marks referenced herein are the property of their respective owners. Third party data providers make no warranties or representations of any kind relating to the accuracy, completeness or timeliness of the data and have no liability for damages of any kind relating to the use of such data.
Responsible-Factor (R Factor) scoring is designed by State Street to reflect certain ESG characteristics and does not represent investment performance. Results generated out of the scoring model is based on
sustainability and corporate governance dimensions of a scored entity.
The information contained in this communication is not a research recommendation or ‘investment research’ and is classified as a ‘Marketing Communication’ in accordance with the Markets in Financial Instruments Directive (2014/65/EU) or applicable Swiss regulation. This means that this marketing communication (a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research (b) is not subject to any prohibition on dealing ahead of the dissemination of investment research.
© 2023 State Street Corporation.
All Rights Reserved.
ID1483211-4117655.2.1.GBL.RTL 0323 Exp. Date: 03/31/2024
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Guidance | April 2023 | |||
Asset Stewardship | ||||
Guidance on Disclosure Expectations for Effective Climate Transition Plans | ||||
As the world mobilizes toward achieving net-zero emissions by midcentury, our portfolio companies are adopting long-term climate ambitions in increasing numbers. However, few have provided a clear roadmap to achieving these goals — and fewer asset managers have provided detail on what companies are expected to disclose as they prepare for a transition to a low-carbon economy.
State Street Global Advisors is a signatory to the Net Zero Asset Managers initiative. We encourage companies in relevant sectors1 to develop climate transition plans that take into account the risks and opportunities associated with a transition to a lower carbon economy. To that end, we believe it is our responsibility to provide portfolio companies with clarity on our expectations for effective climate transition plan disclosure to help ensure we — and the broader investor community — receive the information necessary to assess each company’s preparedness for a transition to a low-carbon economy. |
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Our Process for Developing Disclosure Expectations | The Asset Stewardship team conducted an in-depth assessment of existing ESG frameworks and standards for relevant climate-related disclosures. We considered several factors (e.g., market adoption, usefulness for decision-making, applicability across sectors, financial materiality) and selected a core set of disclosures for climate transition plans that we believe would be useful to investors like us. We leveraged existing frameworks and considered market practice to help reduce the reporting burden on companies while benefiting investors with more consistent and robust disclosure. | |||
Our selected disclosures are organized into ten categories that closely align with those found in the Institutional Investors Group on Climate Change (IIGCC) Net-Zero Investment Framework, which is a widely accepted framework that provides guidance to investors on assessing portfolio company transition plan disclosure 2. We included two additional categories, “Physical Risk” and “Stakeholder Engagement”, as we believe these are critical in understanding company performance and represent areas where disclosure practices could be improved. | ||||
Our Approach: Stakeholder Engagement |
We conducted a series of engagements with key stakeholders — portfolio companies in carbon-intensive sectors, asset owners, investor advocates and coalitions, and internal cross-functional subject matter experts — to collect feedback on our expectations and help inform our approach. Through these engagements, we identified areas of disclosure that are realistic and others where the market may need more time to coalesce around methodologies. | |||
While stakeholders generally agree on the value of considering the risks presented by the social impacts of the transition to a low-carbon economy — including on workers, communities, and customers — we found that the definition of “just transition” and related disclosure expectations is still emerging. In 2022, we conducted a series of targeted engagements with companies in key sectors including Energy, Materials, and Utilities to understand best practices and disclosure trends on managing risks and opportunities associated with workforce transformation, customer affordability, stakeholder engagement, and supply chain management, among others. We continue to prioritize engagement on this topic to inform our disclosure expectations related to just transition. | ||||
Disclosure Expectations for Effective Climate Transition Plans |
We recognize that there is no one-size-fits-all approach to climate transition plans and that climate-related risks and opportunities are highly nuanced across and within industries. The expectations set out below serve to provide transparency on the core criteria we expect companies that have adopted a climate transition plan to address in their related disclosures. | |||
We recognize this is an emerging area of disclosure and we will continue to develop our expectations over time, including consideration of any mandated disclosure by regulators. |
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Figure 1 Key Areas of Climate Transition Disclosure |
Category | Disclosure Expectations for Companies that Have Adopted a Climate Transition Plan | ||||||||
Ambition |
• Disclose what long-term climate ambition has been adopted by the company | |||||||||
Targets |
• Disclose any interim GHG emissions reduction targets | |||||||||
• Disclose any commitment to align with temperature goals | ||||||||||
TCFD Disclosure |
• We promote adoption of TCFD-aligned disclosure | |||||||||
• Disclose any scenario analysis performed by the company | ||||||||||
• Provide emissions reporting and assurance | ||||||||||
Decarbonization Strategy |
• Disclose how the company’s transition plan integrates into the company’s long-term strategy | |||||||||
• Discuss decarbonization actions | ||||||||||
• Disclose carbon offsets utilization | ||||||||||
• Discuss decarbonization across the value chain | ||||||||||
Capital Allocation Alignment |
• Disclose any integration of climate considerations into capital allocation decisions | |||||||||
• Disclose what capital expenditure is made on low carbon strategies | ||||||||||
• Disclose the company’s approach to carbon pricing | ||||||||||
• Disclose any investments in decarbonization | ||||||||||
Climate Policy Engagement |
• Disclose any climate change policies and positions | |||||||||
• Disclose any trade association review | ||||||||||
Climate Governance |
• Disclose board oversight of the climate transition plan | |||||||||
• Disclosure of management oversight of the climate transition plan | ||||||||||
Physical Risk |
• Disclose any physical risk assessment performed by the company | |||||||||
• Disclose the company’s physical risk management for identified risks |
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Stakeholder Engagement |
• Disclose the company’s: | |||||||
— |
Industry collaboration | |||||||
— |
Investor engagement | |||||||
— |
Climate expert engagement | |||||||
— |
Internal engagement |
Applying our Expectations to Proxy Voting and Engagement |
We encourage companies in relevant sectors to develop climate transition plans that take into account the risks and opportunities associated with a transition to a lower carbon economy. Through our engagements, we will aim to better understand climate transition plans and strategies, and gain insight on each company’s unique set of climate-related risks and strategic opportunities presented by the transition. We may consider taking voting action against directors of a company in a relevant sector3 if those directors fail to implement and communicate effective oversight of climate transition risks applicable to that company and fail to demonstrate responsiveness to us and sufficient disclosure following engagement. | |||
Say on Climate | ||||
While we are generally supportive of the goals of “Say on Climate” proposals because we support effective climate-related disclosure, we currently do not endorse an annual advisory climate vote. We have reservations with the potential unintended consequences of such a vote, including insulating directors from accountability, distracting from existing frameworks, and straining investors’ limited proxy voting resources. Where management chooses to include a Say on Climate vote, we assess the company’s disclosure on a case-by-case basis consistent with our Disclosure Expectations for Effective Climate Transition Plans in Figure 1 above. | ||||
We would consider supporting a “Say on Climate” shareholder proposal if the company has not provided investors with meaningful climate-related disclosure in line with our expectations, nor signaled the intention to enhance disclosure in the future. For more information on our approach to climate voting and engagement see our Guidance on Climate-related Disclosures. | ||||
Conclusion | We encourage companies in our portfolios to align their climate-related disclosures and practices with our expectations and at the same time we endeavor to communicate these expectations clearly to the market. Please reach out to our Asset Stewardship team at [email protected]. We look forward to engaging with you on this important topic | |||
Endnotes | 1 As defined by the IIGCC Net Zero Investment Framework | |||
2 SSGA referred to the IIGCC Net Zero Investment Framework which provides a list of alignment criteria for assessing transition plans for listed equity and fixed income | ||||
3 As defined by the IIGCC Net Zero Investment Framework |
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About State Street Global Advisors |
For four decades, State Street Global Advisors has served the world’s governments, institutions and financial advisors. With a rigorous, risk-aware approach built on research, analysis and market-tested experience, we build from a breadth of index and active strategies to create cost-effective solutions. And, as pioneers in index, ETF, and ESG investing, we are always inventing new ways to invest. As a result, we have become the world’s fourth-largest asset manager* with US $3.62 trillion† under our care. | |||
* Pensions & Investments Research Center, as of December 31, 2021. | ||||
† This figure is presented as of March 31, 2023 and includes approximately $65.03 billion USD of assets with respect to SPDR products for which State Street Global Advisors Funds Distributors, LLC (SSGA FD) acts solely as the marketing agent. SSGA FD and State Street Global Advisors are affiliated. Please note all AUM is unaudited. |
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ssga.com
Marketing Communication
State Street Global Advisors
Worldwide Entities
____________________________
Abu Dhabi: State Street Global Advisors Limited, ADGM branch is regulated by the Financial Services Regulatory Authority (FSRA). This document is intended for Professional Clients or Market Counterparties only as defined by the FSRA and no other person should act upon it. State Street Global Advisors Limited, ADGM Branch, Al Khatem Tower, Suite 42801, Level 28, ADGM Square, Al Maryah Island, P.O Box 76404, Abu Dhabi, United Arab Emirates. Regulated by the ADGM Financial Services Regulatory Authority. T: +971 2 245 9000. Australia: State Street Global Advisors, Australia, Limited (ABN 42 003 914 225) is the holder of an Australian Financial Services License (AFSL Number 238276). Registered office: Level 14, 420 George Street, Sydney, NSW 2000, Australia. T: +612 9240-7600. F: +612 9240-7611. Belgium: State Street Global Advisors Belgium, Chaussée de La Hulpe 185, 1170 Brussels, Belgium. T: +32 2 663 2036.
State Street Global Advisors Belgium is a branch office of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. Canada: State Street Global Advisors, Ltd., 1981 McGill College Avenue, Suite 500, Montreal, Qc, H3A 3A8, T: +514 282 2400 and 30 Adelaide Street East Suite 800, Toronto, Ontario M5C 3G6. T: +647 775 5900. France: State Street Global Advisors Europe Limited, France Branch (“State Street Global Advisors France”) is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. State Street Global Advisors France is registered in France with company number RCS Nanterre 899 183 289, and its office is located at Coeur Défense — Tour A — La Défense 4, 33e étage, 100, Esplanade du Général de Gaulle, 92 931 Paris La Défense Cedex, France.
T: +33 1 44 45 40 00. F: +33 1 44 45 41 92. Germany: State Street Global Advisors Europe Limited, Branch in Germany, Brienner Strasse 59, D-80333 Munich, Germany (“State Street Global Advisors Germany”). T: +49 (0)89 55878 400. State Street Global Advisors Germany is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. Hong Kong: State Street Global Advisors Asia Limited, 68/F, Two International Finance Centre, 8 Finance Street, Central, Hong Kong. T: +852 2103-0288. F: +852 2103-0200. Ireland: State Street Global Advisors Europe Limited is regulated by the Central Bank of Ireland. Registered office address 78 Sir John Rogerson’s Quay, Dublin 2. Registered Number: 49934. T: +353 (0)1 776 3000. F: +353 (0)1 776 3300. Italy: State Street Global Advisors Europe Limited, Italy Branch (“State Street Global Advisors Italy”) is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934,
authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. State Street Global Advisors Italy is registered in Italy with company number 11871450968 — REA: 2628603 and VAT number 11871450968, and its office is located at Via Ferrante Aporti, 10 - 20125 Milan, Italy. T: +39 02 32066 100. F: +39 02 32066 155. Japan: State Street Global Advisors (Japan) Co., Ltd., Toranomon Hills Mori Tower 25F 1-23-1 Toranomon, Minato-ku, Tokyo 105-6325 Japan. T: +81-3-4530-7380. Financial Instruments Business Operator, Kanto Local Financial Bureau (Kinsho #345), Membership: Japan Investment Advisers Association, The Investment Trust Association, Japan, Japan Securities Dealers’ Association. Netherlands: State Street Global Advisors Netherlands, Apollo Building 7th floor, Herikerbergweg 29, 1101 CN Amsterdam, Netherlands. T: +31 20 7181 000. State Street Global Advisors Netherlands is a branch office of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934,
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authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. Singapore: State Street Global Advisors Singapore Limited, 168, Robinson Road, #33-01 Capital Tower, Singapore 068912 (Company Reg. No: 200002719D, regulated by the Monetary Authority of Singapore). T: +65 6826-7555. F: +65 6826-7501. Switzerland: State Street Global Advisors AG, Beethovenstr. 19, CH-8027 Zurich. Registered with the Register of Commerce Zurich CHE-105.078.458. T: +41 (0)44 245 70 00. F: +41 (0)44 245 70 16. United Kingdom: State Street Global Advisors Limited. Authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No. 2509928. VAT No. 5776591 81. Registered office: 20 Churchill Place, Canary Wharf, London, E14 5HJ. T: 020 3395 6000. F: 020 3395 6350. United States: State Street Global Advisors, 1 Iron Street, Boston, MA 02210-1641.
Investing involves risk including the risk of loss of principal.
The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor.
The information contained in this communication is not a research recommendation or ‘investment research’ and is classified as a ‘Marketing Communication’ in accordance with the Markets in Financial Instruments Directive (2014/65/EU) or applicable Swiss regulation. This means that this marketing communication (a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research (b) is not subject to any prohibition on dealing ahead of the dissemination of investment research.
All information is from SSGA unless otherwise noted and
has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.
The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without State Street Global Advisors’ express written consent.
ETFs trade like stocks, are subject to investment risk and will fluctuate in market value. The investment return and principal value of an investment will fluctuate in value, so that when shares are sold or redeemed, they may be worth more or less than when they were purchased. Although shares may be bought or sold on an exchange through any brokerage account, shares are not individually redeemable from the fund. Investors may acquire shares and tender them for redemption through the fund in large aggregations known as “creation units.” Please see
the fund’s prospectus for more details.
The returns on a portfolio of securities which exclude companies that do not meet the portfolio’s specified ESG criteria may trail the returns on a portfolio of securities which include such companies. A portfolio’s ESG criteria may result in the portfolio investing in industry sectors or securities which underperform the market as a whole.
Equity securities may fluctuate in value and can decline significantly in response to the activities of individual companies and general market and economic conditions
The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without State Street Global Advisors’ express written consent.
© 2023 State Street Corporation.
All Rights Reserved.
ID1523300- 4117397.4.1.GBL.RTL 0423 Exp. Date: 05/31/2024
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Insights |
| |||
Asset Stewardship |
Guidance on Environmental
Management Disclosures
| |||
March 2023 | ||||
Addressing Deforestation Risk
in Supply Chains
| ||||
Key Takeaways |
• Global deforestation is a major driver of biodiversity loss and climate change, and has significant environmental, social and financial implications for ecosystems, communities, companies and investors. | |||
• Deforestation presents a risk to companies with material links to this practice in their supply chains and investments, and should be disclosed and managed like any other business risk. | ||||
• In response to heightened regulatory, reputational, and financial risks, boards and management teams of companies which source and produce commodities at high risk of deforestation, or finance these activities, should respond accordingly. This includes managing deforestation and land degradation risk in their supply chains and enhancing disclosure on these efforts. | ||||
• There is no standard framework among companies to establish deforestation policies or disclose related oversight practices, risk management efforts, targets and commitments, or performance KPIs, making it difficult for investors to assess exposure to material deforestation-related risks. | ||||
• Partnerships with regional policymakers and local stakeholders are a critical component of managing deforestation-related risks in the supply chain. Successful approaches include public-private partnerships with local policymakers, inclusive training of the local workforce in more sustainable practices, protection of human rights and the respect of Free, Prior and Informed Consent (“FPIC”) of local communities. | ||||
• While nearly 80% of the companies we engaged with acknowledge the value of forests in their public disclosures, only 21% formally recognize deforestation as a business risk. | ||||
• Among the companies engaged, 58% are signatories to initiatives tackling deforestation. To achieve effective management of deforestation risk, companies should consider following this first step with enhanced sustainable business practices, supply chain risk mitigation, robust board oversight and disclosure of these efforts. |
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Background | Deforestation is a major driver of biodiversity loss and climate change, and has significant environmental, social and financial implications for ecosystems, communities, companies, and investors. Globally, forests are disappearing at increasing rates. Since 2015, an estimated 10 million hectares of forests have been lost every year, primarily driven by commercial agriculture and production of commodities, including palm oil, soy and cattle.1 | |||
Forests represent environmental and social value, providing habitat for over 80% of the world’s terrestrial biodiversity and supporting livelihoods for human populations living in and near these forests.2 As critical carbon sinks, forests also play an important role in climate change mitigation, absorbing up to 30% of carbon emissions from industry and fossil fuels every year.3 | ||||
Article 5 of the Paris Climate Agreement4 recognizes deforestation as a key component of mitigating greenhouse gas (GHG) emissions with the IPCC stating that deforestation and conversion of natural ecosystems to human uses contributes 11% of global GHG emissions.5 Tropical deforestation alone contributes 7%, mostly driven by the production of agricultural and forest commodities. As the world moves toward achieving net-zero emissions by midcentury, our portfolio companies exposed to deforestation and land degradation in their value chains must consider these topics when adopting long-term climate ambitions. | ||||
Deforestation can also have human rights-related implications, resulting in headline, human capital and legal risk for companies with exposure to land degradation practices in their supply chain. This includes the potential displacement of local communities and destruction of areas that provide cultural importance or essential resources such as food, fuel and medicine.6 A growing body of evidence has also linked deforestation to outbreaks of infectious disease among local communities and workforces,7 as native animal species are forced out of their habitats to live among human populations. | ||||
Global momentum around addressing deforestation and nature loss has accelerated with the launch of the Task Force on Nature-related Financial Disclosures (TNFD)8 and the focus on nature as part of the COP 26 agenda. Among the various nature-related commitments to come out of the summit, the most pertinent to addressing deforestation was the Glasgow Leaders’ Declaration on Forest and Land Use. Countries hosting 90% of global forests, along with financial institutions and companies, signed a pledge to “halt and reverse forest loss and land degradation by 2030 while delivering sustainable development and promoting an inclusive rural transformation.”9 | ||||
For companies contributing to deforestation through their supply chains and investments, these trends represent a significant shift requiring a renewed approach to their services, products and engagement culture with stakeholders. Aside from presenting an inherent business risk, companies with deforestation exposure are facing heightened regulatory, reputational, and financial risk. At State Street Global Advisors, we believe it is important for boards and management to work to manage risks related to deforestation and land degradation in their supply chains and to enhance disclosure around these efforts. |
|
Guidance on Environmental Management Disclosures Addressing Deforestation Risk in Supply Chains |
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Stewardship Focus Area: Land Use & Biodiversity |
Deforestation is an increasingly important area of focus for the State Street Global Advisors’ Asset Stewardship program. Environmental management — spanning topics that include land use, biodiversity, natural resources and the circular economy — has been a thematic stewardship priority for our program for several years. Effective environmental management encompasses all environmental impacts, within both a company’s operations and its supply chain. In 2022, our team will deepen our focus on land use and biodiversity, conducting targeted engagement campaigns, providing guidance to our investee companies and publishing thought leadership on these subjects.
| |||
Deforestation Engagement Campaign | In 2021, we initiated a series of targeted engagements with our investee companies with direct exposure to deforestation in their supply chains — primarily those that source agricultural and forest commodities. Our objective was to learn more about how these companies exercise oversight of their supply chains and how they are managing the various material risks stemming from deforestation. | |||
We relied on existing frameworks, including those from the CDP,10 Sustainability Accounting Standards Board (SASB),11 United Nations Environment Program (UNEP),12 United Nations Global Compact (UNGC),13 and Ceres14 to identify high-impact sectors, and engaged 15 of our significant holdings in those sectors to request in-depth engagements (see the Appendix for a list of companies engaged). | ||||
We chose to focus on engaging companies in the Food & Beverage and Consumer Goods sectors, due to their usage or production of the core commodities and activities responsible for the majority of agriculture-related deforestation. This includes, but is not limited to, cattle, palm oil, cocoa, leather, rubber, soy, timber and mining. | ||||
Our conversations with companies centered on topics including: | ||||
• Supply chain risk management; | ||||
• Product certifications & industry organizations; | ||||
• Participation in the policymaking process; | ||||
• Land rights preservation and community stakeholder engagement; | ||||
• Human rights and FPIC of local communities; | ||||
• Ingredient traceability and identifying high-risk commodities; | ||||
• Reputational risk and evolving consumer preferences; | ||||
• The shifting regulatory context; and | ||||
• Board oversight of deforestation-related risks. |
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Guidance on Environmental Management Disclosures Addressing Deforestation Risk in Supply Chains |
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We also engaged with external experts including non-governmental organizations, issue advocates, academic institutions and industry coalitions to understand their perspectives on managing risks related to deforestation. The individuals from these groups helped inform our engagement approach and contextualize our insights gleaned from these conversations. |
Engagement Insights | As a result of our engagements and review of company disclosure practices, we identified the following key challenges that companies face and some potential best practices they have adopted to identify and address deforestation risks in their supply chain. These insights are discussed in further detail in the sections below. | |||
• Supply Chain Risk Management While many of the engaged companies have established supplier code of conducts, ongoing monitoring and non-compliance protocols differentiate leaders from laggards. Challengingly, a lack of industry consensus exists regarding how to engage non-compliant suppliers, stalling the implementation of no-deforestation commitments and allowing product produced on deforested lands to enter global supply chains. | ||||
• Integrity of Auditing Process During the Pandemic Due to safety concerns of conducting in-person audits during the ongoing pandemic, companies have had to pivot and virtually engage in innovative ways, including satellite monitoring and wearable technology. While the pandemic catalyzed innovation, this remote monitoring should be coupled with a return to recurring on-the-ground engagement to be most effective. | ||||
• Product Certification Several industry standard-setters play a critical role in defining industry best practices for product certification, but our investee companies echoed the belief that membership and certification are a floor for risk management, not a ceiling. | ||||
• Government Relations and Policymaking Process Challenges arise for companies when working with local governments with weak land use policies and lax enforcement by authorities. Pragmatic public-private partnerships with local policymakers and international organizations can fortify company efforts to create a more resilient supply chain, protect shareholder value, and benefit local stakeholders. | ||||
• Community Engagement & Protection of Human Rights While often characterized as an environmental risk, deforestation also presents a number of social risks that companies must consider. Companies should adopt policies that address indigenous rights such as FPIC and broader human rights topics, such as forced or child labor. Strong policies on these topics should be supported by stakeholder engagement in the value chain so that companies will have access to unfiltered information and perspectives from key communities. |
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• No-Deforestation Commitments, Metrics & KPIs In our earlier publication, “Effective Climate-Risk Disclosure in the Agricultural and Forestry Sectors through the Lens of the Task Force on Climate-related Financial Disclosures” we highlighted the need for companies in high-impact sectors to set goals to reduce their carbon emissions. Similar timebound goals should be considered when managing deforestation-related risks stemming from key commodities in the supply chain. | ||||
Disclosure Insights | ||||
The 15 companies we engaged disclose the following information related to deforestation: | ||||
• 79% acknowledge the value of forests; | ||||
• 58% are signatories to initiatives tackling deforestation; | ||||
• 50% have established senior-level oversight and reporting structures for deforestation-related risks; | ||||
• 21% formally recognize deforestation as a business risk; and | ||||
• 14% have integrated performance metrics related to deforestation-linked commodities into their executive compensation and broader performance evaluation programs. | ||||
Disclosure Expectations for Companies | Companies with material exposure to deforestation in their value chain and/or investments should continue to improve their disclosure in the following areas: | |||
• Board-level oversight and accountability for deforestation and land use-related risks | ||||
• Reporting and targets to reduce emissions linked to deforestation | ||||
• Conservation or reforestation activity taken by the company | ||||
• How deforestation is managed as a business risk | ||||
• Quantitative and qualitative metrics covering high-risk commodities across value chain
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Identifying and Mitigating Risks in the Supply Chain | Supplier Engagement An end-to-end approach to ongoing supplier engagement is an essential component of risk management for companies with exposure to deforestation-related commodities. In our engagement with Conagra Brands, an American consumer packaged goods company, we learned how its Supplier Excellence Program facilitates engagement with the company’s vendors. Conagra assesses key suppliers at least annually on ESG risk-related performance and disclosure. This annual sustainability assessment is supplemented by quarterly performance discussions and risk analyses, and regular consultation between all parties to address any operational issues or gaps in disclosure. | |||
Supplier Monitoring | While many of the engaged companies have established supplier code of conducts, ongoing supplier monitoring for compliance with these codes can prove difficult to implement and requires regular independent review. At Hormel Foods Corporation, an American food processing company, the company’s South American beef suppliers have ensured their compliance with relevant requirements by creating monitoring systems for farms supplying cattle, leveraging satellite images and geo-referenced maps of farms, deforestation data and information from public agencies regarding embargoed? areas and human rights. This oversight is coupled with independent audits of all environmental monitoring systems. | |||
Supplier Non-Compliance | Companies without a defined protocol for dealing with non-compliant suppliers may have greater exposure to deforestation risk and may suffer reputational and/or legal consequences by working with suppliers that are misaligned with policy expectations. We found a lack of consensus on how companies engage with non-compliant suppliers, which can delay the termination of relationships with suppliers that fail to adequately address deforestation. Post Holdings, Inc., an American consumer packaged goods company, requires its suppliers to follow an annually reviewed code of conduct, and any potential breach of this conduct is reviewed in a consistent and transparent manner. Industry organizations like the Global Food Safety Initiative (GFSI) ensure that third-party operations audits assist in identifying non-compliant suppliers and share this information among members. | |||
High Risk Commodity Exposure | The investee companies we engaged with shared a variety of approaches to identifying key ingredients in their products, as well as which commodities were most exposed to deforestation risk. These prioritization frameworks were generally holistic, science-based, and dependent on robust supply chain audits. The results of the identification process are paramount, as they inform the metrics and key performance indicators of companies’ deforestation policies and commitments. We learned how The Kraft Heinz Company, an American multinational food company partnered with the Rainforest Alliance, an NGO, to expand its forest risk commodities supply chain assessment to include soy. This work included surveying their suppliers, evaluating sustainable product certifications and better understanding sourcing risks based on counties of origin. The findings from this exercise were material, with over a third of the company’s global soy volume sourced from potential high-risk counties of origin. |
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COVID-19 Supply Chain Auditing Challenges | The global COVID-19 pandemic limited abilities to conduct in-person audits of suppliers, catalyzing innovation in virtual monitoring, while raising questions about the effectiveness of this method in the long-term. Some of our investee companies reported investing further in satellite monitoring capabilities, while others explored new solutions like wearable technology. Post Holdings, Inc equipped on-site employees with Google Glasses to connect with virtual teams to complete multi-party audits in real time. Several of the engaged companies also emphasized the need to maintain employee privacy and ensure that these remote tools don’t breach these obligations or trust. Safely fast-tracking the adoption of these new technologies, while preserving employee privacy and protecting against cybersecurity threats, were both expressed as continued focus areas for our investee companies. | |||
Product Certifications & Industry Organizations | Many of our investee companies emphasized the importance of participating in industry organizations to mitigate risk and work with their suppliers. These organizations provide certifications for companies who fulfill the required environmental and social criteria. Organizations frequently cited in our engagements included: | |||
• the Roundtable on Sustainable Palm Oil (RSPO); | ||||
• the Forest Stewardship Council, (FSC); | ||||
• the Sustainable Forest Initiative (SFI); | ||||
• the Program for Forest Endorsement (PEFC); and | ||||
• USDA Organic
|
These standard-setters play a critical role in defining industry best practices and encouraging stronger oversight practices, but our investee companies echoed our belief that membership and certification are a floor for risk management, not a ceiling. Compliance with the standards and receiving certification are a strong initial step, but companies cannot be overly reliant on this process and take this as a proxy for total risk mitigation. | ||||
Engaging with Policymakers and Local Governments |
Participating in industry coalitions and obtaining certification are valuable in creating more sustainable and resilient supply chains, and mitigating social and reputational risk. However, these mechanisms are largely voluntary, and their effectiveness for member companies depends on the jurisdiction their supply chains are located in. Several investee companies told us of the challenge posed when working with local governments with weak land use policies and lax enforcement by authorities. To achieve the systemic change required to meet the 2030 Glasgow pledge, and to mitigate continued environmental and social risk stemming from deforestation practices, companies may need to consider how to best participate in the policy-making conversation. |
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Highlighting the outsized impact one company’s efforts can have in this process, Mondelez International, Inc., an American multinational confectionery, food, holding and beverage and snack food company, has spent ten years fostering multi-lateral public-private partnerships in one of its critical supply chain domiciles, sub-Saharan Africa. In Ghana, the company developed “Cocoa Life”,15 a program which incentivizes cocoa farmers to adopt more sustainable practices through increased economic benefits like achieving higher yields using less fertilizers and land. Mondelez built on this progress by announcing a formal partnership with the Forest Commission of Ghana, Cocoa Board and United Nations Development Program (“UNDP”) to reduce deforestation and forest degradation in the country while simultaneously reducing emissions in its cocoa supply chain. | ||||
Pragmatic public-private partnerships with local policymakers and international organizations can fortify company efforts to improve supply chain resilience, protect shareholder value, and benefit local stakeholders. | ||||
Addressing Evolving Shareholder & Stakeholder Expectations |
In recent years, evolving consumer preferences and increased awareness of deforestation’s impacts — particularly its contribution to biodiversity loss and climate change — have led issue advocates and investors to demand enhanced disclosure from companies exposed to deforestation risk. Since 2016, 11 deforestation-related shareholder proposals have been submitted to a shareholder vote, with two of them receiving majority support for the first time in 2021.16 Following the submission of one such proposal at Procter & Gamble, an American multinational consumer goods corporation, requesting that the company report on efforts to eliminate deforestation from its forest pulp and palm oil supply chain, Procter & Gamble responded across several fronts. These actions included implementing public grievance reporting, strengthening its palm oil sourcing policy, advancing company conservation and restoration efforts and accelerating its RSPO certification targets to 2021 from 2022. Investors, issue advocates and consumers will likely continue to hold companies accountable through deforestation-related shareholder proposals moving forward, and boards should prepare to strengthen their disclosure efforts and management oversight accordingly. |
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Preserving Land Rights and Engaging with Community Stakeholders | Effective approaches to acting on deforestation-related commitments must consider the land rights and livelihoods of local people, particularly indigenous communities. As part of Bunge Limited’s commitment to reaching deforestation-free value chains by 2025, we learned how the American agribusiness and food company engages with farmers to protect native vegetation and establishes incentives to support this shift to more sustainable value chains. This process includes fairly compensating farmers who commit to sustainable agricultural practices and avoid negative conversion, discouraging the practice of converting forested land to agriculture in favor of expanding across areas already open for production. | |||
Protecting Human Rights and Respecting FPIC of Local Communities | A critical component of fostering sustainable value chains is the protection of human rights and respect of FPIC of local communities. Responding to feedback from issue advocates, Kellogg Company, an American multinational food manufacturing company, materially revised its deforestation-related commitments to protect local stakeholders in the communities with exposure to its supply chain. These pledges include immediately suspending company groups which perpetrate threats and violence towards human rights advocates, communities and workers. The company also committed to participate in and fund jurisdictional and landscape approaches which fully respect the FPIC of local communities. | |||
Establishing Deforestation Policies and Commitments | Several of the companies we engaged with have committed to establishing no-deforestation ambitions within their supply chains covering key commodities. These policies tend to have time horizons ranging from 2025 to 2030, in line with the global pledge made at COP26. In the absence of a common industry disclosure framework on this subject, the implementation and associated disclosure of these plans varies by company. The Kroger Co., an American retail company that operates supermarkets and multi-department stores, articulated its commitment to source from deforestation-free processes across its four key commodities of palm oil, beef, soy and pulp/paper/timber, with varying implementation mechanisms and certifications for each commodity. | |||
Measuring Success |
As companies navigate the aforementioned challenges, there are a range of deforestation-related metrics and KPIs being used to measure success. High-level goals are typically supported by commodity-specific objectives on varying timelines, and progress against these objectives is shared with management, the board and shareholders. For example, The Campbell Soup Company, an American processed food and snack company is focused on reaching 100% of its suppliers passing a social compliance audit by 2025, while achieving equal success in determining accurate country of origin traceability on products derived from high-risk commodities. Mondelez International Inc. continues to report on 10 KPIs associated with its Cocoa Life project, covering target topics in the value chain, including elimination of child labor, supplier compliance certification, and ingredient traceability. Clorox Company, an American global manufacturer and marketer of consumer and professional products has committed to halve the amount of virgin plastic and virgin fiber used in packaging by 2030.
To build on these initial efforts, stakeholders in our engagements expressed the need for a standardized disclosure framework that provides added transparency on how companies are performing against any deforestation-related targets and commitments. Benefits cited include defining relative and absolute performance thresholds and incentivizing the adoption of better practices among industry peers. |
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Conclusion | At State Street Global Advisors, we believe that global deforestation — namely its direct linkage to biodiversity loss and climate change — presents a risk to companies with material exposure to this practice in their supply chains and investments, and should be disclosed and managed like any other business risk. This perspective, along with our fiduciary duty to act on behalf of our clients’ long-term interests, informs our asset stewardship efforts on this topic. By sharing these insights from our targeted engagement campaign and analysis of public disclosures, our intention is to equip Boards to more effectively respond to the threat of deforestation. | |||
Companies in high-exposure sectors are taking various steps to address risks related to global deforestation in their supply chain and investments, but there are a number of challenges they face while identifying and remediating these issues. We will continue to engage with companies to inform our ongoing efforts in this space. Please reach out to our team at [email protected] to request an engagement on this important topic. |
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Appendix: Companies Engaged as Part of Deforestation Engagement Campaign |
Company Name | Market/Country | Sector | |||||
AGCO Corporation |
United States |
Resource Transformation | ||||||
Bunge Limited |
United States |
Food & Beverage | ||||||
Campbell Soup Company |
United States |
Food & Beverage | ||||||
Conagra Brands, Inc. |
United States |
Food & Beverage | ||||||
Darden Restaurants, Inc. |
United States |
Food & Beverage | ||||||
Hormel Foods Corporation |
United States |
Food & Beverage | ||||||
Kellogg Company |
United States |
Food & Beverage | ||||||
Mondelez International, Inc. |
United States |
Food & Beverage | ||||||
Post Holdings, Inc. |
United States |
Food & Beverage | ||||||
The Clorox Company |
United States |
Consumer Goods | ||||||
The J.M. Smucker Company |
United States |
Food & Beverage | ||||||
The Kraft Heinz Company |
United States |
Food & Beverage | ||||||
The Procter & Gamble Company |
United States |
Consumer Goods | ||||||
The Kroger Co. |
United States |
Food & Beverage | ||||||
Weyerhaeuser Company |
United States |
Renewable Resources & Alternative Energy |
Endnotes |
1 Global Forest Resources Assessment 2020 — Key findings” Food and Agriculture Organization of the United Nations. (2020) http://fao.org/3/CA8753EN/ CA8753EN.pdf.
2 “Forests Sourcebook: Practical Guidance For Sustaining Forests In Development Cooperation” World Bank-WWF Alliance for Forest Conservation and Sustainable Use (2008) World Bank Document.
3 Labbate, Gabriel. “Deforestation Factsheet”, United Nations Environment Programme, (April 2021), https://wedocs.unep.org/bitstream/ handle/20.500.11822/35851/DF.pdf.
4 “Paris Agreement”. United Nations Framework Convention on Climate Change. (April 2016).
5 “Climate Change and Land: An IPCC Special Report on climate change, desertification, land degradation, sustainable land management, food security, and greenhouse gas fluxes in terrestrial ecosystems”, Intergovernmental Panel on Climate Change, (January 2020), https://ipcc.ch/site/assets/uploads/ sites/4/2020/02/SPM_Updated-Jan20.pdf.
6 “Indonesia: Indigenous Peoples Losing Their Forests” Human Rights Watch (September 2019) hrw.org/ news/2019/09/22/indonesia-indigenous-peoples-losing-their-forests#. |
7 Gross, Anna. Schipani, Andres. Palma, Stefania. Findlay, Stephanie. “Global Deforestation Accelerates During the Pandemic”, The Financial Times, (August 2020), https://ft.com/content/b72e3969-522c-4e83-b431-c0b498754b2d.
8 “The TNFD Nature-related & Opportunity Management and Disclosure Framework” Taskforce on Nature-related Financial Disclosures, (March 2020) https://tnfd. global/wp-content/uploads/2022/03/220321-TNFD- framework-beta-v0.1-Exec-Summary-FINAL.pdf.
9 “Glasgow Leaders’ Declaration on Forests and Land Use”,
UN Climate Change Conference UK 2021, (February 2021), https://ukcop26.org/glasgow-leaders-declaration-on-forests-and-
10 “The Collective Effort to End Deforestation: A Pathway For Companies to Raise Their Ambition”, CDP, (March 2021), https://cdn.cdp.net/cdp-production/cms/reports/ documents/000/005/630/original/CDP_Forests_ analysis_report_2020.pdf?1616334771.
11 “Processed Foods: Sustainability Accounting Standard”, Sustainability Accounting Standards Board, (October 2018) https://sasb.org/wp-content/ uploads/2018/11/ Processed_Foods_Standard_2018.pdf. |
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12 Labbate, Gabriel. “Deforestation Factsheet”, United Nations Environment Programme, (April 2021), https://wedocs.unep.org/bitstream/ handle/20.500.11822/35851/DF.pdf.
13 “A Spotlight on Sustainable Supply Chain & Procurement”, United Nations Global Compact (December 2021), https://unglobalcompact.org/take- action/leadership/integrate-sustainability/roadmap/ supply-chain.
14 “The Investor Guide to Deforestation and Climate Change”, Ceres, (June 2020), https://ceres.org/sites/ default/files/reports/2020-06/Ceres%20Investor%20 Guide%20FINAL%20June%2029.pdf. |
15 Van Cutsem, Cedric. “Action Plans to Protect and Restore Forests, with Farmers at the Heart”, Cocoa Life: Mondelez International, (March 2019). https://cocoalife. org/progress/action-plans-to-protect-and-restore- forests-with-cocoa-life-farmers-at-the-heart.
16 Dhanasarnsombat, Sansanee. “Deforestation Shareholder Proposals Wins Signals a Shift”, Bloomberg Law, (August 2021). https://news. bloomberglaw.com/ bloomberg-law-analysis/analysis-deforestation-shareholder-proposal-wins-signal-a-shift. |
About State Street Global Advisors |
Our clients are the world’s governments, institutions and financial advisors. To help them achieve their financial goals we live our guiding principles each and every day:
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For four decades, these principles have helped us be the quiet power in a tumultuous investing world. Helping millions of people secure their financial futures. This takes each of our employees in 29 offices around the world, and a firm-wide conviction that we can always do it better. As a result, we are the world’s fourth-largest asset manager* with US $3.48 trillion† under our care.
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May 2023
Asset Stewardship
Guidance on Human Rights Disclosures & Practices
State Street Global Advisors is committed to upholding human rights, and we expect our investee companies to as well given the reputational, regulatory, legal, and operational risks that human rights violations can pose to a company. We expect portfolio companies to regularly identify whether there are risks related to human rights1 in their operations and manage any material risks that emerge, providing relevant disclosures to investors.
1 |
As defined in the Universal Declaration of Human Rights and the ILO Declaration on Fundamental Principles and Rights at Work. |
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Our Expectations for Human Rights Disclosures |
We expect companies to disclose whether they have established processes for identifying risks related to human rights. If any material human rights risks are identified, we expect further public disclosure describing:
1. Human rights-related risks the company considers most material;
2. Plans to manage and mitigate these risks;
3. Board oversight of these risks; and
4. Assessment of the effectiveness of the human rights risk management program. | |||
State Street Global Advisors believes that best practices for enhancing human rights-related disclosures include describing: | ||||
• Specific geographic regions, industries, resources, or types of workforce where the risk is highest;
• How workers, civil society organizations, and other stakeholders are involved in identifying and mitigating issues;
• Which mechanisms exist for workers to raise grievances without fear of retaliation; and
• How the company supports impacted individuals in providing restorative remedy. | ||||
Engagements | Incorporating Our Expectations Into Conversations with Companies | |||
We will engage companies on this topic, prioritizing companies with the highest risk of human rights violations. When assessing the risk level of a particular company, we will consider the company’s industry, region, and business model; any history of human rights violations; and client and stakeholder input. In 2021, we initiated a targeted engagement campaign on modern slavery, and in 2022, we undertook another series of proactive engagements on human rights, targeting companies who were noncompliant with the UN Global Compact. We also requested reactive engagements with specific companies if we were made aware that they had been accused of human rights violations. | ||||
Thought Leadership Addressing Modern Slavery in Supply Chains | In Q3 2021, we initiated a series of targeted engagements on the topic of modern slavery. We relied on existing frameworks including SASB, the Global Slavery Index, and the International Labor Organization to identify high-risk sectors, and reached out to our largest holdings in those sectors to request in-depth engagements. We focused on companies in industries where modern slavery poses an outsized risk, especially given the increasing reputational and regulatory risks associated with forced labor in the supply chain. Through this process, we gleaned insights into companies’ best practices to inform our ongoing stewardship efforts in this space. To review our insights from this campaign, please visit Modern Slavery Insights. |
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Voting Incorporating Our Expectations into Our Proxy Voting and Engagement Practices |
With respect to voting on human rights-related disclosure issues, we will first engage with companies related to our human rights-related disclosure expectations outlined herein, focusing on companies and industries with the greatest risk and opportunity. Below is the approach we follow when voting on human rights related shareholder proposals: | |||
• FOR we will consider voting for shareholder proposals that we believe will lead to increased alignment with our expectations for human rights related disclosures; | ||||
• ABSTAIN we will consider voting abstain when we support some elements of a proposal’s request, or recognize a company’s commitment to implement related disclosure and/or oversight practices; | ||||
• AGAINST we will vote against shareholder proposals that we believe are immaterial, overly prescriptive, or would not further our disclosure and oversight expectations. | ||||
Investment and Research Activities | State Street Global Advisors also incorporates human rights into investment and research activities. Our firm allocated significant resources toward building our ESG data architecture which gives our portfolio managers and researchers access to a variety of best-in-class data vendors. Our colleagues have access to best-in-class data on companies’ human rights practices. | |||
Conclusion | We encourage companies in our portfolios to align their disclosures and practices with our expectations. Please reach out to State Street Global Advisors’ Asset Stewardship Team at [email protected] to request an engagement on this important topic. | |||
About State Street Global Advisors | For four decades, State Street Global Advisors has served the world’s governments, institutions and financial advisors. With a rigorous, risk-aware approach built on research, analysis and market-tested experience, we build from a breadth of index and active strategies to create cost-effective solutions. And, as pioneers in index, ETF, and ESG investing, we are always inventing new ways to invest. As a result, we have become the world’s fourth-largest asset manager* with US $3.62 trillion† under our care. | |||
* Pensions & Investments Research Center, as of December 31, 2021. | ||||
† This figure is presented as of March 31, 2023 and includes approximately $65.03 billion USD of assets with respect to SPDR products for which State Street Global Advisors Funds Distributors, LLC (SSGA FD) acts solely as the marketing agent. SSGA FD and State Street Global Advisors are affiliated. Please note all AUM is unaudited. |
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State Street Global Advisors
Marketing Communications
Worldwide Entities
Abu Dhabi: State Street Global Advisors Limited, ADGM branch is regulated by the Financial Services Regulatory Authority (FSRA). This document is intended for Professional Clients or Market Counterparties only as defined by the FSRA and no other person should act upon it. State Street Global Advisors Limited, ADGM Branch, Al Khatem Tower, Suite 42801, Level 28, ADGM Square, Al Maryah Island, P.O Box 76404, Abu Dhabi, United Arab Emirates. Regulated by the ADGM Financial Services Regulatory Authority. T: +971 2 245 9000. Australia: State Street Global Advisors, Australia, Limited (ABN 42 003 914 225) is the holder of an Australian Financial Services License (AFSL Number 238276). Registered office: Level 14, 420 George Street, Sydney, NSW 2000, Australia. T: +612 9240-7600. F: +612 9240-7611. Belgium: State Street Global Advisors Belgium, Chaussée de La Hulpe 185, 1170 Brussels, Belgium. T: +32 2 663 2036. State Street Global Advisors Belgium is a branch office of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and
regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir
John Rogerson’s Quay, Dublin 2. Canada: State Street Global Advisors, Ltd., 1981 McGill College Avenue, Suite 500, Montreal, Qc, H3A 3A8, T: +514 282 2400 and 30 Adelaide Street East Suite 800, Toronto, Ontario M5C 3G6. T: +647 775 5900. France: State Street Global Advisors Europe Limited, France Branch (“State Street Global Advisors France”) is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. State Street Global Advisors France is registered in France with company number RCS Nanterre 899 183 289, and its office is located at Coeur Défense — Tour A — La Défense 4, 33e étage, 100, Esplanade du Général de Gaulle, 92 931 Paris La Défense Cedex, France. T: +33 1 44 45 40 00. F: +33 1 44 45 41 92. Germany: State Street Global Advisors Europe Limited, Branch in Germany, Brienner Strasse 59, D-80333 Munich, Germany (“State Street Global Advisors Germany”). T: +49 (0)89 55878 400. State Street Global Advisors Germany is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. Hong Kong: State Street
Global Advisors Asia Limited, 68/F, Two International Finance Centre, 8 Finance Street, Central, Hong Kong. T: +852 2103-0288. F: +852 2103-0200. Ireland: State Street Global Advisors Europe Limited is regulated by the Central Bank of Ireland. Registered office address 78 Sir John Rogerson’s Quay, Dublin 2. Registered Number: 49934. T: +353 (0)1 776 3000. F: +353 (0)1 776 3300. Italy: State Street Global Advisors Europe Limited, Italy Branch (“State Street Global Advisors Italy”) is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. State Street Global Advisors Italy is registered in Italy with company number 11871450968 — REA: 2628603 and VAT number 11871450968, and its office is located at Via Ferrante Aporti, 10 - 20125 Milan, Italy. T: +39 02 32066 100. F: +39 02 32066 155. Japan: State Street Global Advisors (Japan) Co., Ltd., Toranomon Hills Mori Tower 25F 1-23-1 Toranomon, Minato-ku, Tokyo 105-6325 Japan. T: +81-3-4530-7380. Financial Instruments Business Operator, Kanto Local Financial Bureau (Kinsho #345), Membership: Japan Investment Advisers Association, The Investment Trust Association, Japan, Japan Securities Dealers’ Association. Netherlands: State Street Global Advisors
Netherlands, Apollo Building 7th floor, Herikerbergweg 29, 1101 CN Amsterdam, Netherlands. T: +31 20 7181 000. State Street Global Advisors Netherlands is a branch office of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. Singapore: State Street Global Advisors Singapore Limited, 168, Robinson Road, #33-01 Capital Tower, Singapore 068912 (Company Reg. No: 200002719D, regulated by the Monetary Authority of Singapore). T: +65 6826-7555. F: +65 6826-7501. Switzerland: State Street Global Advisors AG, Beethovenstr. 19, CH-8027 Zurich. Registered with the Register of Commerce Zurich CHE-105.078.458. T: +41 (0)44 245 70 00. F: +41 (0)44 245 70 16. South Africa: State Street Global Advisors Limited is regulated by the Financial Sector Conduct Authority in South Africa under license number 42670. United Kingdom: State Street Global Advisors Limited. Authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No. 2509928. VAT No. 5776591 81. Registered office: 20 Churchill Place, Canary Wharf, London, E14 5HJ. T: 020 3395 6000. F: 020 3395 6350. United States: State Street Global Advisors, 1 Iron Street, Boston, MA 02210-1641. T: +1 617 786 3000.
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Important Risk Information
Investing involves risk including the risk of loss of principal.
The returns on a portfolio of securities which exclude companies that do not meet the portfolio’s specified ESG criteria may trail the returns on a portfolio of securities which include such companies. A portfolio’s ESG criteria may result in the portfolio investing in industry sectors or securities which underperform the market as a whole.
Responsible-Factor (R Factor) scoring is designed by State Street to reflect certain ESG characteristics and does not represent investment performance. Results generated out of the scoring model is based on sustainability and corporate governance dimensions
The information contained in this communication is not a research recommendation or ‘investment research’ and is classified as a ‘Marketing Communication’ in accordance with the Markets in Financial Instruments Directive (2014/65/EU) or applicable Swiss regulation.
This means that this marketing communication (a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research (b) is not subject to any prohibition on dealing ahead of the dissemination of investment research.
The views expressed in this material are the views of SSGA Asset Stewardship Team through the period ended May 26, 2023 and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.
Investing involves risk including the risk of loss of principal.
The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA’s express written consent.
All information is from SSGA unless otherwise noted and
has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.
The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor.
The returns on a portfolio of securities which exclude companies that do not meet the portfolio’s specified ESG criteria may trail the returns on a portfolio of securities which include such companies. A portfolio’s ESG criteria may result in the portfolio investing in industry sectors or securities which underperform the market as a whole.
This communication is directed at professional clients (this includes eligible counterparties as defined by the appropriate
EU regulator) who are deemed both knowledgeable and experienced in matters relating to investments. The products and services to which this communication relates are only available to such persons and persons of any other description (including retail clients) should not rely on this communication.
The trademarks and service marks referenced herein are the property of their respective owners. Third party data providers make no warranties or representations of any kind relating to the accuracy, completeness or timeliness of the data and have no liability for damages of any kind relating to the use of such data. Responsible-Factor (R Factor) scoring is designed by State Street to reflect certain ESG characteristics and does not represent investment performance. Results generated out of the scoring model is based on sustainability and corporate governance dimensions of a scored entity.
© 2023 State Street Corporation. All Rights Reserved.
ID1483214-4044035.5.1.GBL.RTL 0323 Exp. Date: 06/30/2024
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Insights Asset Stewardship |
Guidance on Board Oversight of Director Time Commitments | |||
April 2023 |
Key Takeaways |
• The global COVID-19 pandemic and an elevated culture of shareholder engagement have heightened the time commitment required to serve as a director on a public company board.
• Investors would benefit from increased transparency over how Nominating Committees assess their directors’ time commitments and what factors are included in this discussion.
• This guidance sets forth our expectations for Nominating Committees to evaluate their directors’ time commitments, regularly assess director effectiveness, and provide public disclosure on their policies and efforts to investors. | |||
A Historic Transition | The global COVID-19 pandemic and an elevated culture of shareholder engagement have heightened the time commitment required to serve as a director on a public company board. State Street Global Advisors’ Asset Stewardship team values the critical role that effective boards play in keeping management focused on their companies’ long-term goals. Through our engagements with portfolio companies, we learned how their strategies and operations are continuously reinvented to meet a confluence of challenges, including the global health crisis and the systemic risks of climate change and gender, racial and ethnic inequity. These forces continue to shape board agendas, with directors citing corporate resiliency1 as the emerging topic most central to their conversations in 2021. | |||
The Evolving Role and Expectations of Directors | To effectively manage the risks and opportunities facing their companies, directors are meeting more often. In 2021, S&P 500 boards formally met an average of 9.4 times,2 a 25% year-over-year increase. FTSE 150 boards held an average of 11.6 meetings in 2021, a 50% increase compared to 2020,3 reflecting the global nature of this development. | |||
Additionally, a more robust engagement culture with both internal and external stakeholders has placed more demands on directors’ time.
|
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SPAC Directorship | The rise of Special Purpose Acquisition Companies (“SPACs”) continues to shape our governance discussions with boards. The rapid pace of SPAC activity has continued to challenge traditional models of corporate governance, and has driven strong demand for qualified SPAC directors, many of whom also serve as public company directors. | |||
Through our continued dialogue with directors serving on both SPAC and public company boards, we have learned the following: | ||||
• While SPAC director time commitment requirements vary depending on the individual and SPAC board, they are generally less than the average time associated with public company directorship. | ||||
• SPACs are typically subject to a two-year time horizon to find an acquisition target, and directors are generally called on to spend their most significant service time in the final months before the acquisition closes with the target company. | ||||
• Typically, no more than one SPAC director rolls onto the new entity’s board in an official capacity. | ||||
• In many cases, multiple members of the SPAC sponsor management team remain on the board once the target company goes public. | ||||
• SPAC sponsors play a much more time-consuming role relative to directors, and their responsibilities include raising capital, deal sourcing, and conducting deep due diligence on potential targets. | ||||
• SPAC director responsibilities include evaluating target candidates, facilitating industry introductions, and providing general oversight over the process. | ||||
Given these findings, we do not consider service on a SPAC board when evaluating directors for excessive commitments. However, we do expect these roles to be considered by Nominating Committees when evaluating director time commitments.
| ||||
Our Guidance on Director Time Commitments | Insights gleaned from our director engagements, coupled with a growing body of research,4 reflect the ever-increasing time commitment associated with serving as a director on a public company board. Directors have a challenging role, and the topics they are expected to oversee have increased in scope and complexity. |
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Guidance on Board Oversight of Director Time Commitments |
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Despite the elevated oversight expectations on directors and the company boards on which they serve, 112 boards among the S&P 500 do not report specific limits on additional board service.5 Investors would benefit from increased transparency over how Nominating Committees assess their directors’ time commitments and what factors are included in these decisions. We believe well-governed boards are responsible for establishing, enforcing and disclosing their director commitment policies. | ||||
We expect Nominating Committees to evaluate their directors’ time commitments, regularly assess director effectiveness, and provide public disclosure on their policies and efforts to investors.
| ||||
Voting Incorporating Our Guidance into Our Voting Policies |
When voting on the election or re-election of a director, we consider the number of outside board directorships that a non-executive and an executive may undertake. Thus, State Street Global Advisors may take voting action against a director who exceeds the number of board mandates listed below: | |||
• Named Executive Officers (NEOs) of a public company who sit on more than two public company boards | ||||
• Non-executive board chairs or lead independent directors who sit on more than three public company boards | ||||
• Director nominees who sit on more than four public company boards | ||||
For non-executive board chairs/lead independent directors and director nominees who hold excessive commitments, as defined above, we may consider waiving our policy and vote in support of a director if a company discloses its director commitment policy in a publicly available manner (e.g., corporate governance guidelines, proxy statement, company website). This policy or associated disclosure must include: | ||||
• A numerical limit on public company board seats a director can serve on | ||||
— This limit cannot exceed our policy by more than one seat | ||||
• Consideration of public company board leadership positions (e.g., Committee Chair) | ||||
• Affirmation that all directors are currently compliant with the company policy | ||||
• Description of an annual policy review process undertaken by the Nominating Committee to evaluate outside director time commitments
|
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Guidance on Board Oversight of Director Time Commitments |
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A Sample Disclosure Might Look Like: | ||||
“Directors can sit on no more than five public company boards (including our own), with consideration given to public company leadership roles and outside commitments. The Nominating Committee conducts an annual review of director commitment levels, and affirms that all directors are compliant at this time.” | ||||
If a director is imminently leaving a board and this departure is disclosed in a written, time-bound and publicly-available manner, we may consider waiving our withhold vote when evaluating directors for excessive commitments.
| ||||
Service on a mutual fund board, the board of a UK investment trust or a Special Purpose Acquisition Company (SPAC) board is not considered when evaluating directors for excessive commitments. However, we do expect these roles to be considered by Nominating Committees when evaluating director time commitments.
| ||||
Conclusion | We remain focused on our fiduciary duty to improve long-term value of our clients’ investments. It is our conviction that well-governed boards are best placed to evaluate their directors’ time commitments, and that Nominating Committees are responsible for establishing, enforcing and disclosing their director commitment policies to investors. |
Endnotes |
1 Celia Huber, Frithjof Lund and Nina Speilmann,
“How boards have risen to the COVID-19 challenge, and what’s next,”
McKinsey & Company, (April 2021), https://
mckinsey.com/business-functions/strategy-and-corporate
2 2Julie Hembrock Daum, Kathleen M. Tamayo, Ann Yerger,
“2021 U.S. Spencer Stuart Board Index,” Spencer Stuart,
(November 2021), https://spencerstuart.com/-/ media
3 3Tessa Bamford, Monisha Banerjee, Livia Enomoto, Keith
Fryer, Leoni Fruhwirth, Celia Jackson, Nadia Kangmasto, Alastair Rolfe,
Alice Wyatt. “2021 UK Spencer Stuart Board Index” Spencer Stuart,
(November 2021), https://spencerstuart.com/ |
4 Celia Huber, Frithjof Lund and Nina Speilmann, “How boards have risen to the COVID-19 challenge, and what’s next,” Julie Hembrock Daum, Kathleen M. Tamayo, Ann Yerger, “2021 U.S. Spencer Stuart Board Index,”
5 Julie Hembrock Daum, Kathleen M. Tamayo, Ann Yerger, “2021 U.S. Spencer Stuart Board Index,” |
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Guidance on Board Oversight of Director Time Commitments |
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About State Street Global Advisors | Our clients are the world’s governments, institutions and financial advisors. To help them achieve their financial goals we live our guiding principles each and every day: | |||
• Start with rigor | ||||
• Build from breadth | ||||
• Invest as stewards | ||||
• Invent the future | ||||
For four decades, these principles have helped us be the quiet power in a tumultuous investing world. Helping millions of people secure their financial futures. This takes each of our employees in 29 offices around the world, and a firm-wide conviction that we can always do it better. As a result, we are the world’s fourth-largest asset manager* with US $3.62 trillion† under our care.
| ||||
* Pensions & Investments Research Center, as of December 31, 2021. | ||||
† This figure is presented as of March 31, 2023 and includes approximately $65.03 billion USD of assets with respect to SPDR products for which State Street Global Advisors Funds Distributors, LLC (SSGA FD) acts solely as the marketing agent. SSGA FD and State Street Global Advisors are affliiated. Please note all AUM is unaudited. |
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ssga.com
Marketing Communication
State Street Global Advisors
Worldwide Entities
Abu Dhabi: State Street Global Advisors Limited, ADGM branch is regulated by the Financial Services Regulatory Authority (FSRA).
This document is intended for Professional Clients or Market Counterparties only as defined by the FSRA and no other person should act upon it. State Street Global Advisors Limited, ADGM Branch, Al Khatem Tower, Suite 42801, Level 28, ADGM Square, Al Maryah Island, P.O Box 76404, Abu Dhabi, United Arab Emirates. Regulated by the ADGM Financial Services Regulatory Authority. T: +971 2 245 9000. Australia: State Street Global Advisors, Australia, Limited (ABN 42 003 914 225) is the holder of an Australian Financial Services License (AFSL Number 238276). Registered office: Level 14, 420 George Street, Sydney, NSW 2000, Australia. T: +612 9240-7600. F: +612 9240-7611. Belgium: State Street Global Advisors Belgium, Chaussée de La Hulpe 185, 1170 Brussels, Belgium. T: +32 2 663 2036. State Street Global Advisors Belgium is a branch office of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin
2. Canada: State Street Global Advisors, Ltd., 1981 McGill College Avenue, Suite 500, Montreal, Qc, H3A 3A8, T: +514 282 2400 and 30 Adelaide Street East Suite 800, Toronto, Ontario M5C 3G6. T: +647 775 5900. France: State Street Global Advisors Europe Limited, France Branch (“State Street Global Advisors France”) is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. State Street Global Advisors France is registered in France with company number RCS Nanterre 899 183 289, and its office is located at Coeur Défense — Tour A — La Défense 4, 33e étage, 100, Esplanade du Général de Gaulle, 92 931 Paris La Défense Cedex, France. T: +33 1 44 45 40 00. F: +33 1 44 45 41 92. Germany: State Street Global Advisors Europe Limited, Branch in Germany, Brienner Strasse 59, D-80333 Munich, Germany (“State Street Global Advisors Germany”). T: +49 (0)89 55878 400. State Street Global Advisors Germany is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. Hong Kong: State Street Global Advisors Asia Limited,
68/F, Two International Finance Centre, 8 Finance Street, Central, Hong Kong. T: +852 2103-0288. F: +852 2103-0200. Ireland: State Street Global Advisors Europe Limited is regulated by the Central Bank of Ireland. Registered office address 78 Sir John Rogerson’s Quay, Dublin 2. Registered Number: 49934. T: +353 (0)1 776 3000. F: +353 (0)1 776 3300. Italy: State Street Global Advisors Europe Limited, Italy Branch (“State Street Global Advisors Italy”) is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. State Street Global Advisors Italy is registered in Italy with company number 11871450968 — REA: 2628603 and VAT number 11871450968, and its office is located at Via Ferrante Aporti, 10 - 20125 Milan, Italy. T: +39 02 32066 100. F: +39 02 32066 155. Japan: State Street Global Advisors (Japan) Co., Ltd., Toranomon Hills Mori Tower 25F 1-23-1 Toranomon, Minato-ku, Tokyo 105-6325 Japan. T: +81-3-4530-7380. Financial Instruments Business Operator, Kanto Local Financial Bureau (Kinsho #345), Membership: Japan Investment Advisers Association, The Investment Trust Association, Japan, Japan Securities Dealers’ Association. Netherlands: State Street Global Advisors Netherlands, Apollo Building
7th floor, Herikerbergweg 29, 1101 CN Amsterdam, Netherlands. T: +31 20 7181 000. State Street Global Advisors Netherlands is a branch office of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. Singapore: State Street Global Advisors Singapore Limited, 168, Robinson Road, #33-01 Capital Tower, Singapore 068912 (Company Reg. No: 200002719D, regulated by the Monetary Authority of Singapore). T: +65 6826-7555. F: +65 6826-7501. Switzerland: State Street Global Advisors AG, Beethovenstr. 19, CH-8027 Zurich. Registered with the Register of Commerce Zurich CHE-105.078.458. T: +41 (0)44 245 70 00. F: +41 (0)44 245 70 16. United Kingdom: State Street Global Advisors Limited. Authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No. 2509928. VAT No. 5776591 81. Registered office: 20 Churchill Place, Canary Wharf, London, E14 5HJ. T: 020 3395 6000. F: 020 3395 6350. United States: State Street Global Advisors, 1 Iron Street, Boston, MA 02210-1641. T: +1 617 786 3000.
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Guidance on Board Oversight of Director Time Commitments |
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The views expressed in this material are the views of SSGA Asset Stewardship Team through the period ended April 12, 2023 and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.
Investing involves risk including the risk of loss of principal.
The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA’s express written consent.
All information is from SSGA unless otherwise noted and has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no
representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.
The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor
The returns on a portfolio of securities which exclude companies that do not meet the portfolio’s specified ESG criteria may trail the returns on a portfolio of securities which include such companies. A portfolio’s ESG criteria may result in the portfolio investing in industry sectors or securities which underperform the market as a whole.
This communication is directed at professional clients (this includes eligible counterparties as defined by the appropriate EU regulator who are deemed both knowledgeable and experienced in matters relating to investments. The products and services to which this communication relates are only available to such persons and persons of any other description (including retail clients) should not rely on this communication.
The trademarks and service marks referenced herein are the property of their respective owners. Third party data providers make no warranties or representations of any kind relating to the accuracy, completeness or timeliness of the data and have no liability for damages of any kind relating to the use of such data.
Responsible-Factor (R Factor) scoring is designed by State Street to reflect certain ESG characteristics and does not represent investment performance. Results
generated out of the scoring model is based on sustainability and corporate governance dimensions of a scored entity.
The information contained in this communication is not a research recommendation or ‘investment research’ and is classified as a ‘Marketing Communication’ in accordance with the Markets in Financial Instruments Directive (2014/65/EU) or applicable Swiss regulation. This means that this marketing communication (a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research (b) is not subject to any prohibition on dealing ahead of the dissemination of investment research.
© 2023 State Street Corporation.
All Rights Reserved.
ID1522581-4055816.3.1.GBL.RTL 0423
Exp. Date: 03/31/2024
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Guidance on Board Oversight of Director Time Commitments |
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Insights Asset Stewardship
March 2023 |
Corporate Participation in the Political Process in the United States | |||
This guidance describes the framework we use to analyze shareholder proposals regarding corporate participation in the political process in the United States. | ||||
Background | Corporate participation in the political process is common practice in the United States, and we believe it continues to carry risks that warrant stronger board oversight and increased transparency. Companies that make political contributions, pursue lobbying activities, or support politically-active industry groups in the United States have a responsibility to provide adequate disclosure to investors, and their boards should oversee political activities. | |||
What follows is an overview of the framework we use to evaluate three common political activity shareholder proposal themes: 1) political contributions; 2) lobbying; and 3) trade association alignment. We will consider supporting relevant shareholder proposals when a company’s disclosures are not fully aligned with our expectations outlined below. | ||||
Political Contributions | Political contribution proposals ask issuers to disclose direct and indirect political spending. State Street Global Advisors expects investee companies to disclose the following information regarding political contributions not only through mandated filings, but also on the company’s own website or corporate responsibility reporting: | |||
• All contributions, no matter the dollar value, made by the company, its subsidiaries, and/ or affiliated Political Action Committees (PACs) to individual candidates, PACs, and other political organizations at the state and federal levels in the US; and | ||||
• The role of the board in oversight of political contributions. |
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Corporate Participation in the Political Process in the United States |
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Lobbying | Lobbying proposals ask companies to describe the process for the board’s review of political policies, lobbying expenditures, general lobbying activities, and selection and engagement of lobbyists. As investors, we are concerned when lobbying creates potential reputational risks, for example by contradicting companies’ publicly stated positions on relevant issues. We believe that board oversight can help mitigate these risks, as the board is attuned to the company’s values, mission, and public perception. As such, we expect companies to disclose: | |||
• Membership in US trade associations (to which payments are above $50,000 per year); and | ||||
• The role of the board in overseeing lobbying activities. | ||||
Trade Association Alignment | The latest iteration of politically-focused shareholder proposals ask that corporate membership in trade associations be aligned with a company’s stated position on various environmental and social issues, for example climate change. State Street Global Advisors evaluates the following when considering such a proposal: | |||
• The board’s role in overseeing the company’s participation in the political process in the US, including membership in trade associations; | ||||
• Whether the company regularly performs a gap analysis of its stated positions on relevant environmental and/or social issues versus those of its trade associations; and | ||||
• Whether the company disclosed a list of its US trade association memberships (to which payments are above $50,000 per year). | ||||
About State Street Global Advisors | For four decades, State Street Global Advisors has served the world’s governments, institutions and financial advisors. With a rigorous, risk-aware approach built on research, analysis and market-tested experience, we build from a breadth of index and active strategies to create cost-effective solutions. And, as pioneers in index, ETF, and ESG investing, we are always inventing new ways to invest. As a result, we have become the world’s fourth-largest asset manager* with US $3.48 trillion† under our care. | |||
* Pensions & Investments Research Center, as of December 31, 2021. | ||||
† This figure is presented as of December 31, 2022 and includes approximately $58.60 billion USD of assets with respect to SPDR products for which State Street Global Advisors Funds Distributors, LLC (SSGA FD) acts solely as the marketing agent. SSGA FD and State Street Global Advisors are affiliated. Please note all AUM is unaudited. |
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Corporate Participation in the Political Process in the United States |
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ssga.com
Marketing communications
State Street Global Advisors
Worldwide Entities
Abu Dhabi: State Street Global Advisors Limited, ADGM branch is regulated by the Financial Services Regulatory Authority (FSRA). This document is intended for Professional Clients or Market Counterparties only as defined by the FSRA and no other person should act upon it. State Street Global Advisors Limited, ADGM Branch, Al Khatem Tower, Suite 42801, Level 28, ADGM Square, Al Maryah Island, P.O Box 76404, Abu Dhabi, United Arab Emirates. Regulated by the ADGM Financial Services Regulatory Authority. T: +971 2 245 9000. Australia: State Street Global Advisors, Australia, Limited (ABN 42 003 914 225) is the holder of an Australian Financial Services License (AFSL Number 238276). Registered office: Level 14, 420 George Street, Sydney, NSW 2000, Australia. T: +612 9240-7600. F: +612 9240-7611. Belgium: State Street Global Advisors Belgium, Chaussée de La Hulpe 185, 1170 Brussels, Belgium. T: +32 2 663 2036. State Street Global
Advisors Belgium is a branch office of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. Canada: State Street Global Advisors, Ltd., 1981 McGill College Avenue, Suite 500, Montreal, Qc, H3A 3A8, T: +514 282 2400 and 30 Adelaide Street East Suite 800, Toronto, Ontario M5C 3G6. T: +647 775 5900. France: State Street Global Advisors Europe Limited, France Branch (“State Street Global Advisors France”) is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. State Street Global Advisors France is registered in France with company number RCS Nanterre 899 183 289, and its office is located at Coeur Défense — Tour A — La Défense 4, 33e étage, 100, Esplanade du Général de Gaulle, 92 931 Paris La Défense Cedex, France. T: +33 1 44 45 40 00. F: +33 1 44 45 41 92. Germany: State Street Global Advisors Europe
Limited, Branch in Germany, Brienner Strasse 59, D-80333 Munich, Germany (“State Street Global Advisors Germany”). T: +49 (0)89 55878 400. State Street Global Advisors Germany is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. Hong Kong: State Street Global Advisors Asia Limited, 68/F, Two International Finance Centre, 8 Finance Street, Central, Hong Kong. T: +852 2103-0288. F: +852 2103-0200. Ireland: State Street Global Advisors Europe Limited is regulated by the Central Bank of Ireland. Registered office address 78 Sir John Rogerson’s Quay, Dublin 2. Registered Number: 49934. T: +353 (0)1 776 3000. F: +353 (0)1 776 3300. Italy: State Street Global Advisors Europe Limited, Italy Branch (“State Street Global Advisors Italy”) is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay,
Dublin 2. State Street Global Advisors Italy is registered in Italy with company number 11871450968 — REA: 2628603 and VAT number 11871450968, and its office is located at Via Ferrante Aporti, 10 - 20125 Milan, Italy. T: +39 02 32066 100. F: +39 02 32066 155. Japan: State Street Global Advisors (Japan) Co., Ltd., Toranomon Hills Mori Tower 25F 1-23-1 Toranomon, Minato-ku, Tokyo 105-6325 Japan. T: +81-3-4530-7380. Financial Instruments Business Operator, Kanto Local Financial Bureau (Kinsho #345), Membership: Japan Investment Advisers Association, The Investment Trust Association, Japan, Japan Securities Dealers’ Association. Netherlands: State Street Global Advisors Netherlands, Apollo Building 7th floor, Herikerbergweg 29, 1101 CN Amsterdam, Netherlands. T: +31 20 7181 000. State Street Global Advisors Netherlands is a branch office of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. Singapore: State Street Global Advisors Singapore Limited, 168,
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Robinson Road, #33-01 Capital Tower, Singapore 068912 (Company Reg. No: 200002719D, regulated by the Monetary Authority of Singapore). T: +65 6826-7555. F: +65 6826-7501. Switzerland: State Street Global Advisors AG, Beethovenstr. 19, CH-8027 Zurich. Registered with the Register of Commerce Zurich CHE-105.078.458. T: +41 (0)44 245 70 00. F: +41 (0)44 245 70 16. United Kingdom: State Street Global Advisors Limited. Authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No. 2509928. VAT No. 5776591 81. Registered office: 20 Churchill Place, Canary Wharf, London, E14 5HJ. T: 020 3395 6000. F: 020 3395 6350. United States: State Street Global Advisors, 1 Iron Street, Boston, MA 02210-1641. T: +1 617 786 3000.
The views expressed in this material are the views of SSGA Asset Stewardship Team through the period ended March 23, 2023 and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that
any such statements are not guarantees of any future performance and actual results or developments may differ materially from
those projected.
Investing involves risk including the risk of loss of principal.
The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA’s express written consent.
All information is from SSGA unless otherwise noted and has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.
The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon.
You should consult your tax and financial advisor.
The returns on a portfolio of securities which exclude companies that do not meet the portfolio’s specified ESG criteria may trail the returns on a portfolio of securities which include such companies. A portfolio’s ESG criteria may result in the portfolio investing in industry sectors or securities which underperform the market as a whole.
This communication is directed at professional clients (this includes eligible counterparties as defined by the appropriate EU regulator who are deemed both knowledgeable and experienced in matters relating to investments. The products and services to which this communication relates are only available to such persons and persons of any other description (including retail clients) should not rely on this communication.
The trademarks and service marks referenced herein are the property of their respective owners. Third party data providers make no warranties or representations of any kind relating to the accuracy, completeness or timeliness of the data and have no liability
for damages of any kind relating to the use of such data.
Responsible-Factor (R Factor) scoring is designed by State Street to reflect certain ESG characteristics and does not represent investment performance. Results generated out of the scoring model is based on sustainability and corporate governance dimensions of a scored entity.
The information contained in this communication is not a research recommendation or ‘investment research’ and is classified as a ‘Marketing Communication’ in accordance with the Markets in Financial Instruments Directive (2014/65/EU) or applicable Swiss regulation. This means that this marketing communication (a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research (b) is not subject to any prohibition on dealing ahead of the dissemination of investment research.
© 2023 State Street Corporation.
All Rights Reserved.
ID1487000-3503681.3.1.GBL.RTL 0323
Exp. Date: 03/31/2024
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May 2023
Asset Stewardship
Guidance on Diversity Disclosures and Practices
At State Street Global Advisors, we believe that companies have a responsibility to effectively manage and disclose risks and opportunities related to diversity, equity, and inclusion, particularly regarding gender, race, and ethnicity. Gender diversity has been a priority of State Street Global Advisors’ asset stewardship program since 2017 and we have been a leader in this area since, as evidenced by our Fearless Girl campaign. In this Guidance we set forth our expectations for diversity-related disclosures and how we integrate those expectations into our asset stewardship and proxy voting activities.
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Our Expectations for Diversity, Equity, and Inclusion Disclosures | Investors can benefit from increased publicly-available data on diversity, equity, and inclusion at portfolio companies. As such, we encourage companies to share relevant information with the market, and we expect all companies in our portfolio to offer public disclosures in five key areas: | |||
1. Board Oversight Describe how the board executes its role in oversight role of risks and opportunities related to diversity and inclusion; | ||||
2. Strategy Articulate the role diversity (of race, ethnicity, and gender, at minimum) plays in the company’s broader human capital management practices and long-term strategy; | ||||
3. Goals Describe what diversity, equity, and inclusion-related goals exist, how these goals contribute to the company’s overall strategy, and how they are managed and progressing; | ||||
4. Metrics Provide measures of the diversity of the company’s global employee base and board, including: | ||||
a. Workforce Employee diversity by race, ethnicity, and gender (at minimum). We expect to see this information to be broken down by industry-relevant employment categories or levels of seniority, for all full-time employees. In the US, companies are expected to at least use the disclosure framework set forth by the United States Equal Employment Opportunity Commission’s EEO-1 Survey. Non-US companies are encouraged to disclose this information in alignment with SASB guidance and nationally appropriate frameworks; and, | ||||
b. Board Diversity characteristics, including racial, ethnic, and gender makeup (at minimum) of the board of directors; and | ||||
5. Board Diversity Articulate goals and strategy related to diverse representation at the board (including race, ethnicity, and gender, at minimum), including how the board reflects the diversity of the company’s workforce, community, customers, and other key stakeholders. | ||||
Our Expectations for Pay Equity Disclosures | We expect all companies in the US and the UK to provide public disclosure on: | |||
1. Adjusted pay gaps related to race and gender within the company (Disclosure of the unadjusted pay gap is also encouraged, but not expected outside of the UK market at this time); | ||||
2. Strategy to achieve and maintain pay equity; and | ||||
3. Role of the board in overseeing pay strategies as well as Diversity, Equity and Inclusion efforts. |
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Civil Rights Risks | We expect companies in the US to provide public disclosure on: | |||
1. Risks related to civil rights, including risks associated with products, practices, and services; | ||||
2. Plans to manage and mitigate these risks; and | ||||
3. Processes at the board for overseeing such risks (e.g., committee responsible, frequency of discussions, etc.). | ||||
Expanding the Aperture of Diversity, Equity, and Inclusion | Investors, regulators, and other stakeholders are increasingly focused on other dimensions of diversity beyond gender, race, and ethnicity. For example, California lawmakers and the Nasdaq exchange include LGBTQ-identified individuals in their perspectives on board diversity. Some advocates are calling for the prioritization of disability as an essential dimension of diversity, and several companies (especially outside of the US) already disclose information regarding the role of people with disabilities in their organization. We encourage our portfolio companies to consider providing disclosures about the full diversity of their organization, as these disclosures are wholly aligned with contributing to the intent to increase diversity of thought that underlies the present more common focus on gender, race and ethnic diversity. The reputational and regulatory risk of not doing so also may increase in the coming years. | |||
Engagements Incorporating Our Expectations into Conversations with Companies | Since 2021, we have reached out to 35 of the largest employers in our portfolio each year to have deeper conversations on human capital management and diversity, equity, and inclusion. Our aim is to monitor companies’ approaches to these topics, and encourage alignment with our expectations described herein. | |||
Voting Incorporating Our Expectations into Our Proxy Voting Policies | In order to achieve alignment with our aforementioned expectations and advance transparency in the public markets, State Street Global Advisors has the following proxy voting guidelines: | |||
Race & Ethnicity –— United States and United Kingdom | ||||
• If a company in the Russell 1000 or FTSE 350 does not disclose the racial and ethnic composition of its board, we will vote against the Chair of the Nominating Committee. Acceptable disclosures include: | ||||
— Aggregate-level (e.g., “5% of our Directors are Black”, “Seven of our Directors are people of color”, “30% chose not to self-identify”). | ||||
— Individual-level (e.g., “Jane Doe is African-American, John Smith is Caucasian,” etc.). |
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• If a company in the S&P 500 or FTSE 100 does not have at least one director from an underrepresented racial or ethnic community, we will vote against the Chair of the Nominating Committee. | ||||
• If a company in the S&P 500 does not disclose its EEO-1 report, we will vote against the Chair of the Compensation Committee. Acceptable disclosures include: | ||||
— The original EEO-1 report response. | ||||
— The exact content of the report translated into custom graphics. | ||||
Gender | ||||
• We expect boards of companies in all markets and indices to have at least one female board member. In markets where we are implementing this policy for the first time, we may waive the policy if a company engages with State Street Global Advisors and provides a specific, timebound plan for adding at least one woman to the board. | ||||
• In addition, we expect companies in the Russell 3000, TSX, FTSE 350, STOXX 600, and ASX 300 indices to have boards comprised of at least 30 percent women directors. We may waive the policy if a company engages with State Street Global Advisors and provides a specific, timebound plan for reaching 30 percent representation of women directors. | ||||
• If a company fails to meet any of the expectations outlined above, State Street Global Advisors may vote against the Chair of the Nominating Committee or the board leader in the absence of a Nominating Committee, if necessary. Additionally, if a company fails to meet this 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. | ||||
Shareholder Proposals | Below is the approach we follow when voting on shareholder proposals: | |||
• FOR we will consider voting for shareholder proposals that we believe will lead to increased alignment with our expectations for diversity-related disclosures and practices; | ||||
• ABSTAIN we will consider voting abstain when we support some elements of a proposal’s request, or recognize a company’s commitment to implement related disclosure and/or oversight practices; | ||||
AGAINST we will vote against shareholder proposals that we believe are immaterial, overly prescriptive, or would not further our disclosure and oversight expectations. |
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Thought Leadership The Board’s Oversight of Racial and Ethnic Diversity, Equity, and Inclusion | In 2020, State Street Corporation announced it would be taking “10 Actions to Address Racism & Inequality.” As part of Action #7, State Street Global Advisors’ Asset Stewardship team led an internal, cross-functional workstream to study best practices in board oversight of racial and ethnic diversity, equity, and inclusion. We partnered with Russell Reynolds Associates and the Ford Foundation to interview 27 directors of FTSE 100 and S&P 500 multinational corporations, culminating in a report titled “The Board’s Oversight of Racial and Ethnic Diversity, Equity and Inclusion.” | |||
Conclusion | We remain focused on our fiduciary duty to maximize the long-term shareholder value of our clients’ investments. We believe that teams with a diversity of perspectives generate a diversity of ideas that can drive the long-term success of a firm. Please reach out to our Asset Stewardship team at [email protected]. We look forward to engaging with you on this important topic. | |||
About State Street Global Advisors | State Street Global Advisors serves governments, institutions and financial advisors with a rigorous approach, breadth of capabilities and belief that good stewardship is good investing for the long term. Pioneers in index, ETF, and ESG investing and the world’s fourth-largest asset manager*, we are always inventing new ways to invest. | |||
* Pensions & Investments Research Center, as of December 31, 2021. |
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ssga.com
State Street Global Advisors
Marketing Communications
Worldwide Entities
Abu Dhabi: State Street Global Advisors Limited, ADGM branch is regulated by the Financial Services Regulatory Authority (FSRA).
This document is intended for Professional Clients or Market Counterparties only as defined by the FSRA and no other person should act upon it. State Street Global Advisors Limited, ADGM Branch, Al Khatem Tower, Suite 42801, Level 28, ADGM Square, Al Maryah Island, P.O Box 76404, Abu Dhabi, United Arab Emirates. Regulated by the ADGM Financial Services Regulatory Authority.
T: +971 2 245 9000. Australia: State Street Global Advisors, Australia, Limited (ABN 42 003 914 225) is the holder of an Australian Financial Services License (AFSL Number 238276). Registered office: Level 14, 420 George Street, Sydney, NSW 2000, Australia.
T: +612 9240-7600. F: +612 9240-7611. Belgium: State Street Global Advisors Belgium, Chaussée de La Hulpe 185, 1170 Brussels, Belgium. T: +32 2 663 2036. State Street Global Advisors Belgium is a branch office of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose
registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. Canada: State Street Global Advisors, Ltd., 1981 McGill College Avenue, Suite 500, Montreal, Qc, H3A 3A8, T: +514 282 2400 and 30 Adelaide Street East Suite 800, Toronto, Ontario M5C 3G6. T: +647 775 5900. France: State Street Global Advisors Europe Limited, France Branch (“State Street Global
Advisors France”) is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. State Street Global Advisors France is registered in France with company number RCS Nanterre 899 183 289, and its office is located at Coeur Défense — Tour A — La Défense 4, 33e étage, 100, Esplanade du Général de Gaulle, 92 931 Paris La Défense Cedex, France. T: +33 1 44 45 40 00. F: +33 1 44 45 41 92. Germany: State Street Global Advisors Europe Limited, Branch in Germany, Brienner Strasse 59, D-80333 Munich, Germany (“State Street Global Advisors Germany”). T: +49 (0)89 55878 400. State Street Global Advisors Germany is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin
2. Hong Kong: State Street Global Advisors Asia Limited, 68/F, Two International Finance Centre, 8 Finance Street, Central, Hong Kong. T: +852 2103-0288. F: +852 2103-0200. Ireland: State Street Global Advisors Europe Limited is regulated by the Central Bank of Ireland. Registered office address 78 Sir John Rogerson’s Quay, Dublin 2. Registered Number: 49934. T: +353 (0)1 776 3000.
F: +353 (0)1 776 3300. Italy: State Street Global Advisors Europe Limited, Italy Branch (“State Street Global Advisors Italy”) is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. State Street
Global Advisors Italy is registered in Italy with company number
11871450968 — REA: 2628603 and VAT number 11871450968, and its office is located at Via Ferrante Aporti, 10 - 20125 Milan, Italy. T: +39 02 32066 100. F: +39 02 32066 155. Japan: State Street Global Advisors (Japan) Co., Ltd., Toranomon Hills Mori Tower 25F 1-23-1 Toranomon, Minato-ku, Tokyo 105-6325 Japan. T: +81-3-4530-7380. Financial Instruments Business Operator, Kanto Local Financial Bureau (Kinsho #345), Membership: Japan Investment Advisers Association, The Investment Trust Association, Japan, Japan Securities Dealers’ Association. Netherlands:
State Street Global Advisors Netherlands, Apollo Building 7th floor, Herikerbergweg 29, 1101 CN Amsterdam, Netherlands. T: +31 20 7181 000. State Street Global Advisors Netherlands is a branch office of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. Singapore: State Street Global Advisors Singapore Limited, 168, Robinson Road, #33-01 Capital Tower, Singapore 068912 (Company Reg. No: 200002719D, regulated by the Monetary Authority of Singapore). T: +65 6826-7555. F: +65 6826-7501. Switzerland: State Street Global Advisors AG, Beethovenstr. 19, CH-8027 Zurich. Registered with the Register of Commerce Zurich CHE-105.078.458. T: +41 (0)44 245 70 00. F: +41 (0)44 245 70 16. South Africa: State Street Global Advisors Limited is regulated by the Financial Sector Conduct Authority in South Africa under license number 42670. United Kingdom: State Street Global Advisors Limited. Authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No. 2509928. VAT No. 5776591 81. Registered office: 20 Churchill Place, Canary Wharf, London, E14 5HJ. T: 020 3395 6000. F: 020 3395 6350. United States: State Street Global Advisors, 1 Iron Street, Boston, MA 02210-1641. T: +1 617 786 3000.
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Important Risk Information
The views expressed in this material are the views of SSGA Asset Stewardship Team through the period ended May 26, 2023 and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.
Investing involves risk including the risk of loss of principal.
The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA’s express written consent.
All information is from SSGA unless otherwise noted and has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.
The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon.
The returns on a portfolio of securities which exclude companies that do not meet the portfolio’s specified ESG criteria may trail the returns on a portfolio of securities which
include such companies. A portfolio’s ESG criteria may result in the portfolio investing in industry sectors or securities which underperform the market as a whole.
This communication is directed at professional clients (this includes eligible counterparties as defined by the appropriate EU regulator) who are deemed both knowledgeable and experienced in matters relating to investments. The products and services to which this communication relates are only available to such persons and persons of any other description (including retail clients) should not rely on this communication.
The trademarks and service marks referenced herein are the property of their respective owners. Third party data providers make no warranties or representations of any kind relating to the accuracy, completeness or timeliness of the data and have no liability
for damages of any kind relating to the use of such data.
The information contained in this communication is not a research recommendation or ‘investment research’ and is classified as a ‘Marketing Communication’ in accordance with the Markets in Financial Instruments Directive (2014/65/EU) or applicable Swiss regulation. This means that this marketing communication (a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research (b) is not subject to any prohibition on dealing ahead of the dissemination of investment research
© 2023 State Street Corporation.
All Rights Reserved. ID1483220-3383057.7.1.GBL.RTL 0323 Exp. Date: 06/30/2024
Information Classification: Limited Access
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May 2023 Asset Stewardship
Guidance on Human Capital Management Disclosures & Practices
In 2021, State Street Global Advisors’ Asset Stewardship team sought to strengthen our perspective on human capital management. We conducted over 185 engagements with investee companies on this topic in markets across the world, including a proactive engagement campaign targeting the largest employers in our portfolios. Our team also initiated conversations with experts on the topic of human capital management to enhance our understanding of this essential topic.
Our intended outcome through these engagements was to develop expectations for companies’ disclosures on human capital management, and to share our insights regarding best practices and areas for improvement for portfolio companies (please see our complementary Human Capital Management Insights page for more on this topic). |
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Our Expectations for Human Capital Management Disclosures | While there are many material dimensions of human capital management, our engagements and analysis suggest that five areas are particularly meaningful components of a successful human capital management strategy across industries. As a starting point, we expect all companies to provide public disclosure on:: | |||
1. Board Oversight Methods outlining how the board oversees human capital-related risks and opportunities; | ||||
2. Strategy Approaches to human capital management and how these advance the long-term business strategy; | ||||
3. Compensation Strategies throughout the organization that aim to attract and retain employees, and incentivize contribution to an effective human capital strategy; | ||||
4. Voice Channels to ensure the concerns and ideas from workers are solicited and acted upon, and how the workforce is engaged and empowered in the organization; and | ||||
5. Diversity, equity, and inclusion Efforts to advance diversity, equity, and inclusion (see our complementary Guidance on Diversity Disclosures and Practices for additional context). | ||||
We expect public disclosures to contain specific information about these essential dimensions of human capital management. For example, instead of disclosing that “employees are surveyed regularly,” companies could consider describing survey frequency, examples of questions asked, and actions taken in response to employee feedback where relevant. | ||||
We understand that this is an evolving topic and we will continue to engage with companies to develop our expectations and inform our stewardship efforts in this space. We also encourage companies to consider emerging disclosure frameworks, including those required by regulators.
| ||||
Voting Incorporating Our Expectations into Our Proxy Voting and Engagement Practices |
With respect to voting on shareholder proposals related to human capital management , we will first engage with companies related to our human capital management-related disclosure and oversight expectations outlined herein, focusing on companies and industries with the greatest risk and opportunity.
Below is the approach when voting on human capital management-related shareholder proposals:
• FOR We will consider voting for shareholder proposals that we believe will lead to increased alignment with our expectations for human capital-related disclosures and oversight; |
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• ABSTAIN We will consider voting abstain when we support some elements of a proposal’s request, or recognize a company’s commitment to implement related disclosure and/or oversight practices. | ||||
• AGAINST We will vote against shareholder proposals that we believe are immaterial, overly prescriptive or would not further our disclosure and oversight expectations. | ||||
For more information on our voting policies related to diversity, equity, and inclusion, please see our Guidance on Diversity Disclosures & Practices. For example, we will take voting action against chairs of the Nominating Committees at S&P 500 companies that do not disclose EEO-1 reports.
| ||||
Thought Leadership Human Capital Management Insights |
As part of our increased focus on human capital management, we conducted over 150 engagements on this topic in markets across the world in 2021, including a proactive engagement campaign targeting 60 of the largest employers in our portfolio across the Americas, EMEA, and APAC regions. Please see our Human Capital Management Insights for insights from these engagements.
| |||
Conclusion | We encourage companies in our portfolios to align their disclosures and practices with our expectations. Please reach out to State Street Global Advisors’ Asset Stewardship Team at [email protected] to request an engagement on this important topic. | |||
For additional context regarding our perspective on labor rights as an essential dimension of human rights, please see our Guidance on Human Rights Disclosures & Practices.
| ||||
About State Street Global Advisors | For four decades, State Street Global Advisors has served the world’s governments, institutions and financial advisors. With a rigorous, risk-aware approach built on research, analysis and market-tested experience, we build from a breadth of index and active strategies to create cost-effective solutions. And, as pioneers in index, ETF, and ESG investing, we are always inventing new ways to invest. As a result, we have become the world’s fourth-largest asset manager* with US $3.62 trillion† under our care. | |||
* Pensions & Investments Research Center, as of December 31, 2021. † This figure is presented as of March 31, 2023 and includes approximately $65.03 billion USD of assets with respect to SPDR products for which State Street Global Advisors Funds Distributors, LLC (SSGA FD) acts solely as the marketing agent. SSGA FD and State Street Global Advisors are affiliated. Please note all AUM is unaudited. |
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ssga.com
Marketing communication
State Street Global Advisors Worldwide Entities
Abu Dhabi: State Street Global Advisors Limited, ADGM branch is regulated by the Financial Services Regulatory Authority (FSRA). This document is intended for Professional Clients or Market Counterparties only as defined by the FSRA and no other person should act upon it. State Street Global Advisors Limited, ADGM Branch, Al Khatem Tower, Suite 42801, Level 28, ADGM Square, Al Maryah Island, P.O Box 76404, Abu Dhabi, United Arab Emirates. Regulated by the ADGM Financial Services Regulatory Authority. T: +971 2 245 9000. Australia: State Street Global Advisors, Australia, Limited (ABN 42 003 914 225) is the holder of an Australian Financial Services License (AFSL Number 238276). Registered office: Level 14, 420 George Street, Sydney, NSW 2000, Australia. T: +612 9240-7600. F: +612 9240- 7611. Belgium: State Street Global Advisors Belgium, Chaussée de La Hulpe 185, 1170 Brussels, Belgium. T: +32 2 663 2036. State Street Global Advisors Belgium is a branch office of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2.
Canada: State Street Global Advisors, Ltd., 1981 McGill College Avenue, Suite 500, Montreal, Qc, H3A 3A8, T: +514 282 2400 and 30 Adelaide Street East Suite 800, Toronto, Ontario M5C 3G6. T: +647 775 5900. France: State Street Global Advisors Europe Limited, France Branch (“State Street Global Advisors France”) is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. State Street Global Advisors France is registered in France with company number RCS Nanterre 899 183 289, and its office is located at Coeur Défense — Tour A — La Défense 4, 33e étage, 100, Esplanade du Général de Gaulle, 92 931 Paris La Défense Cedex, France. T: +33 1 44 45 40 00. F: +33 1 44 45 41 92. Germany: State Street Global Advisors Europe Limited, Branch in Germany, Brienner Strasse 59, D-80333 Munich, Germany (“State Street Global Advisors Germany”). T: +49 (0)89 55878 400. State Street Global Advisors Germany is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. Hong Kong: State Street Global Advisors Asia Limited,
68/F, Two International Finance Centre, 8 Finance Street, Central, Hong Kong. T: +852 2103-0288. F: +852 2103- 0200. Ireland: State Street Global Advisors Europe Limited is regulated by the Central Bank of Ireland. Registered office address 78 Sir John Rogerson’s Quay, Dublin 2. Registered Number:
49934. T: +353 (0)1 776 3000. F: +353 (0)1 776 3300. Italy: State Street Global Advisors Europe Limited, Italy Branch (“State Street Global Advisors Italy”) is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. State Street Global Advisors Italy is registered in Italy with company number 11871450968 — REA: 2628603 and VAT number 11871450968, and its office is located at Via Ferrante Aporti, 10 - 20125 Milan, Italy. T: +39 02 32066 100. F: +39 02 32066 155. Japan: State Street Global Advisors (Japan) Co., Ltd., Toranomon Hills Mori Tower 25F 1-23-1 Toranomon, Minato-ku, Tokyo 105-6325 Japan. T: +81-3- 4530-7380. Financial Instruments Business Operator, Kanto Local Financial Bureau (Kinsho #345), Membership: Japan Investment Advisers Association, The Investment Trust Association, Japan, Japan Securities Dealers’ Association. Netherlands: State Street Global Advisors Netherlands,Apollo Building
7th floor, Herikerbergweg 29, 1101 CN Amsterdam, Netherlands. T: +31 20 7181 000. State Street Global Advisors Netherlands is a branch office of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. Singapore: State Street Global Advisors Singapore Limited, 168, Robinson Road, #33-01 Capital Tower, Singapore 068912 (Company Reg. No: 200002719D, regulated by the Monetary Authority of Singapore). T: +65 6826-7555. F: +65 6826-7501. Switzerland: State Street Global Advisors AG, Beethovenstr. 19, CH-8027 Zurich. Registered with the Register of Commerce Zurich CHE-105.078.458. T: +41 (0)44 245 70 00. F: +41 (0)44 245 70 16. South Africa: State Street Global Advisors Limited is regulated by the Financial Sector Conduct Authority in South Africa under license number 42670.United Kingdom: State Street Global Advisors Limited. Authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No. 2509928. VAT No. 5776591 81. Registered office: 20 Churchill Place, Canary Wharf, London, E14 5HJ. T: 020 3395 6000. F: 020 3395 6350. United States: State Street Global Advisors, 1 Iron Street, Boston, MA 02210-1641. T: +1 617 786 3000.
Information Classification: Limited Access
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Important Risk Information
Investing involves risk including the risk of loss of principal. The returns on a portfolio of securities which exclude companies that do not meet the portfolio’s specified ESG criteria may trail the returns on a portfolio of securities which include such companies.
A portfolio’s ESG criteria may result in the portfolio investing in industry sectors or securities which underperform the market as a whole.
The views expressed in this material are the views of SSGA Asset Stewardship Team through the period ended May 26, 2023 and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that
any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.
The information contained in this communication is not a research recommendation or ‘investment research’ and is classified as a ‘Marketing Communication’ in accordance with the Markets in Financial Instruments Directive (2014/65/EU) or applicable Swiss regulation. This means that this marketing communication (a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research (b) is not subject to any prohibition on dealing ahead of the dissemination of investment research.
This communication is directed at professional clients (this includes eligible counterparties as defined by the appropriate EU regulator) who are deemed both knowledgeable and experienced in matters relating to investments. The products and services to which this communication relates are only available to such persons and persons of any other description (including retail clients) should not rely on this communication.
The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor.
All information is from SSGA unless otherwise noted and has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such. The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without State Street Global Advisors’ express written consent.
© 2023 State Street Corporation.
All Rights Reserved.
ID1483214- 4044335.4.1.GBL.RTL 0423
Exp. Date: 06/30/2024
Information Classification: Limited Access
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Insights Asset Stewardship |
Guidance on Effective Board Oversight | |||
March 2023 |
||||
As stewards of near-permanent capital to thousands of public companies across the world, State Street Global Advisors focuses on risks and opportunities that may impact long-term value creation for our clients. We rely on the elected representatives of the companies in which we invest — the board of directors — to oversee these firms’ strategies. We expect effective independent board oversight of the material risks and opportunities to its business and operations. We believe that appropriate consideration of these risks and opportunities is an essential component of a firm’s long-term business strategy, and expect boards to actively oversee the management of this strategy.
This paper provides guidance to our portfolio companies on how we evaluate the effectiveness of the board oversight of the risks and opportunities and should be read in conjunction with our Global Proxy Voting and Engagement Principles and applicable regional proxy voting and engagement guidelines. It also outlines our approach to incorporating these perspectives into our voting and engagement. |
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Guidance On Effective Board Oversight | When evaluating a board’s oversight of financially material risks and opportunities, we assess the following factors, based on disclosures and engagements with directors. | |||
Oversees Long-term Strategy | ||||
• Articulates the material risks and opportunities and how those risks and opportunities fit into the firm’s long-term business strategy | ||||
• Regularly assesses the effectiveness of the company’s long-term strategy, and management’s execution of this strategy | ||||
For example, we leverage established frameworks, such as The Sustainability Accounting Standards Board (SASB) Materiality Map to inform our views on the materiality of environmental and social issues at a given company. We have also established the following priorities for proxy voting and engagement: Effective Board Oversight; Climate Risk Management; Human Capital Management; and Diversity, Equity & Inclusion. | ||||
Demonstrates an Effective Oversight Process | ||||
• Describes which committee(s) have oversight over specific risks and opportunities, as well as which topics are overseen and/or discussed at the full-board level | ||||
• Includes risks and opportunities in board and/or committee agendas, and articulates how often specific topics are discussed at the committee and/or full-board level | ||||
• Utilizes KPIs or metrics to assess the effectiveness of risk management processes | ||||
• Engages with key stakeholders including employees and investors | ||||
Ensures Effective Leadership | ||||
• Holds management accountable for progress on relevant metrics and targets | ||||
• Integrates necessary skills and perspectives into the board nominating and executive hiring processes, and provides training to directors and executives, including on topics material to the company’s business or operations | ||||
• Conducts a periodic effectiveness review |
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Ensures Disclosures of Material Information | ||||
• Ensures publication of relevant disclosures, including those regarding material topics | ||||
— For example, we expect companies to disclose against the four pillars of the Task Force on Climate-related Financial Disclosures (TCFD) framework | ||||
Incorporating our Expectations for Effective Oversight Into our Proxy Voting and Engagement Practices |
As responsible stewards, we believe in the importance of effective risk management and oversight of issues that are material to a company. To effectively assess the risk of our clients’ portfolios and the broader market, we expect our portfolio companies to manage risks and opportunities that are material and industry-specific and that have a demonstrated link to long-term value creation, and to provide high-quality disclosure of this process to shareholders.
Consistent with this perspective, we may seek to engage with our portfolio companies to better understand how their boards are overseeing risks and opportunities the company has deemed to be material to its business or operations. If we believe a company has failed to implement and communicate effective oversight of these risks, we may consider voting against the directors responsible. | |||
Next Steps For Directors | We encourage directors to review our existing guidance, as well as our voting guidelines, all of which can be found on our website. We believe regular engagements with directors is an essential component of successful long-term partnerships with our portfolio companies. Please reach out to the Asset Stewardship team at [email protected] to request an engagement or share your ideas on effective board oversight. | |||
About State Street Global Advisors | For four decades, State Street Global Advisors has served the world’s governments, institutions and financial advisors. With a rigorous, risk-aware approach built on research, analysis and market-tested experience, we build from a breadth of index and active strategies to create cost-effective solutions. And, as pioneers in index, ETF, and ESG investing, we are always inventing new ways to invest. As a result, we have become the world’s fourth-largest asset manager* with US $3.48 trillion† under our care. | |||
* Pensions & Investments Research Center, as of December 31, 2021. | ||||
† This figure is presented as of December 31, 2022 and includes approximately $58.60 billion USD of assets with respect to SPDR products for which State Street Global Advisors Funds Distributors, LLC (SSGA FD) acts solely as the marketing agent. SSGA FD and State Street Global Advisors are affiliated. Please note all AUM is unaudited. |
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ssga.com
Marketing communication
State Street Global Advisors Worldwide Entities
Abu Dhabi: State Street Global Advisors Limited, ADGM Branch, Al Khatem Tower, Suite 42801, Level 28, ADGM Square, Al Maryah Island, P.O Box 76404, Abu Dhabi, United Arab Emirates. Regulated by the ADGM Financial Services Regulatory Authority. T: +971 2 245 9000. Australia: State Street Global Advisors, Australia, Limited (ABN 42 003 914 225) is the holder of an Australian Financial Services License (AFSL Number 238276). Registered office: Level 14, 420 George Street, Sydney, NSW 2000, Australia. T: +612 9240-7600. F: +612 9240-7611. Belgium: State Street Global Advisors Belgium, Chaussée de La Hulpe 185, 1170 Brussels, Belgium. T: +32 2 663 2036. State Street Global Advisors Belgium is a branch office of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is
at 78 Sir John Rogerson’s Quay, Dublin 2. Canada: State Street Global Advisors, Ltd., 1981 McGill College Avenue, Suite 500, Montreal, Qc, H3A 3A8, T: +514 282 2400 and 30 Adelaide Street East Suite 800, Toronto, Ontario M5C 3G6. T: +647 775 5900. France: State Street Global Advisors Europe Limited, France Branch (“State Street Global Advisors France”) is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. State Street Global Advisors France is registered in France with company number RCS Nanterre 899 183 289, and its office is located at Coeur Défense – Tour A – La Défense 4, 33e étage, 100, Esplanade du Général de Gaulle, 92 931 Paris La Défense Cedex, France. T: +33 1 44 45 40 00. F: +33 1 44 45 41 92. Germany: State Street Global Advisors Europe Limited, Branch in Germany, Brienner Strasse 59, D-80333 Munich, Germany (“State Street Global Advisors Germany”). T: +49 (0)89 55878
400. State Street Global Advisors Germany is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. Hong Kong: State Street Global Advisors Asia Limited, 68/F, Two International Finance Centre, 8 Finance Street, Central, Hong Kong. T: +852 2103-0288. F: +852 2103-0200. Ireland: State Street Global Advisors Europe Limited is regulated by the Central Bank of Ireland. Registered office address 78 Sir John Rogerson’s Quay, Dublin 2. Registered Number: 49934. T: +353 (0)1 776 3000. F: +353 (0)1 776 3300. Italy: State Street Global Advisors Europe Limited, Italy Branch (“State Street Global Advisors Italy”) is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. State Street Global Advisors Italy is registered in Italy with company number
11871450968 – REA: 2628603 and VAT number 11871450968, and its office is located at Via Ferrante Aporti, 10 - 20125 Milan, Italy. T: +39 02 32066 100. F: +39 02 32066 155. Japan: State Street Global Advisors (Japan) Co., Ltd., Toranomon Hills Mori Tower 25F 1-23-1 Toranomon, Minato-ku, Tokyo 105-6325 Japan. T: +81-3-4530-7380. Financial Instruments Business Operator, Kanto Local Financial Bureau (Kinsho #345), Membership: Japan Investment Advisers Association, The Investment Trust Association, Japan, Japan Securities Dealers’
Association. Netherlands: State Street Global Advisors Netherlands, Apollo Building 7th floor, Herikerbergweg 29, 1101 CN Amsterdam, Netherlands. T: +31 20 7181 000. State Street Global Advisors Netherlands is a branch office of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. Singapore: State Street Global Advisors
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Singapore Limited, 168, Robinson Road, #33-01 Capital Tower, Singapore 068912 (Company Reg. No: 200002719D, regulated by the Monetary Authority of Singapore). T: +65 6826-7555. F: +65 6826-7501. Switzerland: State Street Global Advisors AG, Beethovenstr. 19, CH-8027 Zurich. Registered with the Register of Commerce Zurich CHE-105.078.458. T: +41 (0)44 245 70 00. F: +41 (0)44 245 70 16. United Kingdom: State Street Global Advisors Limited. Authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No. 2509928. VAT No. 5776591 81. Registered office: 20 Churchill Place, Canary Wharf, London, E14 5HJ. T: 020 3395 6000. F: 020 3395 6350. United States: State Street Global Advisors, 1 Iron Street, Boston, MA 02210-1641. T: +1 617 786 3000.
Important Risk Information
Investing involves risk including the risk of loss of principal.
The returns on a portfolio of securities which exclude
companies that do not meet the portfolio’s specified ESG criteria may trail the returns on a portfolio of securities which include such companies. A portfolio’s ESG criteria may result in the portfolio investing in industry sectors or securities which underperform the market as a whole.
Responsible-Factor (R Factor) scoring is designed by State Street to reflect certain ESG characteristics and does not represent investment performance. Results generated out of the scoring model is based on sustainability and corporate governance dimensions of a scored entity.
The information contained in this communication is not a research recommendation or ‘investment research’ and is classified as a ‘Marketing Communication’ in accordance with the Markets in Financial Instruments Directive (2014/65/EU) or applicable Swiss regulation. This means that this marketing communication (a) has not been prepared in accordance with legal requirements designed to promote the independence
of investment research (b) is not subject to any prohibition on dealing ahead of the dissemination of investment research.
This communication is directed at professional clients (this includes eligible counterparties as defined by the appropriate EU regulator) who are deemed both knowledgeable and experienced in matters relating to investments. The products and services to which this communication relates are only available to such persons and persons of any other description (including retail clients) should not rely on this communication.
The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor.
All information is from SSGA unless otherwise noted and has been obtained from sources believed to be reliable, but its accuracy is not
guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.
The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without State Street Global Advisors’ express written consent.
© 2023 State Street Corporation.
All Rights Reserved.
ID1519201-5596229.1.2.GBL.RTL 0423
Exp. Date: 03/31/2024
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Insights Asset Management
|
Guidance on Virtual Shareholder Meetings | |||
April 2023 | ||||
As shareholder meetings have increasingly been held virtually due to the pandemic, our Asset Stewardship team outlines our voting approach to management proposals on this topic, expectations for shareholder engagement best practices and guidance on preserving robust shareholder rights.
| ||||
As a result of the COVID-19 pandemic, companies are increasingly holding virtual shareholder meetings (“VSMs”) globally. Many companies are proposing amendments to their governing documents that grant the board the ability to host VSMs at their own discretion in perpetuity. | ||||
Recognizing the success of virtual and hybrid shareholder meetings and a shifting regulatory environment, we will 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 of any of the criteria above, we may vote against the Chair of the nominating committee. | ||||
Our evaluation of these proposals will also consider the operating environment of the company, including local regulatory developments and specific market circumstances impacting virtual meeting practices. |
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While we are encouraged by the success of VSMs thus far,, companies and shareholders must remain vigilant in continuing to improve their VSM practices. Maintaining a strong level of shareholder dialogue, upholding shareholder rights, and leveraging the virtual format to benefit companies and investors will be essential. |
About State Street Global Advisors | Our clients are the world’s governments, institutions and financial advisors. To help them achieve their financial goals we live our guiding principles each and every day: | |||
• Start with rigor | ||||
• Build from breadth | ||||
• Invest as stewards | ||||
• Invent the future | ||||
For four decades, these principles have helped us be the quiet power in a tumultuous investing world. Helping millions of people secure their financial futures. This takes each of our employees in 29 offices around the world, and a firm-wide conviction that we can always do it better. As a result, we are the world’s fourth-largest asset manager* with US $3.62 trillion† under our care. | ||||
* Pensions & Investments Research Center, as of December 31, 2021. | ||||
† This figure is presented as of March 31, 2023 and includes approximately $65.03 billion USD of assets with respect to SPDR products for which State Street Global Advisors Funds Distributors, LLC (SSGA FD) acts solely as the marketing agent. SSGA FD and State Street Global Advisors are affiliated. Please note all AUM is unaudited. |
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ssga.com
Marketing communication
State Street Global Advisors
Worldwide Entities
Abu Dhabi: State Street Global Advisors Limited, ADGM branch is regulated by the Financial Services Regulatory Authority (FSRA). This document is intended for Professional Clients or Market Counterparties only as defined by the FSRA and no other person should act upon it. State Street Global Advisors Limited, ADGM Branch, Al Khatem Tower, Suite 42801, Level 28, ADGM Square, Al Maryah Island, P.O Box 76404, Abu Dhabi, United Arab Emirates. Regulated by the ADGM Financial Services Regulatory Authority. T: +971 2 245 9000. Australia: State Street Global Advisors, Australia, Limited (ABN 42 003 914 225) is the holder of an Australian Financial Services License (AFSL Number 238276). Registered office: Level 14, 420 George Street, Sydney, NSW 2000, Australia. T: +612 9240-7600. F: +612 9240-7611. Belgium: State Street Global Advisors Belgium, Chaussée de La Hulpe 185, 1170 Brussels, Belgium. T: +32 2 663 2036. State Street Global Advisors Belgium is a branch office of
State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. Canada: State Street Global Advisors, Ltd., 1981 McGill College Avenue, Suite 500, Montreal, Qc, H3A 3A8, T: +514 282 2400 and 30 Adelaide Street East Suite 800, Toronto, Ontario M5C 3G6. T: +647 775 5900. France: State Street Global Advisors Europe Limited, France Branch (“State Street Global Advisors France”) is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. State Street Global Advisors France is registered in France with company number RCS Nanterre 899 183 289, and its office is located at Coeur Défense — Tour A — La Défense 4, 33e étage, 100, Esplanade du Général de Gaulle, 92 931 Paris La Défense Cedex, France. T: +33 1 44 45 40 00. F: +33 1 44 45 41 92. Germany: State Street Global Advisors Europe
Limited, Branch in Germany, Brienner Strasse 59, D-80333 Munich, Germany (“State Street Global Advisors Germany”). T: +49 (0)89 55878 400. State Street Global Advisors Germany is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. Hong Kong: State Street Global Advisors Asia Limited, 68/F, Two International Finance Centre, 8 Finance Street, Central, Hong Kong. T: +852 2103-0288. F: +852 2103-0200. Ireland: State Street Global Advisors Europe Limited is regulated by the Central Bank of Ireland. Registered office address 78 Sir John Rogerson’s Quay, Dublin 2. Registered Number: 49934. T: +353 (0)1 776 3000. F: +353 (0)1 776 3300. Italy: State Street Global Advisors Europe Limited, Italy Branch (“State Street Global Advisors Italy”) is a branch of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. State Street
Global Advisors Italy is registered in Italy with company number 11871450968 — REA: 2628603 and VAT number 11871450968, and its office is located at Via Ferrante Aporti, 10 - 20125 Milan, Italy. T: +39 02 32066 100. F: +39 02 32066 155. Japan: State Street Global Advisors (Japan) Co., Ltd., Toranomon Hills Mori Tower 25F 1-23-1 Toranomon, Minato-ku, Tokyo 105-6325 Japan. T: +81-3-4530-7380. Financial Instruments Business Operator, Kanto Local Financial Bureau (Kinsho #345), Membership: Japan Investment Advisers Association, The Investment Trust Association, Japan, Japan Securities Dealers’ Association. Netherlands: State Street Global Advisors Netherlands, Apollo Building 7th floor, Herikerbergweg 29, 1101 CN Amsterdam, Netherlands. T: +31 20 7181 000. State Street Global Advisors Netherlands is a branch office of State Street Global Advisors Europe Limited, registered in Ireland with company number 49934, authorised and regulated by the Central Bank of Ireland, and whose registered office is at 78 Sir John Rogerson’s Quay, Dublin 2. Singapore: State Street Global Advisors Singapore Limited, 168,
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Robinson Road, #33-01 Capital Tower, Singapore 068912 (Company Reg. No: 200002719D, regulated by the Monetary Authority of Singapore). T: +65 6826-7555.
F: +65 6826-7501. Switzerland: State Street Global Advisors AG, Beethovenstr. 19, CH-8027 Zurich. Registered with the Register of Commerce Zurich CHE-105.078.458. T: +41 (0)44 245 70 00. F: +41 (0)44 245 70 16. United Kingdom: State Street Global Advisors Limited. Authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No. 2509928. VAT No. 5776591 81. Registered office: 20 Churchill Place, Canary Wharf, London, E14 5HJ. T: 020 3395 6000. F: 020 3395 6350. United States: State Street Global Advisors, 1 Iron Street, Boston, MA 02210-1641. T: +1 617 786 3000.
The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without State Street Global Advisors’ express
written consent.
The information provided does not constitute investment advice and it should not be relied on as such. It should not
be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor.
All information is from State Street Global Advisors unless otherwise noted and has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.
Investing involves risk including the risk of loss of principal.
The views expressed in this material are the views of SSGA Asset Stewardship Team through the period ended April 12, 2023 and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ
materially from those projected.
The returns on a portfolio of securities which exclude companies that do not meet the portfolio’s specified ESG criteria may trail the returns on a portfolio of securities which include such companies. A portfolio’s ESG criteria may result in the portfolio investing in industry sectors or securities
which underperform the market as a whole.
This communication is directed at professional clients (this includes eligible counterparties as defined by the appropriate EU regulator who are deemed both knowledgeable and experienced in matters relating to investments. The products and services to which this communication relates are only available to such persons and persons of any other description (including retail clients) should not rely on this communication.
The trademarks and service marks referenced herein are the property of their respective owners. Third party data providers make no warranties or representations of any kind relating to the accuracy, completeness or timeliness of the data and have no liability for damages of any kind relating to the use of such data.
Responsible-Factor (R Factor) scoring is designed by State Street to reflect certain ESG characteristics and does not represent investment performance. Results generated out of the scoring model is based on sustainability and corporate governance dimensions of a scored entity.
The information contained in this communication is not a research recommendation or ‘investment research’ and is classified as a ‘Marketing Communication’ in accordance with the Markets in Financial Instruments Directive (2014/65/EU) or applicable Swiss regulation. This means that this marketing communication (a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research (b) is not subject to any prohibition on dealing ahead of the dissemination of investment research.
© 2023 State Street Corporation.
All Rights Reserved.
ID1522584-4255954.3.1.GBL.RTL 0423
Exp. Date: 04/30/2024
|
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APPENDIX D
Nuveen Asset Management, LLC
Proxy Voting Policy
Applicability
This Policy applies to Nuveen employees acting on behalf of Nuveen Asset Management, LLC, Teachers Advisors, LLC, and TIAA-CREF Investment Management, LLC.
Policy Purpose and Statement
Proxy voting is the primary means by which shareholders may influence a publicly traded company’s governance and operations and thus create the potential for value and positive long-term investment performance. When an SEC registered investment adviser has proxy voting authority, the adviser has a fiduciary duty to vote proxies in the best interests of its clients and must not subrogate its clients’ interests to its own. In their capacity as fiduciaries and investment advisers, Nuveen Asset Management, LLC (“NAM”), Teachers Advisors, LLC (“TAL”) and TIAA-CREF Investment Management, LLC (“TCIM”), (each an “Adviser” and collectively, the “Advisers”), vote proxies for the Portfolio Companies held by their respective clients, including investment companies and other pooled investment vehicles, institutional and retail separate accounts, and other clients as applicable. The Advisers have adopted this Policy, the Nuveen Proxy Voting Guidelines, and the Nuveen Proxy Voting Conflicts of Interest Policy for voting the proxies of the Portfolio Companies they manage. The Advisers leverage the expertise and services of an internal group referred to as the Responsible Investing Team (RI Team) to administer the Advisers’ proxy voting. The RI Team adheres to the Advisers’ Proxy Voting Guidelines which are reasonably designed to ensure that the Advisers vote client securities in the best interests of the Advisers’ clients.
Policy Statement
Proxy voting is a key component of a Portfolio Company’s corporate governance program and is the primary method for exercising shareholder rights and influencing the Portfolio Company’s behavior. Nuveen makes informed voting decisions in compliance with Rule 206(4)-6 (the “Rule”) of the Investment Advisers Act of 1940, as amended (the “Advisers Act”) and applicable laws and regulations, (e.g., the Employee Retirement Income Security Act of 1974, “ERISA”).
Enforcement
As provided in the TIAA Code of Business Conduct, all employees are expected to comply with applicable laws and regulations, as well as the relevant policies, procedures and compliance manuals that apply to Nuveen’s business activities. Violation of this Policy may result in disciplinary action up to and including termination of employment.
Terms and Definitions
Advisory Personnel includes the Adviser’s portfolio managers and/or research analysts.
Proxy Voting Guidelines (the ‘’Guidelines’’) are a set of pre-determined principles setting forth the manner in which the Advisers intend to vote on specific voting categories, and serve to assist clients, Portfolio Companies, and other interested parties in understanding how the Advisers intend to vote on proxy-related matters. The Guidelines are not exhaustive and do not necessarily dictate how the Advisers will ultimately vote with respect to any proposal or resolution.
Portfolio Company includes any publicly traded company held in an account that is managed by an Adviser.
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Policy Requirements
Investment advisers, in accordance with the Rule, are required to (i) adopt and implement written policies and procedures that are reasonably designed to ensure that proxies are voted in the best interest of clients, and address resolution of material conflicts that may arise, (ii) describe their proxy voting procedures to their clients and provide copies on request, and (iii) disclose to clients how they may obtain information on how the Advisers voted their proxies.
The Nuveen Proxy Voting Committee (the “Committee”), the Advisers, the RI Team and Nuveen Compliance are subject to the respective requirements outlined below under Roles and Responsibilities.
Although it is the general policy to vote all applicable proxies received in a timely fashion with respect to securities selected by an Adviser for current clients, the Adviser may refrain from voting in certain circumstances where such voting would be disadvantageous, materially burdensome or impractical, or otherwise inconsistent with the overall best interest of clients.
Roles and Responsibilities
Nuveen Proxy Voting Committee
The purpose of the Committee is to establish a governance framework to oversee the proxy voting activities of the Advisers in accordance with the Policy. The Committee has delegated responsibility for the implementation and ongoing administration of the Policy to the RI Team, subject to the Committee’s ultimate oversight and responsibility as outlined in the Committee’s Proxy Voting Charter.
Advisers
1. |
Advisory Personnel maintain the ultimate decision-making authority with respect to how proxies will be voted, unless otherwise instructed by a client, and may determine to vote contrary to the Guidelines and/or a vote recommendation of the RI Team if such Advisory Personnel determines it is in the best interest of the Adviser’s clients to do so. The rationale for all such contrary vote determinations will be documented and maintained. |
2. |
When voting proxies for different groups of client accounts, Advisory Personnel may vote proxies held by the respective client accounts differently depending on the facts and circumstances specific to such client accounts. The rationale for all such vote determinations will be documented and maintained. |
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Advisory Personnel must comply with the Nuveen Proxy Voting Conflicts of Interest Policy with respect to potential material conflicts of interest. |
Responsible Investing Team
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Performs day-to-day administration of the Advisers’ proxy voting processes. |
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Seeks to vote proxies in adherence to the Guidelines, which have been constructed in a manner intended to align with the best interests of clients. In applying the Guidelines, the RI Team, on behalf of the Advisers, takes into account several factors, including, but not limited to: |
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Input from Advisory Personnel |
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Third-party research |
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Specific Portfolio Company context, including environmental, social and governance practices, and financial performance. |
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Delivers copies of the Advisers’ Policy to clients and prospective clients upon request in a timely manner, as appropriate. |
4. |
Assists with the disclosure of proxy votes as applicable on corporate websites and elsewhere as required by applicable regulations. |
5. |
Prepares reports of proxies voted on behalf of the Advisers’ investment company clients to their Boards or committees thereof, as applicable. |
6. |
Performs an annual vote reconciliation for review by the Committee. |
7. |
Arranges the annual service provider due diligence, including a review of the service provider’s potential conflicts of interests, and presents the results to the Committee. |
8. |
Facilitates quarterly Committee meetings, including agenda and meeting minute preparation. |
9. |
Complies with the Nuveen Proxy Voting Conflicts of Interest Policy with respect to potential material conflicts of interest. |
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Creates and retains certain records in accordance with Nuveen’s Record Management program. |
11. |
Oversees the proxy voting service provider in making and retaining certain records as required under applicable regulation. |
12. |
Assesses, in cooperation with Advisory Personnel, whether securities on loan should be recalled in order to vote their proxies. |
Nuveen Compliance
1. |
Ensures proper disclosure of Advisers’ Policy to clients as required by regulation or otherwise. |
2. |
Ensures proper disclosure to clients of how they may obtain information on how the Advisers voted their proxies. |
3. |
Assists the RI Team with arranging the annual service provider due diligence and presenting the results to the Committee. |
4. |
Monitors for compliance with this Policy and retains records relating to its monitoring activities pursuant to Nuveen’s Records Management program. |
Governance
Review and Approval
This Policy will be reviewed at least annually and will be updated sooner if substantive changes are necessary. The Policy Leader, the Committee and the NEFI Compliance Committee are responsible for the review and approval of this Policy.
Implementation
Nuveen has established the Committee to provide centralized management and oversight of the proxy voting process administered by the RI Team for the Advisers in accordance with its Proxy Voting Committee Charter and this Policy.
Exceptions
Any request for a proposed exception or variation to this Policy will be submitted to the Committee for approval and reported to the appropriate governance committee(s), where appropriate.
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Related Documents
• |
Nuveen Proxy Voting Committee Charter |
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Nuveen Proxy Voting Guidelines |
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Nuveen Proxy Voting Conflicts of Interest Policy and Procedures |
• |
Nuveen Policy Statement on Responsible Investing |
Policy Adoption Date | February 3, 2020 | |
Current Policy Effective Date | October 1, 2022 | |
Current Policy Approval Date | August 31, 2022 | |
Policy Owner | Nuveen Proxy Voting Committee | |
Policy Leader | Managing Director, Nuveen Compliance | |
Policy Portal Administration | Leader: Managing Director, Nuveen Compliance | |
Owner: Managing Director, Head of Affiliate Compliance | ||
Criticality/Tier | Moderate |
Nuveen Proxy Voting Conflicts of Interest Policy and Procedures
Applicability
This Policy applies to employees of Nuveen (“Nuveen”) acting on behalf of Nuveen Asset Management, LLC (“NAM”), Teachers Advisors, LLC (“TAL”) and TIAA-CREF Investment Management, LLC (“TCIM”), (each an “Adviser” and collectively referred to as the “Advisers”).
Policy Purpose and Statement
Proxy voting by investment advisers is subject to U.S. Securities and Exchange Commission (“SEC”) rules and regulations, and for accounts subject to ERISA, U.S. Department of Labor (“DOL”) requirements. These rules and regulations require policies and procedures reasonably designed to ensure proxies are voted in the best interest of clients and that such procedures set forth how the adviser addresses material conflicts that may arise between the Adviser’s interests and those of its clients. The purpose of this Proxy Voting Conflicts of Interest Policy and Procedures (“Policy”) is to describe how the Advisers monitor and address the risks associated with Material Conflicts of Interest arising out of business and personal relationships that could affect proxy voting decisions.
Nuveen’s Responsible Investing Team (“RI Team”) is responsible for providing vote recommendations, based on the Nuveen Proxy Voting Guidelines (the “Guidelines”), to the Advisers and for administering the voting of proxies on behalf of the Advisers. When determining how to vote proxies, the RI Team adheres to the Guidelines which are reasonably designed to ensure that the Advisers vote proxies in the best interests of the Advisers’ clients.
Advisers may face certain potential Material Conflicts of Interest when voting proxies. The procedures set forth below have been reasonably designed to identify, monitor, and address potential Material Conflicts of Interest to ensure that the Advisers’ voting decisions are based on the best interest of their clients and are not the product of a conflict.
Policy Statement
The Advisers have a fiduciary duty to vote proxies in the best interests of their clients and must not subrogate the interests of their clients to their own.
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Enforcement
As provided in the TIAA Code of Business Conduct, all employees are expected to comply with applicable laws and regulations, as well as the relevant policies, procedures and compliance manuals that apply to Nuveen’s business activities. Violation of this Policy may result in disciplinary action up to and including termination of employment.
Terms and Definitions
Advisory Personnel includes the Advisers’ portfolio managers and research analysts.
Conflicts Watch List (“Watch List”) refers to a list maintained by the RI Team based on the following:
1. |
The positions and relationships of the following categories of individuals are evaluated to assist in identifying a potential Material Conflict with a Portfolio Company: |
i. |
The TIAA CEO |
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Nuveen Executive Leadership Team |
iii. |
RI Team members who provide proxy voting recommendations on behalf of the Advisers, |
iv. |
Advisory Personnel, and |
v. |
Household Members of the parties listed above in Nos. 1(i) – 1(iv) |
The following criteria constitute a potential Material Conflict:
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Any individual identified above in 1(i) – 1(v) who serves on a Portfolio Company’s board of directors; and/or |
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Any individual identified above in 1(v) who serves as a senior executive of a Portfolio Company. |
2. |
In addition, the following circumstances have been determined to constitute a potential Material Conflict: |
i. |
Voting proxies for Funds sponsored by a Nuveen Affiliated Entity (i.e., registered investment funds and other funds that require proxy voting) held in client accounts, |
ii. |
Voting proxies for Portfolio Companies that are direct advisory clients of the Advisers and/or the Nuveen Affiliated Entities, |
iii. |
Voting proxies for Portfolio Companies that have a material distribution relationship1 with regard to the products or strategies of the Advisers and/or the Nuveen Affiliated Entities, |
iv. |
Voting proxies for Portfolio Companies that are institutional investment consultants with which the Advisers and/or the Nuveen Affiliated Entities have engaged for any material business opportunity1 and |
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Any other circumstance where the RI Team, the Nuveen Proxy Voting Committee (the “Committee”), the Advisers, Nuveen Legal or Nuveen Compliance are aware of in which the Adviser’s duty to serve its clients’ interests could be materially compromised. |
In addition, certain conflicts may arise when a Proxy Service Provider or their affiliate(s), have determined and/or disclosed that a relationship exists with i) a Portfolio Company ii) an entity acting as a primary shareholder proponent with respect to a Portfolio Company or iii) another party. Such relationships include, but are not limited to, the products and services provided to, and the revenue obtained from, such Portfolio Company or its affiliates. The Proxy Service Provider is required to
1 |
Such criteria is defined in a separate standard operating procedure. |
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disclose such relationships to the Advisers, and the RI Team reviews and evaluates the Proxy Service Provider’s disclosed conflicts of interest and associated controls annually and reports its assessment to the Committee.
Household Member includes any of the following who reside or are expected to reside in your household for at least 90 days a year: i) spouse or Domestic Partner, ii) sibling, iii) child, stepchild, grandchild, parents, grandparent, stepparent, and in-laws (mother, father, son, daughter, brother, sister).
Domestic Partner is defined as an individual who is neither a relative of, or legally married to, a Nuveen employee but shares a residence and is in a mutual commitment similar to marriage with such Nuveen employee.
Material Conflicts of Interest (“Material Conflict”) A conflict of interest that reasonably could have the potential to influence a recommendation based on the criteria described in this Policy.
Nuveen Affiliated Entities refers to TIAA and entities that are under common control with the Advisers and that provide investment advisory services to third party clients2. TIAA and the Advisers will undertake reasonable efforts to identify and manage any potential TIAA-related conflicts of interest.
Portfolio Company refers to any publicly traded company held in an account that is managed by an Adviser or a Nuveen Affiliated Entity.
Proxy Service Provider(s) refers to any independent third-party vendor(s) who provides proxy voting administrative, research and/or recordkeeping services to Nuveen.
Proxy Voting Guidelines (the “Guidelines’’) are a set of pre-determined principles setting forth the manner in which the Advisers generally intend to vote on specific voting categories and serve to assist clients, Portfolio Companies, and other interested parties in understanding how the Advisers generally intend to vote proxy-related matters. The Guidelines are not exhaustive and do not necessarily dictate how the Advisers will ultimately vote with respect to any proposal or resolution.
Proxy Voting Conflicts of Interest Escalation Form (“Escalation Form”) Used in limited circumstances as described below to formally document certain requests to deviate from the Guidelines, the rationale supporting the request, and the ultimate resolution.
Policy Requirements
The Advisers have a fiduciary duty to vote proxies in the best interests of their clients and must not subrogate the interests of their clients to their own.
The RI Team and Advisory Personnel are prohibited from being influenced in their proxy voting decisions by any individual outside the established proxy voting process. The RI Team and Advisory Personnel are required to report to Nuveen Compliance any individuals or parties seeking to influence proxy votes outside the established proxy voting process.
The RI Team generally seeks to vote proxies in adherence to the Guidelines. In the event that a potential Material Conflict has been identified, the Committee, the RI Team, Advisory Personnel and Nuveen Compliance are required to comply with the following:
Proxies are generally voted in accordance with the Guidelines. In instances where a proxy is issued by a Portfolio Company on the Watch List, and the RI Team’s vote direction is in support of company management and either contrary to the Guidelines or the Guidelines require a case by case review, then the RI Team vote recommendation is evaluated using established criteria3 to determine whether a potential conflict exists. In instances where it is determined a potential conflict exists, the vote direction shall default to the recommendation of an independent third-party Proxy Service Provider based on
2 |
Such list is maintained in a separate standard operating procedure. |
3 |
Such criteria is defined in a separate standard operating procedure. |
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such provider’s benchmark policy. To the extent the RI Team believes there is a justification to vote contrary to the Proxy Service Provider’s benchmark recommendation in such an instance, then such requests are evaluated and mitigated pursuant to an Escalation Form review process as described in the Roles and Responsibilities section below. In all cases votes are intended to be in line with the Guidelines and in the best interests of clients.
The Advisers are required to adhere to the baseline standards and guiding principles governing client and personnel conflicts as outlined in the TIAA Conflicts of Interest Policy to assist in identifying, escalating and addressing proxy voting conflicts in a timely manner.
Roles and Responsibilities
Nuveen Proxy Voting Committee
1. |
Annually, review and approve the criteria constituting a Material Conflict involving the individuals and entities named on the Watch List. |
2. |
Review and approve the Policy annually, or more frequently as required. |
3. |
Review Escalation Forms as described above to determine whether the rationale of the recommendation is clearly articulated and reasonable relative to the potential Material Conflict. |
4. |
Review RI Team Material Conflicts reporting. |
5. |
Review and consider any other matters involving the Advisers’ proxy voting activities that are brought to the Committee. |
Responsible Investing Team
1. |
Promptly disclose RI Team members’ Material Conflicts to Nuveen Compliance. |
2. |
RI Team members must recuse themselves from all decisions related to proxy voting for the Portfolio Company seeking the proxy for which they personally have disclosed, or are required to disclose, a Material Conflict. |
3. |
Compile, administer and update the Watch List promptly based on the Watch List criteria described herein as necessary. |
4. |
Evaluate vote recommendations for Portfolio Companies on the Watch List, based on established criteria to determine whether a vote shall default to the third-party Proxy Service Provider, or whether an Escalation Form is required. |
5. |
In instances where an Escalation Form is required as described above, the RI Team member responsible for the recommendation completes and submits the form to an RI Team manager and the Committee. The RI Team will specify a response due date from the Committee typically no earlier than two business days from when the request was delivered. While the RI Team will make reasonable efforts to provide a two business day notification period, in certain instances the required response date may be shortened. The Committee reviews the Escalation Form to determine whether a Material Conflict exists and whether the rationale of the recommendation is clearly articulated and reasonable relative to the existing conflict. The Committee will then provide its response in writing to the RI Team member who submitted the Escalation Form. |
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6. |
Provide Nuveen Compliance with established reporting. |
7. |
Prepare Material Conflicts reporting to the Committee and other parties, as applicable. |
8. |
Retain Escalation Forms and responses thereto and all other relevant documentation in conformance with Nuveen’s Record Management program. |
Advisory Personnel
1. |
Promptly disclose Material Conflicts to Nuveen Compliance. |
2. |
Provide input and/or vote recommendations to the RI Team upon request. Advisory Personnel are prohibited from providing the RI Team with input and/or recommendations for any Portfolio Company for which they have disclosed, or are required to disclose, a Material Conflict. |
3. |
From time to time as part of the Adviser’s normal course of business, Advisory Personnel may initiate an action to override the Guidelines for a particular proposal. For a proxy vote issued by a Portfolio Company on the Watch List, if Advisory Personnel request a vote against the Guidelines and in favor of Portfolio Company management, then the request will be evaluated by the RI Team in accordance with their established criteria and processes described above. To the extent an Escalation Form is required, the Committee reviews the Escalation Form to determine whether the rationale of the recommendation is clearly articulated and reasonable relative to the potential Material Conflict. |
Nuveen Compliance
1. |
Determine criteria constituting a Material Conflict involving the individuals and entities named on the Watch List. |
2. |
Determine parties responsible for collection of, and providing identified Material Conflicts to, the RI Team for inclusion on the Watch List. |
3. |
Perform periodic reviews of votes where Material Conflicts have been identified to determine whether the votes were cast in accordance with this Policy. |
4. |
Develop and maintain, in consultation with the RI Team, standard operating procedures to support the Policy. |
5. |
Perform periodic monitoring to determine adherence to the Policy. |
6. |
Administer training to the Advisers and the RI Team, as applicable, to ensure applicable personnel understand Material Conflicts and disclosure responsibilities. |
7. |
Assist the Committee with the annual review of this Policy. |
Nuveen Legal
1. |
Provide legal guidance as requested. |
Governance
Review and Approval
This Policy will be reviewed at least annually and will be updated sooner if changes are necessary. The Policy Leader, the Committee and the NEFI Compliance Committee are responsible for the review and approval of this Policy.
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Implementation
Nuveen has established the Committee to provide centralized management and oversight of the proxy voting process administered by the RI Team for the Advisers in accordance with its Proxy Voting Committee Charter and this Policy.
Exceptions
Any request for a proposed exception or variation to this Policy will be submitted to the Committee for approval and reported to the appropriate governance committee(s), where appropriate.
Related Documents
• |
Nuveen Proxy Voting Committee Charter |
• |
Nuveen Proxy Voting Guidelines |
• |
Nuveen Proxy Policy |
• |
Nuveen Policy Statement on Responsible Investing |
Policy Adoption Date | February 3, 2020 | |
Current Policy Effective Date | October 1, 2022 | |
Current Policy Approval Date | August 31, 2022 | |
Policy Owner | Nuveen Proxy Voting Committee | |
Policy Leader | Managing Director, Nuveen Compliance | |
Policy Portal Administration | Leader: Managing Director, Nuveen Compliance | |
Owner: Managing Director, Head of Affiliate Compliance | ||
Criticality/Tier | Moderate |
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Shareholder Engagement Policy (Shareholder Advisory Committee) |
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Ratification Proposals: Management Proposals to Ratify Existing Charter or Bylaw Provisions |
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Share Issuance Mandates at U.S. Domestic Issuers Incorporated Outside the U.S. |
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Voting on Golden Parachutes in an Acquisition, Merger, Consolidation, or Proposed Sale |
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Amending Cash and Equity Plans (including Approval for Tax Deductibility (162(m)) |
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Specific Treatment of Certain Award Types in Equity Plan Evaluations |
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Operating Partnership (OP) Units in Equity Plan Analysis of Real Estate Investment Trusts (REITs) |
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Compensation Consultants—Disclosure of Board or Company’s Utilization |
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Hold Equity Past Retirement or for a Significant Period of Time |
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Authorizing the Board to Hire and Terminate Subadvisers Without Shareholder Approval |
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The U.S. research team provides proxy analyses and voting recommendations for the common shareholder meetings of U.S. - incorporated companies that are publicly-traded on U.S. exchanges, as well as certain OTC companies, if they are held in our institutional investor clients’ portfolios. Coverage generally includes corporate actions for common equity holders, such as written consents and bankruptcies. ISS’ U.S. coverage includes investment companies (including open-end funds, closed-end funds, exchange-traded funds, and unit investment trusts), limited partnerships (“LPs”), master limited partnerships (“MLPs”), limited liability companies (“LLCs”), and business development companies. ISS reviews its universe of coverage on an annual basis, and the coverage is subject to change based on client need and industry trends.
Foreign-incorporated companies
In addition to U.S.- incorporated, U.S.- listed companies, ISS’ U.S. policies are applied to certain foreign-incorporated company analyses. Like the SEC, ISS distinguishes two types of companies that list but are not incorporated in the U.S.:
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U.S. Domestic Issuers – which have a majority of outstanding shares held in the U.S. and meet other criteria, as determined by the SEC, and are subject to the same disclosure and listing standards as U.S. incorporated companies (e.g. they are required to file DEF14A proxy statements) – are generally covered under standard U.S. policy guidelines. |
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Foreign Private Issuers (FPIs) – which are allowed to take exemptions from most disclosure requirements (e.g., they are allowed to file 6-K for their proxy materials) and U.S. listing standards – are generally covered under a combination of policy guidelines: |
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FPI Guidelines (see the Americas Regional Proxy Voting Guidelines), may apply to companies incorporated in governance havens, and apply certain minimum independence and disclosure standards in the evaluation of key proxy ballot items, such as the election of directors; and/or |
◾ |
Guidelines for the market that is responsible for, or most relevant to, the item on the ballot. |
U.S. incorporated companies listed only on non-U.S. exchanges are generally covered under the ISS guidelines for the market on which they are traded.
An FPI is generally covered under ISS’ approach to FPIs outlined above, even if such FPI voluntarily files a proxy statement and/or other filing normally required of a U.S. Domestic Issuer, so long as the company retains its FPI status.
In all cases – including with respect to other companies with cross-market features that may lead to ballot items related to multiple markets – items that are on the ballot solely due to the requirements of another market (listing, incorporation, or national code) may be evaluated under the policy of the relevant market, regardless of the
“assigned” primary market coverage.
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Voting on Director Nominees in Uncontested Elections
Four fundamental principles apply when determining votes on director nominees:
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.
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.
Responsiveness: Directors should respond to investor input, such as that expressed through significant opposition to management proposals, significant support for shareholder proposals (whether binding or non-binding), and tender offers where a majority of shares are tendered.
Accountability: Boards should be sufficiently accountable to shareholders, including through transparency of the company’s governance practices and regular board elections, by the provision of sufficient information for shareholders to be able to assess directors and board composition, and through the ability of shareholders to remove directors.
General Recommendation: Generally vote for director nominees, except under the following circumstances (with new nominees1 considered on case-by-case basis):
Vote against2 or withhold from non-independent directors (Executive Directors and Non-Independent Non-Executive Directors per ISS’ Classification of 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. |
1 A “new nominee” is a director who is being presented for election by shareholders for the first time. Recommendations on new nominees who have served for less than one year are made on a case-by-case basis depending on the timing of their appointment and the problematic governance issue in question.
2 In general, companies with a plurality vote standard use “Withhold” as the contrary vote option in director elections; companies with a majority vote standard use “Against”. However, it will vary by company and the proxy must be checked to determine the valid contrary vote option for the particular company.
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ISS Classification of Directors – U.S.
1. |
Executive Director |
1.1. |
Current officer1 of the company or one of its affiliates2. |
2. |
Non-Independent Non-Executive Director |
Board Identification |
2.1. |
Director identified as not independent by the board. |
Controlling/Significant |
Shareholder |
2.2. |
Beneficial owner of more than 50 percent of the company’s voting power (this may be aggregated if voting power is distributed among more than one member of a group). |
Current Employment at Company or Related Company |
2.3. |
Non-officer employee of the firm (including employee representatives). |
2.4. |
Officer1, former officer, or general or limited partner of a joint venture or partnership with the company. |
Former Employment |
2.5. |
Former CEO of the company. 3, 4 |
2.6. |
Former non-CEO officer1 of the company or an affiliate2 within the past five years. |
2.7. |
Former officer1 of an acquired company within the past five years.4 |
2.8. |
Officer1 of a former parent or predecessor firm at the time the company was sold or split off within the past five years. |
2.9. |
Former interim officer if the service was longer than 18 months. If the service was between 12 and 18 months an assessment of the interim officer’s employment agreement will be made.5 |
Family Members |
2.10. |
Immediate family member6 of a current or former officer1 of the company or its affiliates2 within the last five years. |
2.11. |
Immediate family member6 of a current employee of company or its affiliates2 where additional factors raise concern (which may include, but are not limited to, the following: a director related to numerous employees; the company or its affiliates employ relatives of numerous board members; or a non- Section 16 officer in a key strategic role). |
Professional, Transactional, and Charitable Relationships |
2.12. |
Director who (or whose immediate family member6) currently provides professional services7 in excess of $10,000 per year to: the company, an affiliate2, or an individual officer of the company or an affiliate; or who is (or whose immediate family member6 is) a partner, employee, or controlling shareholder of an organization which provides the services. |
2.13. |
Director who (or whose immediate family member6) currently has any material transactional relationship8 with the company or its affiliates2; or who is (or whose immediate family member6 is) a partner in, or a controlling shareholder or an executive officer of, an organization which has the material transactional relationship8 (excluding investments in the company through a private placement). |
2.14. |
Director who (or whose immediate family member6) is a trustee, director, or employee of a charitable or non-profit organization that receives material grants or endowments8 from the company or its affiliates2. |
Other Relationships |
2.15. |
Party to a voting agreement9 to vote in line with management on proposals being brought to shareholder vote. |
2.16. |
Has (or an immediate family member6 has) an interlocking relationship as defined by the SEC involving members of the board of directors or its Compensation Committee.10 |
2.17. |
Founder11 of the company but not currently an employee. |
2.18. |
Director with pay comparable to Named Executive Officers. |
2.19. |
Any material12 relationship with the company. |
3. |
Independent Director |
3.1. |
No material12 connection to the company other than a board seat. |
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Footnotes:
1. The definition of officer will generally follow that of a “Section 16 officer” (officers subject to Section 16 of the Securities and Exchange Act of 1934) and includes the chief executive, operating, financial, legal, technology, and accounting officers of a company (including the president, treasurer, secretary, controller, or any vice president in charge of a principal business unit, division, or policy function). Current interim officers are included in this category. For private companies, the equivalent positions are applicable. A non-employee director serving as an officer due to statutory requirements (e.g. corporate secretary) will generally be classified as a Non-Independent Non-Executive Director under “Any material relationship with the company.” However, if the company provides explicit disclosure that the director is not receiving additional compensation exceeding $10,000 per year for serving in that capacity, then the director will be classified as an Independent Director.
2. “Affiliate” includes a subsidiary, sibling company, or parent company. ISS uses 50 percent control ownership by the parent company as the standard for applying its affiliate designation. The manager/advisor of an externally managed issuer (EMI) is considered an affiliate.
3. Includes any former CEO of the company prior to the company’s initial public offering (IPO).
4. When there is a former CEO of a special purpose acquisition company (SPAC) serving on the board of an acquired company, ISS will generally classify such directors as independent unless determined otherwise taking into account the following factors: the applicable listing standards determination of such director’s independence; any operating ties to the firm; and the existence of any other conflicting relationships or related party transactions.
5. ISS will look at the terms of the interim officer’s employment contract to determine if it contains severance pay, long-term health and pension benefits, or other such standard provisions typically contained in contracts of permanent, non-temporary CEOs. ISS will also consider if a formal search process was under way for a full-time officer at the time.
6. “Immediate family member” follows the SEC’s definition of such and covers spouses, parents, children, step-parents, step-children, siblings, in-laws, and any person (other than a tenant or employee) sharing the household of any director, nominee for director, executive officer, or significant shareholder of the company.
7. Professional services can be characterized as advisory in nature, generally involve access to sensitive company information or to strategic decision-making, and typically have a commission- or fee-based payment structure. Professional services generally include but are not limited to the following: investment banking/financial advisory services, commercial banking (beyond deposit services), investment services, insurance services, accounting/audit services, consulting services, marketing services, legal services, property management services, realtor services, lobbying services, executive search services, and IT consulting services. The following would generally be considered transactional relationships and not professional services: deposit services, IT tech support services, educational services, and construction services. The case of participation in a banking syndicate by a non-lead bank should be considered a transactional (and hence subject to the associated materiality test) rather than a professional relationship. “Of Counsel” relationships are only considered immaterial if the individual does not receive any form of compensation (in excess of $10,000 per year) from, or is a retired partner of, the firm providing the professional service. The case of a company providing a professional service to one of its directors or to an entity with which one of its directors is affiliated, will be considered a transactional rather than a professional relationship. Insurance services and marketing services are assumed to be professional services unless the company explains why such services are not advisory.
8. A material transactional relationship, including grants to non-profit organizations, exists if the company makes annual payments to, or receives annual payments from, another entity, exceeding the greater of: $200,000 or 5 percent of the recipient’s gross revenues, for a company that follows NASDAQ listing standards; or the greater of $1,000,000 or 2 percent of the recipient’s gross revenues, for a company that follows NYSE listing standards. For a company that follows neither of the preceding standards, ISS will apply the NASDAQ-based materiality test. (The recipient is the party receiving the financial proceeds from the transaction).
9. Dissident directors who are parties to a voting agreement pursuant to a settlement or similar arrangement may be classified as Independent Directors if an analysis of the following factors indicates that the voting agreement does not compromise their alignment with all shareholders’ interests: the terms of the agreement; the duration of the standstill provision in the agreement; the limitations and requirements of actions that are agreed upon; if the dissident director nominee(s) is subject to the standstill; and if there any conflicting relationships or related party transactions.
10. Interlocks include: executive officers serving as directors on each other’s compensation or similar committees (or, in the absence of such a committee, on the board); or executive officers sitting on each other’s boards and at least one serves on the other’s compensation or similar committees (or, in the absence of such a committee, on the board).
11. The operating involvement of the founder with the company will be considered; if the founder was never employed by the company, ISS may deem him or her an Independent Director.
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12. For purposes of ISS’s director independence classification, “material” will be defined as a standard of relationship (financial, personal, or otherwise) that a reasonable person might conclude could potentially influence one’s objectivity in the boardroom in a manner that would have a meaningful impact on an individual’s ability to satisfy requisite fiduciary standards on behalf of shareholders.
Attendance at Board and Committee Meetings: Generally vote against or withhold from directors (except nominees who served only part of the fiscal year3) who attend less than 75 percent of the aggregate of their board and committee meetings for the period for which they served, unless an acceptable reason for absences is disclosed in the proxy or another SEC filing. Acceptable reasons for director absences are generally limited to the following:
◾ |
Medical issues/illness; |
◾ |
Family emergencies; and |
◾ |
Missing only one meeting (when the total of all meetings is three or fewer). |
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.
If the proxy disclosure is unclear and insufficient to determine whether a director attended at least 75 percent of the aggregate of his/her board and committee meetings during his/her period of service, vote against or withhold from the director(s) in question.
Overboarded Directors: 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 boards4. |
Gender 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. An exception will be made if there was at least one woman on the board at the preceding annual meeting and the board makes a firm commitment to return to a gender-diverse status within a year.
Racial and/or Ethnic Diversity: 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 members5. An exception will be made if there was racial and/or ethnic diversity on the board at the preceding annual meeting and the board makes a firm commitment to appoint at least one racial and/or ethnic diverse member within a year.
3 Nominees who served for only part of the fiscal year are generally exempted from the attendance policy.
4 Although all of a CEO’s subsidiary boards with publicly-traded common stock will be counted as separate boards, ISS will not recommend a withhold vote for the CEO of a parent company board or any of the controlled (>50 percent ownership) subsidiaries of that parent but may do so at subsidiaries that are less than 50 percent controlled and boards outside the parent/subsidiary relationships.
5 Aggregate diversity statistics provided by the board will only be considered if specific to racial and/or ethnic diversity.
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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; |
◾ |
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. |
Vote case-by-case on Compensation Committee members (or, in exceptional cases, the full board) and the Say on Pay proposal if:
◾ |
The company’s previous say-on-pay received the support of less than 70 percent of votes cast. Factors that will be considered are: |
◾ |
The company’s response, including: |
◾ |
Disclosure of engagement efforts with major institutional investors, including the frequency and timing of engagements and the company participants (including whether independent directors participated); |
◾ |
Disclosure of the specific concerns voiced by dissenting shareholders that led to the say-on-pay opposition; |
◾ |
Disclosure of specific and meaningful actions taken to address shareholders’ concerns; |
◾ |
Other recent compensation actions taken by the company; |
◾ |
Whether the issues raised are recurring or isolated; |
◾ |
The company’s ownership structure; and |
◾ |
Whether the support level was less than 50 percent, which would warrant the highest degree of responsiveness. |
◾ |
The board implements an advisory vote on executive compensation on a less frequent basis than the frequency that received the plurality of votes cast. |
PROBLEMATIC TAKEOVER DEFENSES, CAPITAL STRUCTURE, AND GOVERNANCE STRUCTURE
Poison Pills: Generally vote against or withhold from all nominees (except new nominees1, who should be considered case-by-case) if:
◾ |
The company has a poison pill with a deadhand or slowhand feature6; |
6 If a short-term pill with a deadhand or slowhand feature is enacted but expires before the next shareholder vote, ISS will generally still recommend withhold/against nominees at the next shareholder meeting following its adoption.
W W W . I S S G O V E R N A N C E . C O M | E-14 | 14 of 81 |
◾ |
The board makes a material adverse modification to an existing pill, including, but not limited to, extension, renewal, or lowering the trigger, without shareholder approval; or |
◾ |
The company has a long-term poison pill (with a term of over one year) that was not approved by the public shareholders7. |
Vote case-by-case on nominees if the board adopts an initial short-term pill6 (with a term of one year or less) without shareholder approval, taking into consideration:
◾ |
The disclosed rationale for the adoption; |
◾ |
The trigger; |
◾ |
The company’s market capitalization (including absolute level and sudden changes); |
◾ |
A commitment to put any renewal to a shareholder vote; and |
◾ |
Other factors as relevant. |
Unequal Voting Rights: Generally vote withhold or against directors individually, committee members, or the entire board (except new nominees1, who should be considered case-by-case), if the company employs a common stock structure with unequal voting rights8.
Exceptions to this policy will generally be limited to:
◾ |
Newly-public companies9 with a sunset provision of no more than seven years from the date of going public; |
◾ |
Limited Partnerships and the Operating Partnership (OP) unit structure of REITs; |
◾ |
Situations where the super-voting shares represent less than 5% of total voting power and therefore considered to be de minimis; or |
◾ |
The company provides sufficient protections for minority shareholders, such as allowing minority shareholders a regular binding vote on whether the capital structure should be maintained. |
Classified Board Structure: The board is classified, and a continuing director responsible for a problematic governance issue at the board/committee level that would warrant a withhold/against vote recommendation is not up for election. All appropriate nominees (except new) may be held accountable.
Removal of Shareholder Discretion on Classified Boards: The company has opted into, or failed to opt out of, state laws requiring a classified board structure.
Problematic Governance Structure: For companies that hold or held their first annual meeting9 of public shareholders after Feb. 1, 2015, generally vote against or withhold from directors individually, committee members, or the entire board (except new nominees1, who should be considered case-by-case) if, prior to or in connection with the company’s public offering, the company or its board adopted the following bylaw or charter provisions that are considered to be materially adverse to shareholder rights:
◾ |
Supermajority vote requirements to amend the bylaws or charter; |
◾ |
A classified board structure; or |
◾ |
Other egregious provisions. |
7 Approval prior to, or in connection, with a company’s becoming publicly-traded, or in connection with a de-SPAC transaction, is insufficient.
8 This generally includes classes of common stock that have additional votes per share than other shares; classes of shares that are not entitled to vote on all the same ballot items or nominees; or stock with time-phased voting rights (“loyalty shares”).
9 Includes companies that emerge from bankruptcy, SPAC transactions, spin-offs, direct listings, and those who complete a traditional initial public offering.
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A provision which specifies that the problematic structure(s) will be sunset within seven years of the date of going public will be considered a mitigating factor.
Unless the adverse provision is reversed or removed, vote case-by-case on director nominees in subsequent years.
Unilateral Bylaw/Charter Amendments: Generally vote against or withhold from directors individually, committee members, or the entire board (except new nominees1, who should be considered case-by-case) if the board amends the company’s bylaws or charter without shareholder approval in a manner that materially diminishes shareholders’ rights or that could adversely impact shareholders, considering the following factors:
◾ |
The board’s rationale for adopting the bylaw/charter amendment without shareholder ratification; |
◾ |
Disclosure by the company of any significant engagement with shareholders regarding the amendment; |
◾ |
The level of impairment of shareholders’ rights caused by the board’s unilateral amendment to the bylaws/charter; |
◾ |
The board’s track record with regard to unilateral board action on bylaw/charter amendments or other entrenchment provisions; |
◾ |
The company’s ownership structure; |
◾ |
The company’s existing governance provisions; |
◾ |
The timing of the board’s amendment to the bylaws/charter in connection with a significant business development; and |
◾ |
Other factors, as deemed appropriate, that may be relevant to determine the impact of the amendment on shareholders. |
Unless the adverse amendment is reversed or submitted to a binding shareholder vote, in subsequent years vote case-by-case on director nominees. Generally vote against (except new nominees1, who should be considered case-by-case) if the directors:
◾ |
Classified the board; |
◾ |
Adopted supermajority vote requirements to amend the bylaws or charter; |
◾ |
Eliminated shareholders’ ability to amend bylaws; |
◾ |
Adopted a fee-shifting provision; or |
◾ |
Adopted another provision deemed egregious. |
Restricting Binding Shareholder Proposals: Generally vote against or withhold from the members of the governance committee if:
◾ |
The company’s governing documents impose undue restrictions on shareholders’ ability to amend the bylaws. Such restrictions include but are not limited to: outright prohibition on the submission of binding shareholder proposals or share ownership requirements, subject matter restrictions, or time holding requirements in excess of SEC Rule 14a-8. Vote against or withhold on an ongoing basis. |
Submission of management proposals to approve or ratify requirements in excess of SEC Rule 14a-8 for the submission of binding bylaw amendments will generally be viewed as an insufficient restoration of shareholders’ rights. Generally continue to vote against or withhold on an ongoing basis until shareholders are provided with an unfettered ability to amend the bylaws or a proposal providing for such unfettered right is submitted for shareholder approval.
Director Performance Evaluation: The board lacks mechanisms to promote accountability and oversight, coupled with sustained poor performance relative to peers. Sustained poor performance is measured by one-, three-, and five-year total shareholder returns in the bottom half of a company’s four-digit GICS industry group
(Russell 3000 companies only). Take into consideration the company’s operational metrics and other factors as warranted. Problematic provisions include but are not limited to:
◾ |
A classified board structure; |
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◾ |
A supermajority vote requirement; |
◾ |
Either a plurality vote standard in uncontested director elections, or a majority vote standard in contested elections; |
◾ |
The inability of shareholders to call special meetings; |
◾ |
The inability of shareholders to act by written consent; |
◾ |
A multi-class capital structure; and/or |
◾ |
A non-shareholder-approved poison pill. |
Management Proposals to Ratify Existing Charter or Bylaw Provisions: Vote against/withhold from individual directors, members of the governance committee, or the full board, where boards ask shareholders to ratify existing charter or bylaw provisions considering the following factors:
◾ |
The presence of a shareholder proposal addressing the same issue on the same ballot; |
◾ |
The board’s rationale for seeking ratification; |
◾ |
Disclosure of actions to be taken by the board should the ratification proposal fail; |
◾ |
Disclosure of shareholder engagement regarding the board’s ratification request; |
◾ |
The level of impairment to shareholders’ rights caused by the existing provision; |
◾ |
The history of management and shareholder proposals on the provision at the company’s past meetings; |
◾ |
Whether the current provision was adopted in response to the shareholder proposal; |
◾ |
The company’s ownership structure; and |
◾ |
Previous use of ratification proposals to exclude shareholder proposals. |
Problematic Audit-Related Practices
Generally vote against or withhold from the members of the Audit Committee if:
◾ |
The non-audit fees paid to the auditor are excessive; |
◾ |
The company receives an adverse opinion on the company’s financial statements from its auditor; or |
◾ |
There is persuasive evidence that the Audit Committee entered into an inappropriate indemnification agreement with its auditor that limits the ability of the company, or its shareholders, to pursue legitimate legal recourse against the audit firm. |
Vote case-by-case on members of the Audit Committee and potentially the full board if:
◾ |
Poor accounting practices are identified that rise to a level of serious concern, such as: fraud; misapplication of GAAP; and material weaknesses identified in Section 404 disclosures. Examine the severity, breadth, chronological sequence, and duration, as well as the company’s efforts at remediation or corrective actions, in determining whether withhold/against votes are warranted. |
Problematic Compensation Practices
In the absence of an Advisory Vote on Executive Compensation (Say on Pay) ballot item or in egregious situations, vote against or withhold from the members of the Compensation Committee and potentially the full board if:
◾ |
There is an unmitigated misalignment between CEO pay and company performance (pay for performance); |
◾ |
The company maintains significant problematic pay practices; or |
◾ |
The board exhibits a significant level of poor communication and responsiveness to shareholders. |
Generally vote against or withhold from the Compensation Committee chair, other committee members, or potentially the full board if:
◾ |
The company fails to include a Say on Pay ballot item when required under SEC provisions, or under the company’s declared frequency of say on pay; or |
◾ |
The company fails to include a Frequency of Say on Pay ballot item when required under SEC provisions. |
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Generally vote against members of the board committee responsible for approving/setting non-employee director compensation if there is a pattern (i.e. two or more years) of awarding excessive non-employee director compensation without disclosing a compelling rationale or other mitigating factors.
Problematic Pledging of Company Stock: Vote against the members of the committee that oversees risks related to pledging, or the full board, where a significant level of pledged company stock by executives or directors raises concerns. The following factors will be considered:
◾ |
The presence of an anti-pledging policy, disclosed in the proxy statement, that prohibits future pledging activity; |
◾ |
The magnitude of aggregate pledged shares in terms of total common shares outstanding, market value, and trading volume; |
◾ |
Disclosure of progress or lack thereof in reducing the magnitude of aggregate pledged shares over time; |
◾ |
Disclosure in the proxy statement that shares subject to stock ownership and holding requirements do not include pledged company stock; and |
◾ |
Any other relevant factors. |
For companies that are significant greenhouse gas (GHG) emitters, through their operations or value chain10, generally vote against or withhold from the incumbent chair of the responsible committee (or other directors on a case-by-case basis) in cases where ISS determines that the company is not taking the minimum steps needed to understand, assess, and mitigate risks related to climate change to the company and the larger economy.
Minimum steps to understand and mitigate those risks are considered to be the following. Both minimum criteria will be required to be in alignment with the policy :
◾ |
Detailed disclosure of climate-related risks, such as according to the framework established by the Task Force on Climate-related Financial Disclosures (TCFD), including: |
◾ |
Board governance measures; |
◾ |
Corporate strategy; |
◾ |
Risk management analyses; and |
◾ |
Metrics and targets. |
◾ |
Appropriate GHG emissions reduction targets. |
At this time, “appropriate GHG emissions reductions targets” will be medium-term GHG reduction targets or Net Zero-by-2050 GHG reduction targets for a company’s operations (Scope 1) and electricity use (Scope 2). Targets should cover the vast majority of the company’s direct emissions.
Under extraordinary circumstances, vote against or withhold from directors individually, committee members, or the entire board, due to:
◾ |
Material failures of governance, stewardship, risk oversight11, or fiduciary responsibilities at the company; |
◾ |
Failure to replace management as appropriate; or |
10 Companies defined as “significant GHG emitters” will be those on the current Climate Action 100+ Focus Group list.
11 Examples of failure of risk oversight include but are not limited to: bribery; large or serial fines or sanctions from regulatory bodies; demonstrably poor risk oversight of environmental and social issues, including climate change; significant adverse legal judgments or settlement; or hedging of company stock.
W W W . I S S G O V E R N A N C E . C O M | E-18 | 18 of 81 |
◾ |
Egregious actions related to a director’s service on other boards that raise substantial doubt about his or her ability to effectively oversee management and serve the best interests of shareholders at any company. |
Voting on Director Nominees in Contested Elections
General Recommendation: In cases where companies are targeted in connection with public “vote-no” campaigns, evaluate director nominees under the existing governance policies for voting on director nominees in uncontested elections. Take into consideration the arguments submitted by shareholders and other publicly available information.
General Recommendation: Vote case-by-case on the election of directors in contested elections, considering the following factors:
◾ |
Long-term financial performance of the company relative to its industry; |
◾ |
Management’s track record; |
◾ |
Background to the contested election; |
◾ |
Nominee qualifications and any compensatory arrangements; |
◾ |
Strategic plan of dissident slate and quality of the critique against management; |
◾ |
Likelihood that the proposed goals and objectives can be achieved (both slates); and |
◾ |
Stock ownership positions. |
In the case of candidates nominated pursuant to proxy access, vote case-by-case considering any applicable factors listed above or additional factors which may be relevant, including those that are specific to the company, to the nominee(s) and/or to the nature of the election (such as whether there are more candidates than board seats).
Adopt Anti-Hedging/Pledging/Speculative Investments Policy
General Recommendation: Generally vote for proposals seeking a policy that prohibits named executive officers from engaging in derivative or speculative transactions involving company stock, including hedging, holding stock in a margin account, or pledging stock as collateral for a loan. However, the company’s existing policies regarding responsible use of company stock will be considered.
Board refreshment is best implemented through an ongoing program of individual director evaluations, conducted annually, to ensure the evolving needs of the board are met and to bring in fresh perspectives, skills, and diversity as needed.
W W W . I S S G O V E R N A N C E . C O M | E-19 | 19 of 81 |
General Recommendation: Vote case-by-case on management proposals regarding director term/tenure limits, considering:
◾ |
The rationale provided for adoption of the term/tenure limit; |
◾ |
The robustness of the company’s board evaluation process; |
◾ |
Whether the limit is of sufficient length to allow for a broad range of director tenures; |
◾ |
Whether the limit would disadvantage independent directors compared to non-independent directors; and |
◾ |
Whether the board will impose the limit evenly, and not have the ability to waive it in a discriminatory manner. |
Vote case-by-case on shareholder proposals asking for the company to adopt director term/tenure limits, considering:
◾ |
The scope of the shareholder proposal; and |
◾ |
Evidence of problematic issues at the company combined with, or exacerbated by, a lack of board refreshment. |
General Recommendation: Generally vote against management and shareholder proposals to limit the tenure of independent directors through mandatory retirement ages. Vote for proposals to remove mandatory age limits.
General Recommendation: Vote for proposals seeking to fix the board size or designate a range for the board size.
Vote against proposals that give management the ability to alter the size of the board outside of a specified range without shareholder approval.
Classification/Declassification of the Board
General Recommendation: Vote against proposals to classify (stagger) the board.
Vote for proposals to repeal classified boards and to elect all directors annually.
General Recommendation: Generally vote for proposals seeking disclosure on a CEO succession planning policy, considering, at a minimum, the following factors:
◾ |
The reasonableness/scope of the request; and |
◾ |
The company’s existing disclosure on its current CEO succession planning process. |
General Recommendation: Generally vote against management proposals to eliminate cumulate voting, and for shareholder proposals to restore or provide for cumulative voting, unless:
W W W . I S S G O V E R N A N C E . C O M | E-20 | 20 of 81 |
◾ |
The company has proxy access12, thereby allowing shareholders to nominate directors to the company’s ballot; and |
◾ |
The company has adopted a majority vote standard, with a carve-out for plurality voting in situations where there are more nominees than seats, and a director resignation policy to address failed elections. |
Vote for proposals for cumulative voting at controlled companies (insider voting power > 50%).
Director and Officer Indemnification, Liability Protection, and Exculpation
General Recommendation: Vote case-by-case on proposals on director and officer indemnification, liability protection, and exculpation13.
Consider the stated rationale for the proposed change. Also consider, among other factors, the extent to which the proposal would:
◾ |
Eliminate directors’ and officers’ liability for monetary damages for violating the duty of care. |
◾ |
Eliminate directors’ and officers’ liability for monetary damages for violating the duty of loyalty. |
◾ |
Expand coverage beyond just legal expenses to liability for acts that are more serious violations of fiduciary obligation than mere carelessness. |
◾ |
Expand the scope of indemnification to provide for mandatory indemnification of company officials in connection with acts that previously the company was permitted to provide indemnification for, at the discretion of the company’s board (i.e., “permissive indemnification”), but that previously the company was not required to indemnify. |
Vote for those proposals providing such expanded coverage in cases when a director’s or officer’s legal defense was unsuccessful if both of the following apply:
◾ |
If the individual was found to have acted in good faith and in a manner that the individual reasonably believed was in the best interests of the company; and |
If only the individual’s legal expenses would be covered.
Establish/Amend Nominee Qualifications
General Recommendation: Vote case-by-case on proposals that establish or amend director qualifications. Votes should be based on the reasonableness of the criteria and the degree to which they may preclude dissident nominees from joining the board.
Vote case-by-case on shareholder resolutions seeking a director nominee who possesses a particular subject matter expertise, considering:
◾ |
The company’s board committee structure, existing subject matter expertise, and board nomination provisions relative to that of its peers; |
12 A proxy access right that meets the recommended guidelines.
13 Indemnification: the condition of being secured against loss or damage.
Limited liability: a person’s financial liability is limited to a fixed sum, or personal financial assets are not at risk if the individual loses a lawsuit that results in financial award/damages to the plaintiff.
Exculpation: to eliminate or limit the personal liability of a director or officer to the corporation or its shareholders for monetary damages for breach of fiduciary duty as a director or officer.
W W W . I S S G O V E R N A N C E . C O M | E-21 | 21 of 81 |
◾ |
The company’s existing board and management oversight mechanisms regarding the issue for which board oversight is sought; |
◾ |
The company’s disclosure and performance relating to the issue for which board oversight is sought and any significant related controversies; and |
◾ |
The scope and structure of the proposal. |
Establish Other Board Committee Proposals
General Recommendation: Generally vote against shareholder proposals to establish a new board committee, as such proposals seek a specific oversight mechanism/structure that potentially limits a company’s flexibility to determine an appropriate oversight mechanism for itself. However, the following factors will be considered:
◾ |
Existing oversight mechanisms (including current committee structure) regarding the issue for which board oversight is sought; |
◾ |
Level of disclosure regarding the issue for which board oversight is sought; |
◾ |
Company performance related to the issue for which board oversight is sought; |
◾ |
Board committee structure compared to that of other companies in its industry sector; and |
◾ |
The scope and structure of the proposal. |
Filling Vacancies/Removal of Directors
General Recommendation: Vote against proposals that provide that directors may be removed only for cause.
Vote for proposals to restore shareholders’ ability to remove directors with or without cause.
Vote against proposals that provide that only continuing directors may elect replacements to fill board vacancies.
Vote for proposals that permit shareholders to elect directors to fill board vacancies.
General Recommendation: Generally vote for shareholder proposals requiring that the board chair position be filled by an independent director, taking into consideration the following:
◾ |
The scope and rationale of the proposal; |
◾ |
The company’s current board leadership structure; |
◾ |
The company’s governance structure and practices; |
◾ |
Company performance; and |
◾ |
Any other relevant factors that may be applicable. |
The following factors will increase the likelihood of a “for” recommendation:
◾ |
A majority non-independent board and/or the presence of non-independent directors on key board committees; |
◾ |
A weak or poorly-defined lead independent director role that fails to serve as an appropriate counterbalance to a combined CEO/chair role; |
◾ |
The presence of an executive or non-independent chair in addition to the CEO, a recent recombination of the role of CEO and chair, and/or departure from a structure with an independent chair; |
◾ |
Evidence that the board has failed to oversee and address material risks facing the company; |
◾ |
A material governance failure, particularly if the board has failed to adequately respond to shareholder concerns or if the board has materially diminished shareholder rights; or |
W W W . I S S G O V E R N A N C E . C O M | E-22 | 22 of 81 |
◾ |
Evidence that the board has failed to intervene when management’s interests are contrary to shareholders’ interests. |
Majority of Independent Directors/Establishment of Independent Committees
General Recommendation: Vote for shareholder proposals asking that a majority or more of directors be independent unless the board composition already meets the proposed threshold by ISS’ definition of Independent Director (See ISS’ Classification of Directors.)
Vote for shareholder proposals asking that board audit, compensation, and/or nominating committees be composed exclusively of independent directors unless they currently meet that standard.
Majority Vote Standard for the Election of Directors
General Recommendation: Generally vote for management proposals to adopt a majority of votes cast standard for directors in uncontested elections. Vote against if no carve-out for a plurality vote standard in contested elections is included.
Generally vote for precatory and binding shareholder resolutions requesting that the board change the company’s bylaws to stipulate that directors need to be elected with an affirmative majority of votes cast, provided it does not conflict with the state law where the company is incorporated. Binding resolutions need to allow for a carve-out for a plurality vote standard when there are more nominees than board seats.
Companies are strongly encouraged to also adopt a post-election policy (also known as a director resignation policy) that will provide guidelines so that the company will promptly address the situation of a holdover director.
General Recommendation: Generally vote for management and shareholder proposals for proxy access with the following provisions:
◾ |
Ownership threshold: maximum requirement not more than three percent (3%) of the voting power; |
◾ |
Ownership duration: maximum requirement not longer than three (3) years of continuous ownership for each member of the nominating group; |
◾ |
Aggregation: minimal or no limits on the number of shareholders permitted to form a nominating group; |
◾ |
Cap: cap on nominees of generally twenty-five percent (25%) of the board. |
Review for reasonableness any other restrictions on the right of proxy access. Generally vote against proposals that are more restrictive than these guidelines.
Require More Nominees than Open Seats
General Recommendation: Vote against shareholder proposals that would require a company to nominate more candidates than the number of open board seats.
W W W . I S S G O V E R N A N C E . C O M | E-23 | 23 of 81 |
Shareholder Engagement Policy (Shareholder Advisory Committee)
General Recommendation: Generally vote for shareholder proposals requesting that the board establish an internal mechanism/process, which may include a committee, in order to improve communications between directors and shareholders, unless the company has the following features, as appropriate:
◾ |
Established a communication structure that goes beyond the exchange requirements to facilitate the exchange of information between shareholders and members of the board; |
◾ |
Effectively disclosed information with respect to this structure to its shareholders; |
◾ |
Company has not ignored majority-supported shareholder proposals, or a majority withhold vote on a director nominee; and |
◾ |
The company has an independent chair or a lead director, according to ISS’ definition. This individual must be made available for periodic consultation and direct communication with major shareholders. |
W W W . I S S G O V E R N A N C E . C O M | E-24 | 24 of 81 |
Auditor Indemnification and Limitation of Liability
General Recommendation: Vote case-by-case on the issue of auditor indemnification and limitation of liability. Factors to be assessed include, but are not limited to:
◾ |
The terms of the auditor agreement—the degree to which these agreements impact shareholders’ rights; |
◾ |
The motivation and rationale for establishing the agreements; |
◾ |
The quality of the company’s disclosure; and |
◾ |
The company’s historical practices in the audit area. |
Vote against or withhold from members of an audit committee in situations where there is persuasive evidence that the audit committee entered into an inappropriate indemnification agreement with its auditor that limits the ability of the company, or its shareholders, to pursue legitimate legal recourse against the audit firm.
General Recommendation: Vote for proposals to ratify auditors unless any of the following apply:
◾ |
An auditor has a financial interest in or association with the company, and is therefore not independent; |
◾ |
There is reason to believe that the independent auditor has rendered an opinion that is neither accurate nor indicative of the company’s financial position; |
◾ |
Poor accounting practices are identified that rise to a serious level of concern, such as fraud or misapplication of GAAP; or |
◾ |
Fees for non-audit services (“Other” fees) are excessive. |
Non-audit fees are excessive if:
◾ |
Non-audit (“other”) fees > audit fees + audit-related fees + tax compliance/preparation fees |
Tax compliance and preparation include the preparation of original and amended tax returns and refund claims, and tax payment planning. All other services in the tax category, such as tax advice, planning, or consulting, should be added to “Other” fees. If the breakout of tax fees cannot be determined, add all tax fees to “Other” fees.
In circumstances where “Other” fees include fees related to significant one-time capital structure events (such as initial public offerings, bankruptcy emergence, and spin-offs) and the company makes public disclosure of the amount and nature of those fees that are an exception to the standard “non-audit fee” category, then such fees may be excluded from the non-audit fees considered in determining the ratio of non-audit to audit/audit-related fees/tax compliance and preparation for purposes of determining whether non-audit fees are excessive.
Shareholder Proposals Limiting Non-Audit Services
General Recommendation: Vote case-by-case on shareholder proposals asking companies to prohibit or limit their auditors from engaging in non-audit services.
W W W . I S S G O V E R N A N C E . C O M | E-25 | 25 of 81 |
Shareholder Proposals on Audit Firm Rotation
General Recommendation: Vote case-by-case on shareholder proposals asking for audit firm rotation, taking into account:
◾ |
The tenure of the audit firm; |
◾ |
The length of rotation specified in the proposal; |
◾ |
Any significant audit-related issues at the company; |
◾ |
The number of Audit Committee meetings held each year; |
◾ |
The number of financial experts serving on the committee; and |
◾ |
Whether the company has a periodic renewal process where the auditor is evaluated for both audit quality and competitive price. |
W W W . I S S G O V E R N A N C E . C O M | E-26 | 26 of 81 |
3. Shareholder Rights & Defenses
Advance Notice Requirements for Shareholder Proposals/Nominations
General Recommendation: Vote case-by-case on advance notice proposals, giving support to those proposals which allow shareholders to submit proposals/nominations as close to the meeting date as reasonably possible and within the broadest window possible, recognizing the need to allow sufficient notice for company, regulatory, and shareholder review.
To be reasonable, the company’s deadline for shareholder notice of a proposal/nominations must be no earlier than 120 days prior to the anniversary of the previous year’s meeting and have a submittal window of no shorter than 30 days from the beginning of the notice period (also known as a 90-120-day window). The submittal window is the period under which shareholders must file their proposals/nominations prior to the deadline.
In general, support additional efforts by companies to ensure full disclosure in regard to a proponent’s economic and voting position in the company so long as the informational requirements are reasonable and aimed at providing shareholders with the necessary information to review such proposals.
Amend Bylaws without Shareholder Consent
General Recommendation: Vote against proposals giving the board exclusive authority to amend the bylaws.
Vote case-by-case on proposals giving the board the ability to amend the bylaws in addition to shareholders, taking into account the following:
◾ |
Any impediments to shareholders’ ability to amend the bylaws (i.e. supermajority voting requirements); |
◾ |
The company’s ownership structure and historical voting turnout; |
◾ |
Whether the board could amend bylaws adopted by shareholders; and |
◾ |
Whether shareholders would retain the ability to ratify any board-initiated amendments. |
Control Share Acquisition Provisions
General Recommendation: Vote for proposals to opt out of control share acquisition statutes unless doing so would enable the completion of a takeover that would be detrimental to shareholders.
Vote against proposals to amend the charter to include control share acquisition provisions.
Vote for proposals to restore voting rights to the control shares.
Control share acquisition statutes function by denying shares their voting rights when they contribute to ownership in excess of certain thresholds. Voting rights for those shares exceeding ownership limits may only be restored by approval of either a majority or supermajority of disinterested shares. Thus, control share acquisition statutes effectively require a hostile bidder to put its offer to a shareholder vote or risk voting disenfranchisement if the bidder continues buying up a large block of shares.
Control Share Cash-Out Provisions
General Recommendation: Vote for proposals to opt out of control share cash-out statutes.
W W W . I S S G O V E R N A N C E . C O M | E-27 | 27 of 81 |
Control share cash-out statutes give dissident shareholders the right to “cash-out” of their position in a company at the expense of the shareholder who has taken a control position. In other words, when an investor crosses a preset threshold level, remaining shareholders are given the right to sell their shares to the acquirer, who must buy them at the highest acquiring price.
General Recommendation: Vote for proposals to opt out of state disgorgement provisions.
Disgorgement provisions require an acquirer or potential acquirer of more than a certain percentage of a company’s stock to disgorge, or pay back, to the company any profits realized from the sale of that company’s stock purchased 24 months before achieving control status. All sales of company stock by the acquirer occurring within a certain period of time (between 18 months and 24 months) prior to the investor’s gaining control status are subject to these recapture-of-profits provisions.
General Recommendation: Vote case-by-case on proposals to adopt fair price provisions (provisions that stipulate that an acquirer must pay the same price to acquire all shares as it paid to acquire the control shares), evaluating factors such as the vote required to approve the proposed acquisition, the vote required to repeal the fair price provision, and the mechanism for determining the fair price.
Generally vote against fair price provisions with shareholder vote requirements greater than a majority of disinterested shares.
General Recommendation: Vote for proposals to opt out of state freeze-out provisions. Freeze-out provisions force an investor who surpasses a certain ownership threshold in a company to wait a specified period of time before gaining control of the company.
General Recommendation: Vote for proposals to adopt anti-greenmail charter or bylaw amendments or otherwise restrict a company’s ability to make greenmail payments.
Vote case-by-case on anti-greenmail proposals when they are bundled with other charter or bylaw amendments.
Greenmail payments are targeted share repurchases by management of company stock from individuals or groups seeking control of the company. Since only the hostile party receives payment, usually at a substantial premium over the market value of its shares, the practice discriminates against all other shareholders.
Federal Forum Selection Provisions
Federal forum selection provisions require that U.S. federal courts be the sole forum for shareholders to litigate claims arising under federal securities law.
W W W . I S S G O V E R N A N C E . C O M | E-28 | 28 of 81 |
General Recommendation: Generally vote for federal forum selection provisions in the charter or bylaws that specify “the district courts of the United States” as the exclusive forum for federal securities law matters, in the absence of serious concerns about corporate governance or board responsiveness to shareholders.
Vote against provisions that restrict the forum to a particular federal district court; unilateral adoption (without a shareholder vote) of such a provision will generally be considered a one-time failure under the Unilateral Bylaw/Charter Amendments policy.
Exclusive Forum Provisions for State Law Matters
Exclusive forum provisions in the charter or bylaws restrict shareholders’ ability to bring derivative lawsuits against the company, for claims arising out of state corporate law, to the courts of a particular state (generally the state of incorporation).
General Recommendation: Generally vote for charter or bylaw provisions that specify courts located within the state of Delaware as the exclusive forum for corporate law matters for Delaware corporations, in the absence of serious concerns about corporate governance or board responsiveness to shareholders.
For states other than Delaware, vote case-by-case on exclusive forum provisions, taking into consideration:
◾ |
The company’s stated rationale for adopting such a provision; |
◾ |
Disclosure of past harm from duplicative shareholder lawsuits in more than one forum; |
◾ |
The breadth of application of the charter or bylaw provision, including the types of lawsuits to which it would apply and the definition of key terms; and |
◾ |
Governance features such as shareholders’ ability to repeal the provision at a later date (including the vote standard applied when shareholders attempt to amend the charter or bylaws) and their ability to hold directors accountable through annual director elections and a majority vote standard in uncontested elections. |
Generally vote against provisions that specify a state other than the state of incorporation as the exclusive forum for corporate law matters, or that specify a particular local court within the state; unilateral adoption of such a provision will generally be considered a one-time failure under the Unilateral Bylaw/Charter Amendments policy.
Fee-shifting provisions in the charter or bylaws require that a shareholder who sues a company unsuccessfully pay all litigation expenses of the defendant corporation and its directors and officers.
General Recommendation: Generally vote against provisions that mandate fee-shifting whenever plaintiffs are not completely successful on the merits (i.e., including cases where the plaintiffs are partially successful).
Unilateral adoption of a fee-shifting provision will generally be considered an ongoing failure under the Unilateral Bylaw/Charter Amendments policy.
W W W . I S S G O V E R N A N C E . C O M | E-29 | 29 of 81 |
Net Operating Loss (NOL) Protective Amendments
General Recommendation: Vote against proposals to adopt a protective amendment for the stated purpose of protecting a company’s net operating losses (NOL) if the effective term of the protective amendment would exceed the shorter of three years and the exhaustion of the NOL.
Vote case-by-case, considering the following factors, for management proposals to adopt an NOL protective amendment that would remain in effect for the shorter of three years (or less) and the exhaustion of the NOL:
◾ |
The ownership threshold (NOL protective amendments generally prohibit stock ownership transfers that would result in a new 5-percent holder or increase the stock ownership percentage of an existing 5-percent holder); |
◾ |
The value of the NOLs; |
◾ |
Shareholder protection mechanisms (sunset provision or commitment to cause expiration of the protective amendment upon exhaustion or expiration of the NOL); |
◾ |
The company’s existing governance structure including: board independence, existing takeover defenses, track record of responsiveness to shareholders, and any other problematic governance concerns; and |
◾ |
Any other factors that may be applicable. |
Poison Pills (Shareholder Rights Plans)
Shareholder Proposals to Put Pill to a Vote and/or Adopt a Pill Policy
General Recommendation: Vote for shareholder proposals requesting that the company submit its poison pill to a shareholder vote or redeem it unless the company has: (1) A shareholder-approved poison pill in place; or (2) The company has adopted a policy concerning the adoption of a pill in the future specifying that the board will only adopt a shareholder rights plan if either:
◾ |
Shareholders have approved the adoption of the plan; or |
◾ |
The board, in its exercise of its fiduciary responsibilities, determines that it is in the best interest of shareholders under the circumstances to adopt a pill without the delay in adoption that would result from seeking stockholder approval (i.e., the “fiduciary out” provision). A poison pill adopted under this fiduciary out will be put to a shareholder ratification vote within 12 months of adoption or expire. If the pill is not approved by a majority of the votes cast on this issue, the plan will immediately terminate. |
If the shareholder proposal calls for a time period of less than 12 months for shareholder ratification after adoption, vote for the proposal, but add the caveat that a vote within 12 months would be considered sufficient implementation.
Management Proposals to Ratify a Poison Pill
General Recommendation: Vote case-by-case on management proposals on poison pill ratification, focusing on the features of the shareholder rights plan. Rights plans should contain the following attributes:
◾ |
No lower than a 20 percent trigger, flip-in or flip-over; |
◾ |
A term of no more than three years; |
◾ |
No deadhand, slowhand, no-hand, or similar feature that limits the ability of a future board to redeem the pill; |
◾ |
Shareholder redemption feature (qualifying offer clause); if the board refuses to redeem the pill 90 days after a qualifying offer is announced, 10 percent of the shares may call a special meeting or seek a written consent to vote on rescinding the pill. |
W W W . I S S G O V E R N A N C E . C O M | E-30 | 30 of 81 |
In addition, the rationale for adopting the pill should be thoroughly explained by the company. In examining the request for the pill, take into consideration the company’s existing governance structure, including: board independence, existing takeover defenses, and any problematic governance concerns.
Management Proposals to Ratify a Pill to Preserve Net Operating Losses (NOLs)
General Recommendation: Vote against proposals to adopt a poison pill for the stated purpose of protecting a company’s net operating losses (NOL) if the term of the pill would exceed the shorter of three years and the exhaustion of the NOL.
Vote case-by-case on management proposals for poison pill ratification, considering the following factors, if the term of the pill would be the shorter of three years (or less) and the exhaustion of the NOL:
◾ |
The ownership threshold to transfer (NOL pills generally have a trigger slightly below 5 percent); |
◾ |
The value of the NOLs; |
◾ |
Shareholder protection mechanisms (sunset provision, or commitment to cause expiration of the pill upon exhaustion or expiration of NOLs); |
◾ |
The company’s existing governance structure, including: board independence, existing takeover defenses, track record of responsiveness to shareholders, and any other problematic governance concerns; and |
◾ |
Any other factors that may be applicable. |
Proxy Voting Disclosure, Confidentiality, and Tabulation
General Recommendation: Vote case-by-case on proposals regarding proxy voting mechanics, taking into consideration whether implementation of the proposal is likely to enhance or protect shareholder rights. Specific issues covered under the policy include, but are not limited to, confidential voting of individual proxies and ballots, confidentiality of running vote tallies, and the treatment of abstentions and/or broker non-votes in the company’s vote-counting methodology.
While a variety of factors may be considered in each analysis, the guiding principles are: transparency, consistency, and fairness in the proxy voting process. The factors considered, as applicable to the proposal, may include:
◾ |
The scope and structure of the proposal; |
◾ |
The company’s stated confidential voting policy (or other relevant policies) and whether it ensures a “level playing field” by providing shareholder proponents with equal access to vote information prior to the annual meeting; |
◾ |
The company’s vote standard for management and shareholder proposals and whether it ensures consistency and fairness in the proxy voting process and maintains the integrity of vote results; |
◾ |
Whether the company’s disclosure regarding its vote counting method and other relevant voting policies with respect to management and shareholder proposals are consistent and clear; |
◾ |
Any recent controversies or concerns related to the company’s proxy voting mechanics; |
◾ |
Any unintended consequences resulting from implementation of the proposal; and |
◾ |
Any other factors that may be relevant. |
Ratification Proposals: Management Proposals to Ratify Existing Charter or Bylaw Provisions
General Recommendation: Generally vote against management proposals to ratify provisions of the company’s existing charter or bylaws, unless these governance provisions align with best practice.
W W W . I S S G O V E R N A N C E . C O M | E-31 | 31 of 81 |
In addition, voting against/withhold from individual directors, members of the governance committee, or the full board may be warranted, considering:
◾ |
The presence of a shareholder proposal addressing the same issue on the same ballot; |
◾ |
The board’s rationale for seeking ratification; |
◾ |
Disclosure of actions to be taken by the board should the ratification proposal fail; |
◾ |
Disclosure of shareholder engagement regarding the board’s ratification request; |
◾ |
The level of impairment to shareholders’ rights caused by the existing provision; |
◾ |
The history of management and shareholder proposals on the provision at the company’s past meetings; |
◾ |
Whether the current provision was adopted in response to the shareholder proposal; |
◾ |
The company’s ownership structure; and |
◾ |
Previous use of ratification proposals to exclude shareholder proposals. |
Reimbursing Proxy Solicitation Expenses
General Recommendation: Vote case-by-case on proposals to reimburse proxy solicitation expenses.
When voting in conjunction with support of a dissident slate, vote for the reimbursement of all appropriate proxy solicitation expenses associated with the election.
Generally vote for shareholder proposals calling for the reimbursement of reasonable costs incurred in connection with nominating one or more candidates in a contested election where the following apply:
◾ |
The election of fewer than 50 percent of the directors to be elected is contested in the election; |
◾ |
One or more of the dissident’s candidates is elected; |
◾ |
Shareholders are not permitted to cumulate their votes for directors; and |
◾ |
The election occurred, and the expenses were incurred, after the adoption of this bylaw. |
General Recommendation: Management or shareholder proposals to change a company’s state of incorporation should be evaluated case-by-case, giving consideration to both financial and corporate governance concerns including the following:
◾ |
Reasons for reincorporation; |
◾ |
Comparison of company’s governance practices and provisions prior to and following the reincorporation; and |
◾ |
Comparison of corporation laws of original state and destination state. |
Vote for reincorporation when the economic factors outweigh any neutral or negative governance changes.
Shareholder Ability to Act by Written Consent
General Recommendation: Generally vote against management and shareholder proposals to restrict or prohibit shareholders’ ability to act by written consent.
Generally vote for management and shareholder proposals that provide shareholders with the ability to act by written consent, taking into account the following factors:
◾ |
Shareholders’ current right to act by written consent; |
◾ |
The consent threshold; |
◾ |
The inclusion of exclusionary or prohibitive language; |
W W W . I S S G O V E R N A N C E . C O M | E-32 | 32 of 81 |
◾ |
Investor ownership structure; and |
◾ |
Shareholder support of, and management’s response to, previous shareholder proposals. |
Vote case-by-case on shareholder proposals if, in addition to the considerations above, the company has the following governance and antitakeover provisions:
◾ |
An unfettered14 right for shareholders to call special meetings at a 10 percent threshold; |
◾ |
A majority vote standard in uncontested director elections; |
◾ |
No non-shareholder-approved pill; and |
◾ |
An annually elected board. |
Shareholder Ability to Call Special Meetings
General Recommendation: Vote against management or shareholder proposals to restrict or prohibit shareholders’ ability to call special meetings.
Generally vote for management or shareholder proposals that provide shareholders with the ability to call special meetings taking into account the following factors:
◾ |
Shareholders’ current right to call special meetings; |
◾ |
Minimum ownership threshold necessary to call special meetings (10 percent preferred); |
◾ |
The inclusion of exclusionary or prohibitive language; |
◾ |
Investor ownership structure; and |
◾ |
Shareholder support of, and management’s response to, previous shareholder proposals. |
General Recommendation: Vote against proposals that ask the board to consider non-shareholder constituencies or other non-financial effects when evaluating a merger or business combination.
General Recommendation: Vote case-by-case on proposals to opt in or out of state takeover statutes (including fair price provisions, stakeholder laws, poison pill endorsements, severance pay and labor contract provisions, and anti-greenmail provisions).
Supermajority Vote Requirements
General Recommendation: Vote against proposals to require a supermajority shareholder vote.
Vote for management or shareholder proposals to reduce supermajority vote requirements. However, for companies with shareholder(s) who have significant ownership levels, vote case-by-case, taking into account:
◾ |
Ownership structure; |
◾ |
Quorum requirements; and |
◾ |
Vote requirements. |
14 “Unfettered” means no restrictions on agenda items, no restrictions on the number of shareholders who can group together to reach the 10 percent threshold, and only reasonable limits on when a meeting can be called: no greater than 30 days after the last annual meeting and no greater than 90 prior to the next annual meeting.
W W W . I S S G O V E R N A N C E . C O M | E-33 | 33 of 81 |
General Recommendation: Generally vote for management proposals allowing for the convening of shareholder meetings by electronic means, so long as they do not preclude in-person meetings. Companies are encouraged to disclose the circumstances under which virtual-only15 meetings would be held, and to allow for comparable rights and opportunities for shareholders to participate electronically as they would have during an in-person meeting.
Vote case-by-case on shareholder proposals concerning virtual-only meetings, considering:
◾ |
Scope and rationale of the proposal; and |
◾ |
Concerns identified with the company’s prior meeting practices. |
15 Virtual-only shareholder meeting” refers to a meeting of shareholders that is held exclusively using technology without a corresponding in-person meeting.
W W W . I S S G O V E R N A N C E . C O M | E-34 | 34 of 81 |
Adjustments to Par Value of Common Stock
General Recommendation: Vote for management proposals to reduce the par value of common stock unless the action is being taken to facilitate an anti-takeover device or some other negative corporate governance action.
Vote for management proposals to eliminate par value.
General Authorization Requests
General Recommendation: Vote case-by-case on proposals to increase the number of authorized shares of common stock that are to be used for general corporate purposes:
◾ |
If share usage (outstanding plus reserved) is less than 50% of the current authorized shares, vote for an increase of up to 50% of current authorized shares. |
◾ |
If share usage is 50% to 100% of the current authorized, vote for an increase of up to 100% of current authorized shares. |
◾ |
If share usage is greater than current authorized shares, vote for an increase of up to the current share usage. |
◾ |
In the case of a stock split, the allowable increase is calculated (per above) based on the post-split adjusted authorization. |
Generally vote against proposed increases, even if within the above ratios, if the proposal or the company’s prior or ongoing use of authorized shares is problematic, including, but not limited to:
◾ |
The proposal seeks to increase the number of authorized shares of the class of common stock that has superior voting rights to other share classes; |
◾ |
On the same ballot is a proposal for a reverse split for which support is warranted despite the fact that it would result in an excessive increase in the share authorization; |
◾ |
The company has a non-shareholder approved poison pill (including an NOL pill); or |
◾ |
The company has previous sizeable placements (within the past 3 years) of stock with insiders at prices substantially below market value, or with problematic voting rights, without shareholder approval. |
However, generally vote for proposed increases beyond the above ratios or problematic situations when there is disclosure of specific and severe risks to shareholders of not approving the request, such as:
◾ |
In, or subsequent to, the company’s most recent 10-K filing, the company discloses that there is substantial doubt about its ability to continue as a going concern; |
◾ |
The company states that there is a risk of imminent bankruptcy or imminent liquidation if shareholders do not approve the increase in authorized capital; or |
◾ |
A government body has in the past year required the company to increase its capital ratios. |
For companies incorporated in states that allow increases in authorized capital without shareholder approval, generally vote withhold or against all nominees if a unilateral capital authorization increase does not conform to the above policies.
W W W . I S S G O V E R N A N C E . C O M | E-35 | 35 of 81 |
Specific Authorization Requests
General Recommendation: Generally vote for proposals to increase the number of authorized common shares where the primary purpose of the increase is to issue shares in connection with transaction(s) (such as acquisitions, SPAC transactions, private placements, or similar transactions) on the same ballot, or disclosed in the proxy statement, that warrant support. For such transactions, the allowable increase will be the greater of:
◾ |
twice the amount needed to support the transactions on the ballot, and |
◾ |
the allowable increase as calculated for general issuances above. |
General Recommendation: Generally vote against proposals to create a new class of common stock unless:
◾ |
The company discloses a compelling rationale for the dual-class capital structure, such as: |
◾ |
The company’s auditor has concluded that there is substantial doubt about the company’s ability to continue as a going concern; or |
◾ |
The new class of shares will be transitory; |
◾ |
The new class is intended for financing purposes with minimal or no dilution to current shareholders in both the short term and long term; and |
◾ |
The new class is not designed to preserve or increase the voting power of an insider or significant shareholder. |
Issue Stock for Use with Rights Plan
General Recommendation: Vote against proposals that increase authorized common stock for the explicit purpose of implementing a non-shareholder-approved shareholder rights plan (poison pill).
General Recommendation: Vote case-by-case on shareholder proposals that seek preemptive rights, taking into consideration:
◾ |
The size of the company; |
◾ |
The shareholder base; and |
◾ |
The liquidity of the stock. |
General Authorization Requests
General Recommendation: Vote case-by-case on proposals to increase the number of authorized shares of preferred stock that are to be used for general corporate purposes:
◾ |
If share usage (outstanding plus reserved) is less than 50% of the current authorized shares, vote for an increase of up to 50% of current authorized shares. |
◾ |
If share usage is 50% to 100% of the current authorized, vote for an increase of up to 100% of current authorized shares. |
◾ |
If share usage is greater than current authorized shares, vote for an increase of up to the current share usage. |
W W W . I S S G O V E R N A N C E . C O M | E-36 | 36 of 81 |
◾ |
In the case of a stock split, the allowable increase is calculated (per above) based on the post-split adjusted authorization. |
◾ |
If no preferred shares are currently issued and outstanding, vote against the request, unless the company discloses a specific use for the shares. |
Generally vote against proposed increases, even if within the above ratios, if the proposal or the company’s prior or ongoing use of authorized shares is problematic, including, but not limited to:
◾ |
If the shares requested are blank check preferred shares that can be used for antitakeover purposes;16 |
◾ |
The company seeks to increase a class of non-convertible preferred shares entitled to more than one vote per share on matters that do not solely affect the rights of preferred stockholders “supervoting shares”); |
◾ |
The company seeks to increase a class of convertible preferred shares entitled to a number of votes greater than the number of common shares into which they are convertible (“supervoting shares”) on matters that do not solely affect the rights of preferred stockholders; |
◾ |
The stated intent of the increase in the general authorization is to allow the company to increase an existing designated class of supervoting preferred shares; |
◾ |
On the same ballot is a proposal for a reverse split for which support is warranted despite the fact that it would result in an excessive increase in the share authorization; |
◾ |
The company has a non-shareholder approved poison pill (including an NOL pill); or |
◾ |
The company has previous sizeable placements (within the past 3 years) of stock with insiders at prices substantially below market value, or with problematic voting rights, without shareholder approval. |
However, generally vote for proposed increases beyond the above ratios or problematic situations when there is disclosure of specific and severe risks to shareholders of not approving the request, such as:
◾ |
In, or subsequent to, the company’s most recent 10-K filing, the company discloses that there is substantial doubt about its ability to continue as a going concern; |
◾ |
The company states that there is a risk of imminent bankruptcy or imminent liquidation if shareholders do not approve the increase in authorized capital; or |
◾ |
A government body has in the past year required the company to increase its capital ratios. |
For companies incorporated in states that allow increases in authorized capital without shareholder approval, generally vote withhold or against all nominees if a unilateral capital authorization increase does not conform to the above policies.
Specific Authorization Requests
General Recommendation: Generally vote for proposals to increase the number of authorized preferred shares where the primary purpose of the increase is to issue shares in connection with transaction(s) (such as acquisitions, SPAC transactions, private placements, or similar transactions) on the same ballot, or disclosed in the proxy statement, that warrant support. For such transactions, the allowable increase will be the greater of:
◾ |
twice the amount needed to support the transactions on the ballot, and |
◾ |
the allowable increase as calculated for general issuances above. |
16 To be acceptable, appropriate disclosure would be needed that the shares are “declawed”: i.e., representation by the board that it will not, without prior stockholder approval, issue or use the preferred stock for any defensive or anti-takeover purpose or for the purpose of implementing any stockholder rights plan.
W W W . I S S G O V E R N A N C E . C O M | E-37 | 37 of 81 |
General Recommendation: Vote case-by-case on recapitalizations (reclassifications of securities), taking into account the following:
◾ |
More simplified capital structure; |
◾ |
Enhanced liquidity; |
◾ |
Fairness of conversion terms; |
◾ |
Impact on voting power and dividends; |
◾ |
Reasons for the reclassification; |
◾ |
Conflicts of interest; and |
◾ |
Other alternatives considered. |
General Recommendation: Vote for management proposals to implement a reverse stock split if:
◾ |
The number of authorized shares will be proportionately reduced; or |
◾ |
The effective increase in authorized shares is equal to or less than the allowable increase calculated in accordance with ISS’ Common Stock Authorization policy. |
Vote case-by-case on proposals that do not meet either of the above conditions, taking into consideration the following factors:
◾ |
Stock exchange notification to the company of a potential delisting; |
◾ |
Disclosure of substantial doubt about the company’s ability to continue as a going concern without additional financing; |
◾ |
The company’s rationale; or |
◾ |
Other factors as applicable. |
Share Issuance Mandates at U.S. Domestic Issuers Incorporated Outside the U.S.
General Recommendation: For U.S. domestic issuers incorporated outside the U.S. and listed solely on a U.S. exchange, generally vote for resolutions to authorize the issuance of common shares up to 20 percent of currently issued common share capital, where not tied to a specific transaction or financing proposal.
For pre-revenue or other early-stage companies that are heavily reliant on periodic equity financing, generally vote for resolutions to authorize the issuance of common shares up to 50 percent of currently issued common share capital. The burden of proof will be on the company to establish that it has a need for the higher limit.
Renewal of such mandates should be sought at each year’s annual meeting.
Vote case-by-case on share issuances for a specific transaction or financing proposal.
W W W . I S S G O V E R N A N C E . C O M | E-38 | 38 of 81 |
General Recommendation: For U.S.-incorporated companies, and foreign-incorporated U.S. Domestic Issuers that are traded solely on U.S. exchanges, vote for management proposals to institute open-market share repurchase plans in which all shareholders may participate on equal terms, or to grant the board authority to conduct open-market repurchases, in the absence of company-specific concerns regarding:
◾ |
Greenmail; |
◾ |
The use of buybacks to inappropriately manipulate incentive compensation metrics; |
◾ |
Threats to the company’s long-term viability; or |
◾ |
Other company-specific factors as warranted. |
Vote case-by-case on proposals to repurchase shares directly from specified shareholders, balancing the stated rationale against the possibility for the repurchase authority to be misused, such as to repurchase shares from insiders at a premium to market price.
Share Repurchase Programs Shareholder Proposals
General Recommendation: Generally vote against shareholder proposals prohibiting executives from selling shares of company stock during periods in which the company has announced that it may or will be repurchasing shares of its stock. Vote for the proposal when there is a pattern of abuse by executives exercising options or selling shares during periods of share buybacks.
Stock Distributions: Splits and Dividends
General Recommendation: Generally vote for management proposals to increase the common share authorization for stock split or stock dividend, provided that the effective increase in authorized shares is equal to or is less than the allowable increase calculated in accordance with ISS’ Common Stock Authorization policy.
General Recommendation: Vote case-by-case on the creation of tracking stock, weighing the strategic value of the transaction against such factors as:
◾ |
Adverse governance changes; |
◾ |
Excessive increases in authorized capital stock; |
◾ |
Unfair method of distribution; |
◾ |
Diminution of voting rights; |
◾ |
Adverse conversion features; |
◾ |
Negative impact on stock option plans; and |
◾ |
Alternatives such as spin-off. |
General Recommendation: Vote for proposals to restore or provide shareholders with rights of appraisal.
W W W . I S S G O V E R N A N C E . C O M | E-39 | 39 of 81 |
General Recommendation: Vote case-by-case on asset purchase proposals, considering the following factors:
◾ |
Purchase price; |
◾ |
Fairness opinion; |
◾ |
Financial and strategic benefits; |
◾ |
How the deal was negotiated; |
◾ |
Conflicts of interest; |
◾ |
Other alternatives for the business; |
◾ |
Non-completion risk. |
General Recommendation: Vote case-by-case on asset sales, considering the following factors:
◾ |
Impact on the balance sheet/working capital; |
◾ |
Potential elimination of diseconomies; |
◾ |
Anticipated financial and operating benefits; |
◾ |
Anticipated use of funds; |
◾ |
Value received for the asset; |
◾ |
Fairness opinion; |
◾ |
How the deal was negotiated; |
◾ |
Conflicts of interest. |
General Recommendation: Vote case-by-case on bundled or “conditional” proxy proposals. In the case of items that are conditioned upon each other, examine the benefits and costs of the packaged items. In instances when the joint effect of the conditioned items is not in shareholders’ best interests, vote against the proposals. If the combined effect is positive, support such proposals.
General Recommendation: Vote case-by-case on proposals regarding conversion of securities. When evaluating these proposals, the investor should review the dilution to existing shareholders, the conversion price relative to market value, financial issues, control issues, termination penalties, and conflicts of interest.
Vote for the conversion if it is expected that the company will be subject to onerous penalties or will be forced to file for bankruptcy if the transaction is not approved.
Corporate Reorganization/Debt Restructuring/Prepackaged Bankruptcy Plans/Reverse Leveraged Buyouts/Wrap Plans
General Recommendation: Vote case-by-case on proposals to increase common and/or preferred shares and to issue shares as part of a debt restructuring plan, after evaluating:
◾ |
Dilution to existing shareholders’ positions; |
◾ |
Terms of the offer - discount/premium in purchase price to investor, including any fairness opinion; termination penalties; exit strategy; |
W W W . I S S G O V E R N A N C E . C O M | E-40 | 40 of 81 |
◾ |
Financial issues - company’s financial situation; degree of need for capital; use of proceeds; effect of the financing on the company’s cost of capital; |
◾ |
Management’s efforts to pursue other alternatives; |
◾ |
Control issues - change in management; change in control, guaranteed board and committee seats; standstill provisions; voting agreements; veto power over certain corporate actions; and |
◾ |
Conflict of interest - arm’s length transaction, managerial incentives. |
Vote for the debt restructuring if it is expected that the company will file for bankruptcy if the transaction is not approved.
General Recommendation: Vote case-by-case on proposals regarding the formation of a holding company, taking into consideration the following:
◾ |
The reasons for the change; |
◾ |
Any financial or tax benefits; |
◾ |
Regulatory benefits; |
◾ |
Increases in capital structure; and |
◾ |
Changes to the articles of incorporation or bylaws of the company. |
Absent compelling financial reasons to recommend for the transaction, vote against the formation of a holding company if the transaction would include either of the following:
◾ |
Increases in common or preferred stock in excess of the allowable maximum (see discussion under “Capital”); or |
◾ |
Adverse changes in shareholder rights. |
Going Private and Going Dark Transactions (LBOs and Minority Squeeze-outs)
General Recommendation: Vote case-by-case on going private transactions, taking into account the following:
◾ |
Offer price/premium; |
◾ |
Fairness opinion; |
◾ |
How the deal was negotiated; |
◾ |
Conflicts of interest; |
◾ |
Other alternatives/offers considered; and |
◾ |
Non-completion risk. |
Vote case-by-case on going dark transactions, determining whether the transaction enhances shareholder value by taking into consideration:
◾ |
Whether the company has attained benefits from being publicly-traded (examination of trading volume, liquidity, and market research of the stock); |
◾ |
Balanced interests of continuing vs. cashed-out shareholders, taking into account the following: |
◾ |
Are all shareholders able to participate in the transaction? |
◾ |
Will there be a liquid market for remaining shareholders following the transaction? |
◾ |
Does the company have strong corporate governance? |
◾ |
Will insiders reap the gains of control following the proposed transaction? |
◾ |
Does the state of incorporation have laws requiring continued reporting that may benefit shareholders? |
W W W . I S S G O V E R N A N C E . C O M | E-41 | 41 of 81 |
General Recommendation: Vote case-by-case on proposals to form joint ventures, taking into account the following:
◾ |
Percentage of assets/business contributed; |
◾ |
Percentage ownership; |
◾ |
Financial and strategic benefits; |
◾ |
Governance structure; |
◾ |
Conflicts of interest; |
◾ |
Other alternatives; and |
◾ |
Non-completion risk. |
General Recommendation: Vote case-by-case on liquidations, taking into account the following:
◾ |
Management’s efforts to pursue other alternatives; |
◾ |
Appraisal value of assets; and |
◾ |
The compensation plan for executives managing the liquidation. |
Vote for the liquidation if the company will file for bankruptcy if the proposal is not approved.
General Recommendation: Vote case-by-case on mergers and acquisitions. Review and evaluate the merits and drawbacks of the proposed transaction, balancing various and sometimes countervailing factors including:
◾ |
Valuation - Is the value to be received by the target shareholders (or paid by the acquirer) reasonable? While the fairness opinion may provide an initial starting point for assessing valuation reasonableness, emphasis is placed on the offer premium, market reaction, and strategic rationale. |
◾ |
Market reaction - How has the market responded to the proposed deal? A negative market reaction should cause closer scrutiny of a deal. |
◾ |
Strategic rationale - Does the deal make sense strategically? From where is the value derived? Cost and revenue synergies should not be overly aggressive or optimistic, but reasonably achievable. Management should also have a favorable track record of successful integration of historical acquisitions. |
◾ |
Negotiations and process - Were the terms of the transaction negotiated at arm’s-length? Was the process fair and equitable? A fair process helps to ensure the best price for shareholders. Significant negotiation “wins” can also signify the deal makers’ competency. The comprehensiveness of the sales process (e.g., full auction, partial auction, no auction) can also affect shareholder value. |
◾ |
Conflicts of interest - Are insiders benefiting from the transaction disproportionately and inappropriately as compared to non-insider shareholders? As the result of potential conflicts, the directors and officers of the company may be more likely to vote to approve a merger than if they did not hold these interests. Consider whether these interests may have influenced these directors and officers to support or recommend the merger. The CIC figure presented in the “ISS Transaction Summary” section of this report is an aggregate figure that can in certain cases be a misleading indicator of the true value transfer from shareholders to insiders. Where such figure appears to be excessive, analyze the underlying assumptions to determine whether a potential conflict exists. |
W W W . I S S G O V E R N A N C E . C O M | E-42 | 42 of 81 |
◾ |
Governance - Will the combined company have a better or worse governance profile than the current governance profiles of the respective parties to the transaction? If the governance profile is to change for the worse, the burden is on the company to prove that other issues (such as valuation) outweigh any deterioration in governance. |
Private Placements/Warrants/Convertible Debentures
General Recommendation: Vote case-by-case on proposals regarding private placements, warrants, and convertible debentures taking into consideration:
◾ |
Dilution to existing shareholders’ position: The amount and timing of shareholder ownership dilution should be weighed against the needs and proposed shareholder benefits of the capital infusion. Although newly issued common stock, absent preemptive rights, is typically dilutive to existing shareholders, share price appreciation is often the necessary event to trigger the exercise of “out of the money” warrants and convertible debt. In these instances from a value standpoint, the negative impact of dilution is mitigated by the increase in the company’s stock price that must occur to trigger the dilutive event. |
◾ |
Terms of the offer (discount/premium in purchase price to investor, including any fairness opinion, conversion features, termination penalties, exit strategy): |
◾ |
The terms of the offer should be weighed against the alternatives of the company and in light of company’s financial condition. Ideally, the conversion price for convertible debt and the exercise price for warrants should be at a premium to the then prevailing stock price at the time of private placement. |
◾ |
When evaluating the magnitude of a private placement discount or premium, consider factors that influence the discount or premium, such as, liquidity, due diligence costs, control and monitoring costs, capital scarcity, information asymmetry, and anticipation of future performance. |
◾ |
Financial issues: |
◾ |
The company’s financial condition; |
◾ |
Degree of need for capital; |
◾ |
Use of proceeds; |
◾ |
Effect of the financing on the company’s cost of capital; |
◾ |
Current and proposed cash burn rate; |
◾ |
Going concern viability and the state of the capital and credit markets. |
◾ |
Management’s efforts to pursue alternatives and whether the company engaged in a process to evaluate alternatives: A fair, unconstrained process helps to ensure the best price for shareholders. Financing alternatives can include joint ventures, partnership, merger, or sale of part or all of the company. |
◾ |
Control issues: |
◾ |
Change in management; |
◾ |
Change in control; |
◾ |
Guaranteed board and committee seats; |
◾ |
Standstill provisions; |
◾ |
Voting agreements; |
◾ |
Veto power over certain corporate actions; and |
◾ |
Minority versus majority ownership and corresponding minority discount or majority control premium. |
W W W . I S S G O V E R N A N C E . C O M | E-43 | 43 of 81 |
◾ |
Conflicts of interest: |
◾ |
Conflicts of interest should be viewed from the perspective of the company and the investor. |
◾ |
Were the terms of the transaction negotiated at arm’s length? Are managerial incentives aligned with shareholder interests? |
◾ |
Market reaction: |
◾ |
The market’s response to the proposed deal. A negative market reaction is a cause for concern. Market reaction may be addressed by analyzing the one-day impact on the unaffected stock price. |
Vote for the private placement, or for the issuance of warrants and/or convertible debentures in a private placement, if it is expected that the company will file for bankruptcy if the transaction is not approved.
Reorganization/Restructuring Plan (Bankruptcy)
General Recommendation: Vote case-by-case on proposals to common shareholders on bankruptcy plans of reorganization, considering the following factors including, but not limited to:
◾ |
Estimated value and financial prospects of the reorganized company; |
◾ |
Percentage ownership of current shareholders in the reorganized company; |
◾ |
Whether shareholders are adequately represented in the reorganization process (particularly through the existence of an Official Equity Committee); |
◾ |
The cause(s) of the bankruptcy filing, and the extent to which the plan of reorganization addresses the cause(s); |
◾ |
Existence of a superior alternative to the plan of reorganization; and |
◾ |
Governance of the reorganized company. |
Special Purpose Acquisition Corporations (SPACs)
General Recommendation: Vote case-by-case on SPAC mergers and acquisitions taking into account the following:
◾ |
Valuation - Is the value being paid by the SPAC reasonable? SPACs generally lack an independent fairness opinion and the financials on the target may be limited. Compare the conversion price with the intrinsic value of the target company provided in the fairness opinion. Also, evaluate the proportionate value of the combined entity attributable to the SPAC IPO shareholders versus the pre-merger value of SPAC. Additionally, a private company discount may be applied to the target if it is a private entity. |
◾ |
Market reaction - How has the market responded to the proposed deal? A negative market reaction may be a cause for concern. Market reaction may be addressed by analyzing the one-day impact on the unaffected stock price. |
◾ |
Deal timing - A main driver for most transactions is that the SPAC charter typically requires the deal to be complete within 18 to 24 months, or the SPAC is to be liquidated. Evaluate the valuation, market reaction, and potential conflicts of interest for deals that are announced close to the liquidation date. |
◾ |
Negotiations and process - What was the process undertaken to identify potential target companies within specified industry or location specified in charter? Consider the background of the sponsors. |
◾ |
Conflicts of interest - How are sponsors benefiting from the transaction compared to IPO shareholders? Potential conflicts could arise if a fairness opinion is issued by the insiders to qualify the deal rather than a third party or if management is encouraged to pay a higher price for the target because of an 80 percent rule (the charter requires that the fair market value of the target is at least equal to 80 percent of net assets of the SPAC). Also, there may be sense of urgency by the management team of the SPAC to close the deal since its charter typically requires a transaction to be completed within the 18-24-month timeframe. |
◾ |
Voting agreements - Are the sponsors entering into enter into any voting agreements/tender offers with shareholders who are likely to vote against the proposed merger or exercise conversion rights? |
◾ |
Governance - What is the impact of having the SPAC CEO or founder on key committees following the proposed merger? |
W W W . I S S G O V E R N A N C E . C O M | E-44 | 44 of 81 |
Special Purpose Acquisition Corporations (SPACs) - Proposals for Extensions
General Recommendation: Vote case-by-case on SPAC extension proposals taking into account the length of the requested extension, the status of any pending transaction(s) or progression of the acquisition process, any added incentive for non-redeeming shareholders, and any prior extension requests.
◾ |
Length of request: Typically, extension requests range from two to six months, depending on the progression of the SPAC’s acquistion process. |
◾ |
Pending transaction(s) or progression of the acquisition process: Sometimes an intial business combination was already put to a shareholder vote, but, for varying reasons, the transaction could not be consummated by the termination date and the SPAC is requesting an extension. Other times, the SPAC has entered into a definitive transaction agreement, but needs additional time to consummate or hold the shareholder meeting. |
◾ |
Added incentive for non-redeeming shareholders: Sometimes the SPAC sponsor (or other insiders) will contribute, typically as a loan to the company, additional funds that will be added to the redemption value of each public share as long as such shares are not redeemed in connection with the extension request. The purpose of the “equity kicker” is to incentivize shareholders to hold their shares through the end of the requested extension or until the time the transaction is put to a shareholder vote, rather than electing redeemption at the extension proposal meeting. |
◾ |
Prior extension requests: Some SPACs request additional time beyond the extension period sought in prior extension requests. |
General Recommendation: Vote case-by-case on spin-offs, considering:
◾ |
Tax and regulatory advantages; |
◾ |
Planned use of the sale proceeds; |
◾ |
Valuation of spinoff; |
◾ |
Fairness opinion; |
◾ |
Benefits to the parent company; |
◾ |
Conflicts of interest; |
◾ |
Managerial incentives; |
◾ |
Corporate governance changes; |
◾ |
Changes in the capital structure. |
Value Maximization Shareholder Proposals
General Recommendation: Vote case-by-case on shareholder proposals seeking to maximize shareholder value by:
◾ |
Hiring a financial advisor to explore strategic alternatives; |
◾ |
Selling the company; or |
◾ |
Liquidating the company and distributing the proceeds to shareholders. |
These proposals should be evaluated based on the following factors:
◾ |
Prolonged poor performance with no turnaround in sight; |
◾ |
Signs of entrenched board and management (such as the adoption of takeover defenses); |
◾ |
Strategic plan in place for improving value; |
◾ |
Likelihood of receiving reasonable value in a sale or dissolution; and |
◾ |
The company actively exploring its strategic options, including retaining a financial advisor. |
W W W . I S S G O V E R N A N C E . C O M | E-45 | 45 of 81 |
Underlying all evaluations are five global principles that most investors expect corporations to adhere to in designing and administering executive and director compensation programs:
1. |
Maintain appropriate pay-for-performance alignment, with emphasis on long-term shareholder value: This principle encompasses overall executive pay practices, which must be designed to attract, retain, and appropriately motivate the key employees who drive shareholder value creation over the long term. It will take into consideration, among other factors, the link between pay and performance; the mix between fixed and variable pay; performance goals; and equity-based plan costs; |
2. |
Avoid arrangements that risk “pay for failure”: This principle addresses the appropriateness of long or indefinite contracts, excessive severance packages, and guaranteed compensation; |
3. |
Maintain an independent and effective compensation committee: This principle promotes oversight of executive pay programs by directors with appropriate skills, knowledge, experience, and a sound process for compensation decision-making (e.g., including access to independent expertise and advice when needed); |
4. |
Provide shareholders with clear, comprehensive compensation disclosures: This principle underscores the importance of informative and timely disclosures that enable shareholders to evaluate executive pay practices fully and fairly; |
5. |
Avoid inappropriate pay to non-executive directors: This principle recognizes the interests of shareholders in ensuring that compensation to outside directors is reasonable and does not compromise their independence and ability to make appropriate judgments in overseeing managers’ pay and performance. At the market level, it may incorporate a variety of generally accepted best practices. |
Advisory Votes on Executive Compensation—Management Proposals (Say-on-Pay)
General Recommendation: Vote case-by-case on ballot items related to executive pay and practices, as well as certain aspects of outside director compensation.
Vote against Advisory Votes on Executive Compensation (Say-on-Pay or “SOP”) if:
◾ |
There is an unmitigated misalignment between CEO pay and company performance (pay for performance); |
◾ |
The company maintains significant problematic pay practices; |
◾ |
The board exhibits a significant level of poor communication and responsiveness to shareholders. |
Vote against or withhold from the members of the Compensation Committee and potentially the full board if:
◾ |
There is no SOP on the ballot, and an against vote on an SOP would otherwise be warranted due to pay-for-performance misalignment, problematic pay practices, or the lack of adequate responsiveness on compensation issues raised previously, or a combination thereof; |
◾ |
The board fails to respond adequately to a previous SOP proposal that received less than 70 percent support of votes cast; |
◾ |
The company has recently practiced or approved problematic pay practices, such as option repricing or option backdating; or |
◾ |
The situation is egregious. |
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Primary Evaluation Factors for Executive Pay
Pay-for-Performance Evaluation
ISS annually conducts a pay-for-performance analysis to identify strong or satisfactory alignment between pay and performance over a sustained period. With respect to companies in the S&P1500, Russell 3000, or Russell 3000E Indices17, this analysis considers the following:
1. |
Peer Group18 Alignment: |
◾ |
The degree of alignment between the company’s annualized TSR rank and the CEO’s annualized total pay rank within a peer group, each measured over a three-year period. |
◾ |
The rankings of CEO total pay and company financial performance within a peer group, each measured over a three-year period. |
◾ |
The multiple of the CEO’s total pay relative to the peer group median in the most recent fiscal year. |
2. |
Absolute Alignment19 – the absolute alignment between the trend in CEO pay and company TSR over the prior five fiscal years – i.e., the difference between the trend in annual pay changes and the trend in annualized TSR during the period. |
If the above analysis demonstrates significant unsatisfactory long-term pay-for-performance alignment or, in the case of companies outside the Russell indices, a misalignment between pay and performance is otherwise suggested, our analysis may include any of the following qualitative factors, as relevant to an evaluation of how various pay elements may work to encourage or to undermine long-term value creation and alignment with shareholder interests:
◾ |
The ratio of performance- to time-based incentive awards; |
◾ |
The overall ratio of performance-based compensation to fixed or discretionary pay; |
◾ |
The rigor of performance goals; |
◾ |
The complexity and risks around pay program design; |
◾ |
The transparency and clarity of disclosure; |
◾ |
The company’s peer group benchmarking practices; |
◾ |
Financial/operational results, both absolute and relative to peers; |
◾ |
Special circumstances related to, for example, a new CEO in the prior FY or anomalous equity grant practices (e.g., bi-annual awards); |
◾ |
Realizable pay20 compared to grant pay; and |
◾ |
Any other factors deemed relevant. |
17 The Russell 3000E Index includes approximately 4,000 of the largest U.S. equity securities.
18 The revised peer group is generally comprised of 14-24 companies that are selected using market cap, revenue (or assets for certain financial firms), GICS industry group, and company’s selected peers’ GICS industry group, with size constraints, via a process designed to select peers that are comparable to the subject company in terms of revenue/assets and industry, and also within a market-cap bucket that is reflective of the company’s market cap. For Oil, Gas & Consumable Fuels companies, market cap is the only size determinant.
19 Only Russell 3000 Index companies are subject to the Absolute Alignment analysis.
20 ISS research reports include realizable pay for S&P1500 companies.
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Problematic pay elements are generally evaluated case-by-case considering the context of a company’s overall pay program and demonstrated pay-for-performance philosophy. The focus is on executive compensation practices that contravene the global pay principles, including:
◾ |
Problematic practices related to non-performance-based compensation elements; |
◾ |
Incentives that may motivate excessive risk-taking or present a windfall risk; and |
◾ |
Pay decisions that circumvent pay-for-performance, such as options backdating or waiving performance requirements. |
The list of examples below highlights certain problematic practices that carry significant weight in this overall consideration and may result in adverse vote recommendations:
◾ |
Repricing or replacing of underwater stock options/SARs without prior shareholder approval (including cash buyouts and voluntary surrender of underwater options); |
◾ |
Extraordinary perquisites or tax gross-ups; |
◾ |
New or materially amended agreements that provide for: |
◾ |
Excessive termination or CIC severance payments (generally exceeding 3 times base salary and average/target/most recent bonus); |
◾ |
CIC severance payments without involuntary job loss or substantial diminution of duties (“single” or “modified single” triggers) or in connection with a problematic Good Reason definition; |
◾ |
CIC excise tax gross-up entitlements (including “modified” gross-ups); |
◾ |
Multi-year guaranteed awards that are not at risk due to rigorous performance conditions; |
◾ |
Liberal CIC definition combined with any single-trigger CIC benefits; |
◾ |
Insufficient executive compensation disclosure by externally-managed issuers (EMIs) such that a reasonable assessment of pay programs and practices applicable to the EMI’s executives is not possible; |
◾ |
Severance payments made when the termination is not clearly disclosed as involuntary (for example, a termination without cause or resignation for good reason); |
◾ |
Any other provision or practice deemed to be egregious and present a significant risk to investors. |
The above examples are not an exhaustive list. Please refer to ISS’ U.S. Compensation Policies FAQ document for additional detail on specific pay practices that have been identified as problematic and may lead to negative vote recommendations.
Options Backdating
The following factors should be examined case-by-case to allow for distinctions to be made between “sloppy” plan administration versus deliberate action or fraud:
◾ |
Reason and motive for the options backdating issue, such as inadvertent vs. deliberate grant date changes; |
◾ |
Duration of options backdating; |
◾ |
Size of restatement due to options backdating; |
◾ |
Corrective actions taken by the board or compensation committee, such as canceling or re-pricing backdated options, the recouping of option gains on backdated grants; and |
◾ |
Adoption of a grant policy that prohibits backdating and creates a fixed grant schedule or window period for equity grants in the future. |
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Compensation Committee Communications and Responsiveness
Consider the following factors case-by-case when evaluating ballot items related to executive pay on the board’s responsiveness to investor input and engagement on compensation issues:
◾ |
Failure to respond to majority-supported shareholder proposals on executive pay topics; or |
◾ |
Failure to adequately respond to the company’s previous say-on-pay proposal that received the support of less than 70 percent of votes cast, taking into account: |
◾ |
Disclosure of engagement efforts with major institutional investors, including the frequency and timing of engagements and the company participants (including whether independent directors participated); |
◾ |
Disclosure of the specific concerns voiced by dissenting shareholders that led to the say-on-pay opposition; |
◾ |
Disclosure of specific and meaningful actions taken to address shareholders’ concerns; |
◾ |
Other recent compensation actions taken by the company; |
◾ |
Whether the issues raised are recurring or isolated; |
◾ |
The company’s ownership structure; and |
◾ |
Whether the support level was less than 50 percent, which would warrant the highest degree of responsiveness. |
Frequency of Advisory Vote on Executive Compensation (“Say When on Pay”)
General Recommendation: Vote for annual advisory votes on compensation, which provide the most consistent and clear communication channel for shareholder concerns about companies’ executive pay programs.
Voting on Golden Parachutes in an Acquisition, Merger, Consolidation, or Proposed Sale
General Recommendation: Vote case-by-case on say on Golden Parachute proposals, including consideration of existing change-in-control arrangements maintained with named executive officers but also considering new or extended arrangements.
Features that may result in an “against” recommendation include one or more of the following, depending on the number, magnitude, and/or timing of issue(s):
◾ |
Single- or modified-single-trigger cash severance; |
◾ |
Single-trigger acceleration of unvested equity awards; |
◾ |
Full acceleration of equity awards granted shortly before the change in control; |
◾ |
Acceleration of performance awards above the target level of performance without compelling rationale; |
◾ |
Excessive cash severance (generally >3x base salary and bonus); |
◾ |
Excise tax gross-ups triggered and payable; |
◾ |
Excessive golden parachute payments (on an absolute basis or as a percentage of transaction equity value); or |
◾ |
Recent amendments that incorporate any problematic features (such as those above) or recent actions (such as extraordinary equity grants) that may make packages so attractive as to influence merger agreements that may not be in the best interests of shareholders; or |
◾ |
The company’s assertion that a proposed transaction is conditioned on shareholder approval of the golden parachute advisory vote. |
Recent amendment(s) that incorporate problematic features will tend to carry more weight on the overall analysis. However, the presence of multiple legacy problematic features will also be closely scrutinized.
In cases where the golden parachute vote is incorporated into a company’s advisory vote on compensation (management say-on-pay), ISS will evaluate the say-on-pay proposal in accordance with these guidelines, which may give higher weight to that component of the overall evaluation.
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Equity-Based and Other Incentive Plans
Please refer to ISS’ U.S. Equity Compensation Plans FAQ document for additional details on the Equity Plan Scorecard policy.
General Recommendation: Vote case-by-case on certain equity-based compensation plans21 depending on a combination of certain plan features and equity grant practices, where positive factors may counterbalance negative factors, and vice versa, as evaluated using an “Equity Plan Scorecard” (EPSC) approach with three pillars:
◾ |
Plan Cost: The total estimated cost of the company’s equity plans relative to industry/market cap peers, measured by the company’s estimated Shareholder Value Transfer (SVT) in relation to peers and considering both: |
◾ |
SVT based on new shares requested plus shares remaining for future grants, plus outstanding unvested/unexercised grants; and |
◾ |
SVT based only on new shares requested plus shares remaining for future grants. |
◾ |
Plan Features: |
◾ |
Quality of disclosure around vesting upon a change in control (CIC); |
◾ |
Discretionary vesting authority; |
◾ |
Liberal share recycling on various award types; |
◾ |
Lack of minimum vesting period for grants made under the plan; |
◾ |
Dividends payable prior to award vesting. |
◾ |
Grant Practices: |
◾ |
The company’s three-year burn rate relative to its industry/market cap peers; |
◾ |
Vesting requirements in CEO’s recent equity grants (3-year look-back); |
◾ |
The estimated duration of the plan (based on the sum of shares remaining available and the new shares requested, divided by the average annual shares granted in the prior three years); |
◾ |
The proportion of the CEO’s most recent equity grants/awards subject to performance conditions; |
◾ |
Whether the company maintains a sufficient claw-back policy; |
◾ |
Whether the company maintains sufficient post-exercise/vesting share-holding requirements. |
Generally vote against the plan proposal if the combination of above factors indicates that the plan is not, overall, in shareholders’ interests, or if any of the following egregious factors (“overriding factors”) apply:
◾ |
Awards may vest in connection with a liberal change-of-control definition; |
◾ |
The plan would permit repricing or cash buyout of underwater options without shareholder approval (either by expressly permitting it – for NYSE and Nasdaq listed companies – or by not prohibiting it when the company has a history of repricing – for non-listed companies); |
◾ |
The plan is a vehicle for problematic pay practices or a significant pay-for-performance disconnect under certain circumstances; |
◾ |
The plan is excessively dilutive to shareholders’ holdings; |
◾ |
The plan contains an evergreen (automatic share replenishment) feature; or |
◾ |
Any other plan features are determined to have a significant negative impact on shareholder interests. |
21 Proposals evaluated under the EPSC policy generally include those to approve or amend (1) stock option plans for employees and/or employees and directors, (2) restricted stock plans for employees and/or employees and directors, and (3) omnibus stock incentive plans for employees and/or employees and directors; amended plans will be further evaluated case-by-case.
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Further Information on certain EPSC Factors:
Shareholder Value Transfer (SVT)
The cost of the equity plans is expressed as Shareholder Value Transfer (SVT), which is measured using a binomial option pricing model that assesses the amount of shareholders’ equity flowing out of the company to employees and directors. SVT is expressed as both a dollar amount and as a percentage of market value, and includes the new shares proposed, shares available under existing plans, and shares granted but unexercised (using two measures, in the case of plans subject to the Equity Plan Scorecard evaluation, as noted above). All award types are valued. For omnibus plans, unless limitations are placed on the most expensive types of awards (for example, full-value awards), the assumption is made that all awards to be granted will be the most expensive types.
For proposals that are not subject to the Equity Plan Scorecard evaluation, Shareholder Value Transfer is reasonable if it falls below a company-specific benchmark. The benchmark is determined as follows: The top quartile performers in each industry group (using the Global Industry Classification Standard: GICS) are identified. Benchmark SVT levels for each industry are established based on these top performers’ historic SVT. Regression analyses are run on each industry group to identify the variables most strongly correlated to SVT. The benchmark industry SVT level is then adjusted upwards or downwards for the specific company by plugging the company-specific performance measures, size, and cash compensation into the industry cap equations to arrive at the company’s benchmark.22
Three-Year Value-Adjusted Burn Rate
A “Value-Adjusted Burn Rate” is used for stock plan evaluations. Value-Adjusted Burn Rate benchmarks are calculated as the greater of: (1) an industry-specific threshold based on three-year burn rates within the company’s GICS group segmented by S&P 500, Russell 3000 index (less the S&P 500) and non-Russell 3000 index; and (2) a de minimis threshold established separately for each of the S&P 500, the Russell 3000 index less the S&P 500, and the non-Russell 3000 index. Year-over-year burn-rate benchmark changes will be limited to a predetermined range above or below the prior year’s burn-rate benchmark.
The Value-Adjusted Burn Rate is calculated as follows:
Value-Adjusted Burn Rate = ((# of options * option’s dollar value using a Black-Scholes model) + (# of full-value awards * stock price)) / (Weighted average common shares * stock price).
Liberal Change in Control Definition
Generally vote against equity plans if the plan has a liberal definition of change in control and the equity awards could vest upon such liberal definition of change in control, even though an actual change in control may not occur. Examples of such a definition include, but are not limited to, announcement or commencement of a tender offer, provisions for acceleration upon a “potential” takeover, shareholder approval of a merger or other transactions, or similar language.
22 For plans evaluated under the Equity Plan Scorecard policy, the company’s SVT benchmark is considered along with other factors.
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Vote against plans that expressly permit the repricing or exchange of underwater stock options/stock appreciate rights (SARs) without prior shareholder approval. “Repricing” typically includes the ability to do any of the following:
◾ |
Amend the terms of outstanding options or SARs to reduce the exercise price of such outstanding options or SARs; |
◾ |
Cancel outstanding options or SARs in exchange for options or SARs with an exercise price that is less than the exercise price of the original options or SARs; |
◾ |
Cancel underwater options in exchange for stock awards; or |
◾ |
Provide cash buyouts of underwater options. |
While the above cover most types of repricing, ISS may view other provisions as akin to repricing depending on the facts and circumstances.
Also, vote against or withhold from members of the Compensation Committee who approved repricing (as defined above or otherwise determined by ISS), without prior shareholder approval, even if such repricings are allowed in their equity plan.
Vote against plans that do not expressly prohibit repricing or cash buyout of underwater options without shareholder approval if the company has a history of repricing/buyouts without shareholder approval, and the applicable listing standards would not preclude them from doing so.
Problematic Pay Practices or Significant Pay-for-Performance Disconnect
If the equity plan on the ballot is a vehicle for problematic pay practices, vote against the plan.
ISS may recommend a vote against the equity plan if the plan is determined to be a vehicle for pay-for-performance misalignment. Considerations in voting against the equity plan may include, but are not limited to:
◾ |
Severity of the pay-for-performance misalignment; |
◾ |
Whether problematic equity grant practices are driving the misalignment; and/or |
◾ |
Whether equity plan awards have been heavily concentrated to the CEO and/or the other NEOs. |
Amending Cash and Equity Plans (including Approval for Tax Deductibility (162(m))
General Recommendation: Vote case-by-case on amendments to cash and equity incentive plans.
Generally vote for proposals to amend executive cash, stock, or cash and stock incentive plans if the proposal:
◾ |
Addresses administrative features only; or |
◾ |
Seeks approval for Section 162(m) purposes only, and the plan administering committee consists entirely of independent directors, per ISS’ Classification of Directors. Note that if the company is presenting the plan to shareholders for the first time for any reason (including after the company’s initial public offering), or if the proposal is bundled with other material plan amendments, then the recommendation will be case-by-case (see below). |
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Vote against proposals to amend executive cash, stock, or cash and stock incentive plans if the proposal:
◾ |
Seeks approval for Section 162(m) purposes only, and the plan administering committee does not consist entirely of independent directors, per ISS’ Classification of Directors. |
Vote case-by-case on all other proposals to amend cash incentive plans. This includes plans presented to shareholders for the first time after the company’s IPO and/or proposals that bundle material amendment(s) other than those for Section 162(m) purposes.
Vote case-by-case on all other proposals to amend equity incentive plans, considering the following:
◾ |
If the proposal requests additional shares and/or the amendments include a term extension or addition of full value awards as an award type, the recommendation will be based on the Equity Plan Scorecard evaluation as well as an analysis of the overall impact of the amendments. |
◾ |
If the plan is being presented to shareholders for the first time (including after the company’s IPO), whether or not additional shares are being requested, the recommendation will be based on the Equity Plan Scorecard evaluation as well as an analysis of the overall impact of any amendments. |
◾ |
If there is no request for additional shares and the amendments do not include a term extension or addition of full value awards as an award type, then the recommendation will be based entirely on an analysis of the overall impact of the amendments, and the EPSC evaluation will be shown only for informational purposes. |
In the first two case-by-case evaluation scenarios, the EPSC evaluation/score is the more heavily weighted consideration.
Specific Treatment of Certain Award Types in Equity Plan Evaluations
Options that have Dividend Equivalent Rights (DERs) associated with them will have a higher calculated award value than those without DERs under the binomial model, based on the value of these dividend streams. The higher value will be applied to new shares, shares available under existing plans, and shares awarded but not exercised per the plan specifications. DERS transfer more shareholder equity to employees and non-employee directors and this cost should be captured.
Operating Partnership (OP) Units in Equity Plan Analysis of Real Estate Investment Trusts (REITs)
For Real Estate Investment Trusts (REITS), include the common shares issuable upon conversion of outstanding Operating Partnership (OP) units in the share count for the purposes of determining: (1) market capitalization in the Shareholder Value Transfer (SVT) analysis and (2) shares outstanding in the burn rate analysis.
General Recommendation: Vote for proposals to implement a 401(k) savings plan for employees.
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Employee Stock Ownership Plans (ESOPs)
General Recommendation: Vote for proposals to implement an ESOP or increase authorized shares for existing ESOPs, unless the number of shares allocated to the ESOP is excessive (more than five percent of outstanding shares).
Employee Stock Purchase Plans—Qualified Plans
General Recommendation: Vote case-by-case on qualified employee stock purchase plans. Vote for employee stock purchase plans where all of the following apply:
◾ |
Purchase price is at least 85 percent of fair market value; |
◾ |
Offering period is 27 months or less; and |
◾ |
The number of shares allocated to the plan is 10 percent or less of the outstanding shares. |
Vote against qualified employee stock purchase plans where when the plan features do not meet all of the above criteria.
Employee Stock Purchase Plans—Non-Qualified Plans
General Recommendation: Vote case-by-case on nonqualified employee stock purchase plans. Vote for nonqualified employee stock purchase plans with all the following features:
◾ |
Broad-based participation; |
◾ |
Limits on employee contribution, which may be a fixed dollar amount or expressed as a percent of base salary; |
◾ |
Company matching contribution up to 25 percent of employee’s contribution, which is effectively a discount of 20 percent from market value; and |
◾ |
No discount on the stock price on the date of purchase when there is a company matching contribution. |
Vote against nonqualified employee stock purchase plans when the plan features do not meet all of the above criteria. If the matching contribution or effective discount exceeds the above, ISS may evaluate the SVT cost of the plan as part of the assessment.
Option Exchange Programs/Repricing Options
General Recommendation: Vote case-by-case on management proposals seeking approval to exchange/reprice options taking into consideration:
◾ |
Historic trading patterns—the stock price should not be so volatile that the options are likely to be back “in-the-money” over the near term; |
◾ |
Rationale for the re-pricing—was the stock price decline beyond management’s control?; |
◾ |
Is this a value-for-value exchange?; |
◾ |
Are surrendered stock options added back to the plan reserve?; |
◾ |
Timing—repricing should occur at least one year out from any precipitous drop in company’s stock price; |
◾ |
Option vesting—does the new option vest immediately or is there a black-out period?; |
◾ |
Term of the option—the term should remain the same as that of the replaced option; |
◾ |
Exercise price—should be set at fair market or a premium to market; |
◾ |
Participants—executive officers and directors must be excluded. |
If the surrendered options are added back to the equity plans for re-issuance, then also take into consideration the company’s total cost of equity plans and its three-year average burn rate.
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In addition to the above considerations, evaluate the intent, rationale, and timing of the repricing proposal. The proposal should clearly articulate why the board is choosing to conduct an exchange program at this point in time. Repricing underwater options after a recent precipitous drop in the company’s stock price demonstrates poor timing and warrants additional scrutiny. Also, consider the terms of the surrendered options, such as the grant date, exercise price and vesting schedule. Grant dates of surrendered options should be far enough back (two to three years) so as not to suggest that repricings are being done to take advantage of short-term downward price movements. Similarly, the exercise price of surrendered options should be above the 52-week high for the stock price.
Vote for shareholder proposals to put option repricings to a shareholder vote.
General Recommendation: Vote case-by-case on plans that provide participants with the option of taking all or a portion of their cash compensation in the form of stock.
Vote for non-employee director-only equity plans that provide a dollar-for-dollar cash-for-stock exchange.
Vote case-by-case on plans which do not provide a dollar-for-dollar cash for stock exchange. In cases where the exchange is not dollar-for-dollar, the request for new or additional shares for such equity program will be considered using the binomial option pricing model. In an effort to capture the total cost of total compensation, ISS will not make any adjustments to carve out the in-lieu-of cash compensation.
Transfer Stock Option (TSO) Programs
General Recommendation: One-time Transfers: Vote against or withhold from compensation committee members if they fail to submit one-time transfers to shareholders for approval.
Vote case-by-case on one-time transfers. Vote for if:
◾ |
Executive officers and non-employee directors are excluded from participating; |
◾ |
Stock options are purchased by third-party financial institutions at a discount to their fair value using option pricing models such as Black-Scholes or a Binomial Option Valuation or other appropriate financial models; and |
◾ |
There is a two-year minimum holding period for sale proceeds (cash or stock) for all participants. |
Additionally, management should provide a clear explanation of why options are being transferred to a third-party institution and whether the events leading up to a decline in stock price were beyond management’s control. A review of the company’s historic stock price volatility should indicate if the options are likely to be back “in-the-money” over the near term.
Ongoing TSO program: Vote against equity plan proposals if the details of ongoing TSO programs are not provided to shareholders. Since TSOs will be one of the award types under a stock plan, the ongoing TSO program, structure, and mechanics must be disclosed to shareholders. The specific criteria to be considered in evaluating these proposals include, but not limited, to the following:
◾ |
Eligibility; |
◾ |
Vesting; |
◾ |
Bid-price; |
◾ |
Term of options; |
◾ |
Cost of the program and impact of the TSOs on company’s total option expense; and |
◾ |
Option repricing policy. |
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Amendments to existing plans that allow for introduction of transferability of stock options should make clear that only options granted post-amendment shall be transferable.
Shareholder Ratification of Director Pay Programs
General Recommendation: Vote case-by-case on management proposals seeking ratification of non-employee director compensation, based on the following factors:
◾ |
If the equity plan under which non-employee director grants are made is on the ballot, whether or not it warrants support; and |
◾ |
An assessment of the following qualitative factors: |
◾ |
The relative magnitude of director compensation as compared to companies of a similar profile; |
◾ |
The presence of problematic pay practices relating to director compensation; |
◾ |
Director stock ownership guidelines and holding requirements; |
◾ |
Equity award vesting schedules; |
◾ |
The mix of cash and equity-based compensation; |
◾ |
Meaningful limits on director compensation; |
◾ |
The availability of retirement benefits or perquisites; and |
◾ |
The quality of disclosure surrounding director compensation. |
Equity Plans for Non-Employee Directors
General Recommendation: Vote case-by-case on compensation plans for non-employee directors, based on:
◾ |
The total estimated cost of the company’s equity plans relative to industry/market cap peers, measured by the company’s estimated Shareholder Value Transfer (SVT) based on new shares requested plus shares remaining for future grants, plus outstanding unvested/unexercised grants; |
◾ |
The company’s three-year burn rate relative to its industry/market cap peers (in certain circumstances); and |
◾ |
The presence of any egregious plan features (such as an option repricing provision or liberal CIC vesting risk). |
On occasion, non-employee director stock plans will exceed the plan cost or burn-rate benchmarks when combined with employee or executive stock plans. In such cases, vote case-by-case on the plan taking into consideration the following qualitative factors:
◾ |
The relative magnitude of director compensation as compared to companies of a similar profile; |
◾ |
The presence of problematic pay practices relating to director compensation; |
◾ |
Director stock ownership guidelines and holding requirements; |
◾ |
Equity award vesting schedules; |
◾ |
The mix of cash and equity-based compensation; |
◾ |
Meaningful limits on director compensation; |
◾ |
The availability of retirement benefits or perquisites; and |
◾ |
The quality of disclosure surrounding director compensation. |
Non-Employee Director Retirement Plans
General Recommendation: Vote against retirement plans for non-employee directors. Vote for shareholder proposals to eliminate retirement plans for non-employee directors.
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Shareholder Proposals on Compensation
Bonus Banking/Bonus Banking “Plus”
General Recommendation: Vote case-by-case on proposals seeking deferral of a portion of annual bonus pay, with ultimate payout linked to sustained results for the performance metrics on which the bonus was earned (whether for the named executive officers or a wider group of employees), taking into account the following factors:
◾ |
The company’s past practices regarding equity and cash compensation; |
◾ |
Whether the company has a holding period or stock ownership requirements in place, such as a meaningful retention ratio (at least 50 percent for full tenure); and |
◾ |
Whether the company has a rigorous claw-back policy in place. |
Compensation Consultants—Disclosure of Board or Company’s Utilization
General Recommendation: Generally vote for shareholder proposals seeking disclosure regarding the company, board, or compensation committee’s use of compensation consultants, such as company name, business relationship(s), and fees paid.
Disclosure/Setting Levels or Types of Compensation for Executives and Directors
General Recommendation: Generally vote for shareholder proposals seeking additional disclosure of executive and director pay information, provided the information requested is relevant to shareholders’ needs, would not put the company at a competitive disadvantage relative to its industry, and is not unduly burdensome to the company.
Generally vote against shareholder proposals seeking to set absolute levels on compensation or otherwise dictate the amount or form of compensation (such as types of compensation elements or specific metrics) to be used for executive or directors.
Generally vote against shareholder proposals that mandate a minimum amount of stock that directors must own in order to qualify as a director or to remain on the board.
Vote case-by-case on all other shareholder proposals regarding executive and director pay, taking into account relevant factors, including but not limited to: company performance, pay level and design versus peers, history of compensation concerns or pay-for-performance disconnect, and/or the scope and prescriptive nature of the proposal.
Golden Coffins/Executive Death Benefits
General Recommendation: Generally vote for proposals calling for companies to adopt a policy of obtaining shareholder approval for any future agreements and corporate policies that could oblige the company to make payments or awards following the death of a senior executive in the form of unearned salary or bonuses, accelerated vesting or the continuation in force of unvested equity grants, perquisites and other payments or awards made in lieu of compensation. This would not apply to any benefit programs or equity plan proposals for which the broad-based employee population is eligible.
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Hold Equity Past Retirement or for a Significant Period of Time
General Recommendation: Vote case-by-case on shareholder proposals asking companies to adopt policies requiring senior executive officers to retain a portion of net shares acquired through compensation plans. The following factors will be taken into account:
◾ |
The percentage/ratio of net shares required to be retained; |
◾ |
The time period required to retain the shares; |
◾ |
Whether the company has equity retention, holding period, and/or stock ownership requirements in place and the robustness of such requirements; |
◾ |
Whether the company has any other policies aimed at mitigating risk taking by executives; |
◾ |
Executives’ actual stock ownership and the degree to which it meets or exceeds the proponent’s suggested holding period/retention ratio or the company’s existing requirements; and |
◾ |
Problematic pay practices, current and past, which may demonstrate a short-term versus long-term focus. |
General Recommendation: Vote case-by-case on proposals calling for an analysis of the pay disparity between corporate executives and other non-executive employees. The following factors will be considered:
◾ |
The company’s current level of disclosure of its executive compensation setting process, including how the company considers pay disparity; |
◾ |
If any problematic pay practices or pay-for-performance concerns have been identified at the company; and |
◾ |
The level of shareholder support for the company’s pay programs. |
Generally vote against proposals calling for the company to use the pay disparity analysis or pay ratio in a specific way to set or limit executive pay.
Pay for Performance/Performance-Based Awards
General Recommendation: Vote case-by-case on shareholder proposals requesting that a significant amount of future long-term incentive compensation awarded to senior executives shall be performance-based and requesting that the board adopt and disclose challenging performance metrics to shareholders, based on the following analytical steps:
◾ |
First, vote for shareholder proposals advocating the use of performance-based equity awards, such as performance contingent options or restricted stock, indexed options, or premium-priced options, unless the proposal is overly restrictive or if the company has demonstrated that it is using a “substantial” portion of performance-based awards for its top executives. Standard stock options and performance-accelerated awards do not meet the criteria to be considered as performance-based awards. Further, premium-priced options should have a meaningful premium to be considered performance-based awards. |
◾ |
Second, assess the rigor of the company’s performance-based equity program. If the bar set for the performance-based program is too low based on the company’s historical or peer group comparison, generally vote for the proposal. Furthermore, if target performance results in an above target payout, vote for the shareholder proposal due to program’s poor design. If the company does not disclose the performance metric of the performance-based equity program, vote for the shareholder proposal regardless of the outcome of the first step to the test. |
In general, vote for the shareholder proposal if the company does not meet both of the above two steps.
W W W . I S S G O V E R N A N C E . C O M | E-58 | 58 of 81 |
General Recommendation: Vote case-by-case on shareholder proposals that request the board establish a pay-for-superior performance standard in the company’s executive compensation plan for senior executives. These proposals generally include the following principles:
◾ |
Set compensation targets for the plan’s annual and long-term incentive pay components at or below the peer group median; |
◾ |
Deliver a majority of the plan’s target long-term compensation through performance-vested, not simply time-vested, equity awards; |
◾ |
Provide the strategic rationale and relative weightings of the financial and non-financial performance metrics or criteria used in the annual and performance-vested long-term incentive components of the plan; |
◾ |
Establish performance targets for each plan financial metric relative to the performance of the company’s peer companies; |
◾ |
Limit payment under the annual and performance-vested long-term incentive components of the plan to when the company’s performance on its selected financial performance metrics exceeds peer group median performance. |
Consider the following factors in evaluating this proposal:
◾ |
What aspects of the company’s annual and long-term equity incentive programs are performance driven? |
◾ |
If the annual and long-term equity incentive programs are performance driven, are the performance criteria and hurdle rates disclosed to shareholders or are they benchmarked against a disclosed peer group? |
◾ |
Can shareholders assess the correlation between pay and performance based on the current disclosure? |
◾ |
What type of industry and stage of business cycle does the company belong to? |
Pre-Arranged Trading Plans (10b5-1 Plans)
General Recommendation: Generally vote for shareholder proposals calling for the addition of certain safeguards in prearranged trading plans (10b5-1 plans) for executives. Safeguards may include:
◾ |
Adoption, amendment, or termination of a 10b5-1 Plan must be disclosed in a Form 8-K; |
◾ |
Amendment or early termination of a 10b5-1 Plan allowed only under extraordinary circumstances, as determined by the board; |
◾ |
Request that a certain number of days that must elapse between adoption or amendment of a 10b5-1 Plan and initial trading under the plan; |
◾ |
Reports on Form 4 must identify transactions made pursuant to a 10b5-1 Plan; |
◾ |
An executive may not trade in company stock outside the 10b5-1 Plan; |
◾ |
Trades under a 10b5-1 Plan must be handled by a broker who does not handle other securities transactions for the executive. |
Prohibit Outside CEOs from Serving on Compensation Committees
General Recommendation: Generally vote against proposals seeking a policy to prohibit any outside CEO from serving on a company’s compensation committee, unless the company has demonstrated problematic pay practices that raise concerns about the performance and composition of the committee.
W W W . I S S G O V E R N A N C E . C O M | E-59 | 59 of 81 |
Recoupment of Incentive or Stock Compensation in Specified Circumstances
General Recommendation: Vote case-by-case on proposals to recoup incentive cash or stock compensation made to senior executives if it is later determined that the figures upon which incentive compensation is earned turn out to have been in error, or if the senior executive has breached company policy or has engaged in misconduct that may be significantly detrimental to the company’s financial position or reputation, or if the senior executive failed to manage or monitor risks that subsequently led to significant financial or reputational harm to the company. Many companies have adopted policies that permit recoupment in cases where an executive’s fraud, misconduct, or negligence significantly contributed to a restatement of financial results that led to the awarding of unearned incentive compensation. However, such policies may be narrow given that not all misconduct or negligence may result in significant financial restatements. Misconduct, negligence, or lack of sufficient oversight by senior executives may lead to significant financial loss or reputational damage that may have long-lasting impact.
In considering whether to support such shareholder proposals, ISS will take into consideration the following factors:
◾ |
If the company has adopted a formal recoupment policy; |
◾ |
The rigor of the recoupment policy focusing on how and under what circumstances the company may recoup incentive or stock compensation; |
◾ |
Whether the company has chronic restatement history or material financial problems; |
◾ |
Whether the company’s policy substantially addresses the concerns raised by the proponent; |
◾ |
Disclosure of recoupment of incentive or stock compensation from senior executives or lack thereof; or |
◾ |
Any other relevant factors. |
Severance Agreements for Executives/Golden Parachutes
General Recommendation: Vote for shareholder proposals requiring that golden parachutes or executive severance agreements be submitted for shareholder ratification, unless the proposal requires shareholder approval prior to entering into employment contracts.
Vote case-by-case on proposals to ratify or cancel golden parachutes. An acceptable parachute should include, but is not limited to, the following:
◾ |
The triggering mechanism should be beyond the control of management; |
◾ |
The amount should not exceed three times base amount (defined as the average annual taxable W-2 compensation during the five years prior to the year in which the change of control occurs); |
◾ |
Change-in-control payments should be double-triggered, i.e., (1) after a change in control has taken place, and (2) termination of the executive as a result of the change in control. Change in control is defined as a change in the company ownership structure. |
Share Buyback Impact on Incentive Program Metrics
General Recommendation: Vote case-by-case on proposals requesting the company exclude the impact of share buybacks from the calculation of incentive program metrics, considering the following factors:
◾ |
The frequency and timing of the company’s share buybacks; |
◾ |
The use of per-share metrics in incentive plans; |
◾ |
The effect of recent buybacks on incentive metric results and payouts; and |
◾ |
Whether there is any indication of metric result manipulation. |
W W W . I S S G O V E R N A N C E . C O M | E-60 | 60 of 81 |
Supplemental Executive Retirement Plans (SERPs)
General Recommendation: Generally vote for shareholder proposals requesting to put extraordinary benefits contained in SERP agreements to a shareholder vote unless the company’s executive pension plans do not contain excessive benefits beyond what is offered under employee-wide plans.
Generally vote for shareholder proposals requesting to limit the executive benefits provided under the company’s supplemental executive retirement plan (SERP) by limiting covered compensation to a senior executive’s annual salary or those pay elements covered for the general employee population.
General Recommendation: Generally vote for proposals calling for companies to adopt a policy of not providing tax gross-up payments to executives, except in situations where gross-ups are provided pursuant to a plan, policy, or arrangement applicable to management employees of the company, such as a relocation or expatriate tax equalization policy.
Termination of Employment Prior to Severance Payment/Eliminating Accelerated Vesting of Unvested Equity
General Recommendation: Vote case-by-case on shareholder proposals seeking a policy requiring termination of employment prior to severance payment and/or eliminating accelerated vesting of unvested equity.
The following factors will be considered:
◾ |
The company’s current treatment of equity upon employment termination and/or in change-in-control situations (i.e., vesting is double triggered and/or pro rata, does it allow for the assumption of equity by acquiring company, the treatment of performance shares, etc.); |
◾ |
Current employment agreements, including potential poor pay practices such as gross-ups embedded in those agreements. |
Generally vote for proposals seeking a policy that prohibits automatic acceleration of the vesting of equity awards to senior executives upon a voluntary termination of employment or in the event of a change in control (except for pro rata vesting considering the time elapsed and attainment of any related performance goals between the award date and the change in control).
W W W . I S S G O V E R N A N C E . C O M | E-61 | 61 of 81 |
General Recommendation: Generally vote against proposals to provide management with the authority to adjourn an annual or special meeting absent compelling reasons to support the proposal.
Vote for proposals that relate specifically to soliciting votes for a merger or transaction if supporting that merger or transaction. Vote against proposals if the wording is too vague or if the proposal includes “other business.”
General Recommendation: Vote case-by-case on proposals to reduce quorum requirements for shareholder meetings below a majority of the shares outstanding, taking into consideration:
◾ |
The new quorum threshold requested; |
◾ |
The rationale presented for the reduction; |
◾ |
The market capitalization of the company (size, inclusion in indices); |
◾ |
The company’s ownership structure; |
◾ |
Previous voter turnout or attempts to achieve quorum; |
◾ |
Any provisions or commitments to restore quorum to a majority of shares outstanding, should voter turnout improve sufficiently; and |
◾ |
Other factors as appropriate. |
In general, a quorum threshold kept as close to a majority of shares outstanding as is achievable is preferred.
Vote case-by-case on directors who unilaterally lower the quorum requirements below a majority of the shares outstanding, taking into consideration the factors listed above.
General Recommendation: Vote for bylaw or charter changes that are of a housekeeping nature (updates or corrections).
General Recommendation: Vote for proposals to change the corporate name unless there is compelling evidence that the change would adversely impact shareholder value.
Change Date, Time, or Location of Annual Meeting
General Recommendation: Vote for management proposals to change the date, time, or location of the annual meeting unless the proposed change is unreasonable.
Vote against shareholder proposals to change the date, time, or location of the annual meeting unless the current scheduling or location is unreasonable.
General Recommendation: Vote against proposals to approve other business when it appears as a voting item.
W W W . I S S G O V E R N A N C E . C O M | E-62 | 62 of 81 |
7. Social and Environmental Issues
Global Approach – E&S Shareholder Proposals
ISS applies a common approach globally to evaluating social and environmental proposals which cover a wide range of topics, including consumer and product safety, environment and energy, labor standards and human rights, workplace and board diversity, and corporate political issues. While a variety of factors goes into each analysis, the overall principle guiding all vote recommendations focuses on how the proposal may enhance or protect shareholder value in either the short or long term.
General Recommendation: Generally vote case-by-case, examining primarily whether implementation of the proposal is likely to enhance or protect shareholder value. The following factors will be considered:
◾ |
If the issues presented in the proposal are being appropriately or effectively dealt with through legislation or government regulation; |
◾ |
If the company has already responded in an appropriate and sufficient manner to the issue(s) raised in the proposal; |
◾ |
Whether the proposal’s request is unduly burdensome (scope or timeframe) or overly prescriptive; |
◾ |
The company’s approach compared with any industry standard practices for addressing the issue(s) raised by the proposal; |
◾ |
Whether there are significant controversies, fines, penalties, or litigation associated with the company’s practices related to the issue(s) raised in the proposal; |
◾ |
If the proposal requests increased disclosure or greater transparency, whether reasonable and sufficient information is currently available to shareholders from the company or from other publicly available sources; and |
◾ |
If the proposal requests increased disclosure or greater transparency, whether implementation would reveal proprietary or confidential information that could place the company at a competitive disadvantage. |
General Recommendation: Generally vote against proposals seeking a company’s endorsement of principles that support a particular public policy position. Endorsing a set of principles may require a company to take a stand on an issue that is beyond its own control and may limit its flexibility with respect to future developments.
Management and the board should be afforded the flexibility to make decisions on specific public policy positions based on their own assessment of the most beneficial strategies for the company.
General Recommendation: Generally vote for proposals seeking a report on a company’s animal welfare standards, or animal welfare-related risks, unless:
◾ |
The company has already published a set of animal welfare standards and monitors compliance; |
◾ |
The company’s standards are comparable to industry peers; and |
◾ |
There are no recent significant fines, litigation, or controversies related to the company’s and/or its suppliers’ treatment of animals. |
W W W . I S S G O V E R N A N C E . C O M | E-63 | 63 of 81 |
General Recommendation: Generally vote against proposals to phase out the use of animals in product testing, unless:
◾ |
The company is conducting animal testing programs that are unnecessary or not required by regulation; |
◾ |
The company is conducting animal testing when suitable alternatives are commonly accepted and used by industry peers; or |
◾ |
There are recent, significant fines or litigation related to the company’s treatment of animals. |
General Recommendation: Generally vote against proposals requesting the implementation of Controlled Atmosphere Killing (CAK) methods at company and/or supplier operations unless such methods are required by legislation or generally accepted as the industry standard.
Vote case-by-case on proposals requesting a report on the feasibility of implementing CAK methods at company and/or supplier operations considering the availability of existing research conducted by the company or industry groups on this topic and any fines or litigation related to current animal processing procedures at the company.
Genetically Modified Ingredients
General Recommendation: Generally vote against proposals requesting that a company voluntarily label genetically engineered (GE) ingredients in its products. The labeling of products with GE ingredients is best left to the appropriate regulatory authorities.
Vote case-by-case on proposals asking for a report on the feasibility of labeling products containing GE ingredients, taking into account:
◾ |
The potential impact of such labeling on the company’s business; |
◾ |
The quality of the company’s disclosure on GE product labeling, related voluntary initiatives, and how this disclosure compares with industry peer disclosure; and |
◾ |
Company’s current disclosure on the feasibility of GE product labeling. |
Generally vote against proposals seeking a report on the social, health, and environmental effects of genetically modified organisms (GMOs). Studies of this sort are better undertaken by regulators and the scientific community.
Generally vote against proposals to eliminate GE ingredients from the company’s products, or proposals asking for reports outlining the steps necessary to eliminate GE ingredients from the company’s products. Such decisions are more appropriately made by management with consideration of current regulations.
Reports on Potentially Controversial Business/Financial Practices
General Recommendation: Vote case-by-case on requests for reports on a company’s potentially controversial business or financial practices or products, taking into account:
◾ |
Whether the company has adequately disclosed mechanisms in place to prevent abuses; |
W W W . I S S G O V E R N A N C E . C O M | E-64 | 64 of 81 |
◾ |
Whether the company has adequately disclosed the financial risks of the products/practices in question; |
◾ |
Whether the company has been subject to violations of related laws or serious controversies; and |
◾ |
Peer companies’ policies/practices in this area. |
Pharmaceutical Pricing, Access to Medicines, and Prescription Drug Reimportation
General Recommendation: Generally vote against proposals requesting that companies implement specific price restraints on pharmaceutical products unless the company fails to adhere to legislative guidelines or industry norms in its product pricing practices.
Vote case-by-case on proposals requesting that a company report on its product pricing or access to medicine policies, considering:
◾ |
The potential for reputational, market, and regulatory risk exposure; |
◾ |
Existing disclosure of relevant policies; |
◾ |
Deviation from established industry norms; |
◾ |
Relevant company initiatives to provide research and/or products to disadvantaged consumers; |
◾ |
Whether the proposal focuses on specific products or geographic regions; |
◾ |
The potential burden and scope of the requested report; |
◾ |
Recent significant controversies, litigation, or fines at the company. |
Generally vote for proposals requesting that a company report on the financial and legal impact of its prescription drug reimportation policies unless such information is already publicly disclosed.
Generally vote against proposals requesting that companies adopt specific policies to encourage or constrain prescription drug reimportation. Such matters are more appropriately the province of legislative activity and may place the company at a competitive disadvantage relative to its peers.
Product Safety and Toxic/Hazardous Materials
General Recommendation: Generally vote for proposals requesting that a company report on its policies, initiatives/procedures, and oversight mechanisms related to toxic/hazardous materials or product safety in its supply chain, unless:
◾ |
The company already discloses similar information through existing reports such as a supplier code of conduct and/or a sustainability report; |
◾ |
The company has formally committed to the implementation of a toxic/hazardous materials and/or product safety and supply chain reporting and monitoring program based on industry norms or similar standards within a specified time frame; and |
◾ |
The company has not been recently involved in relevant significant controversies, fines, or litigation. |
Vote case-by-case on resolutions requesting that companies develop a feasibility assessment to phase-out of certain toxic/hazardous materials, or evaluate and disclose the potential financial and legal risks associated with utilizing certain materials, considering:
◾ |
The company’s current level of disclosure regarding its product safety policies, initiatives, and oversight mechanisms; |
◾ |
Current regulations in the markets in which the company operates; and |
◾ |
Recent significant controversies, litigation, or fines stemming from toxic/hazardous materials at the company. |
W W W . I S S G O V E R N A N C E . C O M | E-65 | 65 of 81 |
Generally vote against resolutions requiring that a company reformulate its products.
General Recommendation: Vote case-by-case on resolutions regarding the advertisement of tobacco products, considering:
◾ |
Recent related fines, controversies, or significant litigation; |
◾ |
Whether the company complies with relevant laws and regulations on the marketing of tobacco; |
◾ |
Whether the company’s advertising restrictions deviate from those of industry peers; |
◾ |
Whether the company entered into the Master Settlement Agreement, which restricts marketing of tobacco to youth; and |
◾ |
Whether restrictions on marketing to youth extend to foreign countries. |
Vote case-by-case on proposals regarding second-hand smoke, considering;
◾ |
Whether the company complies with all laws and regulations; |
◾ |
The degree that voluntary restrictions beyond those mandated by law might hurt the company’s competitiveness; and |
◾ |
The risk of any health-related liabilities. |
Generally vote against resolutions to cease production of tobacco-related products, to avoid selling products to tobacco companies, to spin-off tobacco-related businesses, or prohibit investment in tobacco equities. Such business decisions are better left to company management or portfolio managers.
Generally vote against proposals regarding tobacco product warnings. Such decisions are better left to public health authorities.
Say on Climate (SoC) Management Proposals
General Recommendation: Vote case-by-case on management proposals that request shareholders to approve the company’s climate transition action plan23, taking into account the completeness and rigor of the plan. Information that will be considered where available includes the following:
◾ |
The extent to which the company’s climate related disclosures are in line with TCFD recommendations and meet other market standards; |
◾ |
Disclosure of its operational and supply chain GHG emissions (Scopes 1, 2, and 3); |
◾ |
The completeness and rigor of company’s short-, medium-, and long-term targets for reducing operational and supply chain GHG emissions (Scopes 1, 2, and 3 if relevant); |
◾ |
Whether the company has sought and received third-party approval that its targets are science-based; |
◾ |
Whether the company has made a commitment to be “net zero” for operational and supply chain emissions (Scopes 1, 2, and 3) by 2050; |
◾ |
Whether the company discloses a commitment to report on the implementation of its plan in subsequent years; |
◾ |
Whether the company’s climate data has received third-party assurance; |
23 Variations of this request also include climate transition related ambitions, or commitment to reporting on the implementation of a climate plan.
W W W . I S S G O V E R N A N C E . C O M | E-66 | 66 of 81 |
◾ |
Disclosure of how the company’s lobbying activities and its capital expenditures align with company strategy; |
◾ |
Whether there are specific industry decarbonization challenges; and |
◾ |
The company’s related commitment, disclosure, and performance compared to its industry peers. |
Say on Climate (SoC) Shareholder Proposals
General Recommendation: Vote case-by-case on shareholder proposals that request the company to disclose a report providing its GHG emissions levels and reduction targets and/or its upcoming/approved climate transition action plan and provide shareholders the opportunity to express approval or disapproval of its GHG emissions reduction plan, taking into account information such as the following:
◾ |
The completeness and rigor of the company’s climate-related disclosure; |
◾ |
The company’s actual GHG emissions performance; |
◾ |
Whether the company has been the subject of recent, significant violations, fines, litigation, or controversy related to its GHG emissions; and |
◾ |
Whether the proposal’s request is unduly burdensome (scope or timeframe) or overly prescriptive. |
Climate Change/Greenhouse Gas (GHG) Emissions
General Recommendation: Generally vote for resolutions requesting that a company disclose information on the financial, physical, or regulatory risks it faces related to climate change on its operations and investments or on how the company identifies, measures, and manages such risks, considering:
◾ |
Whether the company already provides current, publicly-available information on the impact that climate change may have on the company as well as associated company policies and procedures to address related risks and/or opportunities; |
◾ |
The company’s level of disclosure compared to industry peers; and |
◾ |
Whether there are significant controversies, fines, penalties, or litigation associated with the company’s climate change-related performance. |
Generally vote for proposals requesting a report on greenhouse gas (GHG) emissions from company operations and/or products and operations, unless:
◾ |
The company already discloses current, publicly-available information on the impacts that GHG emissions may have on the company as well as associated company policies and procedures to address related risks and/or opportunities; |
◾ |
The company’s level of disclosure is comparable to that of industry peers; and |
◾ |
There are no significant, controversies, fines, penalties, or litigation associated with the company’s GHG emissions. |
Vote case-by-case on proposals that call for the adoption of GHG reduction goals from products and operations, taking into account:
◾ |
Whether the company provides disclosure of year-over-year GHG emissions performance data; |
◾ |
Whether company disclosure lags behind industry peers; |
◾ |
The company’s actual GHG emissions performance; |
◾ |
The company’s current GHG emission policies, oversight mechanisms, and related initiatives; and |
◾ |
Whether the company has been the subject of recent, significant violations, fines, litigation, or controversy related to GHG emissions. |
W W W . I S S G O V E R N A N C E . C O M | E-67 | 67 of 81 |
General Recommendation: Generally vote for proposals requesting that a company report on its energy efficiency policies, unless:
◾ |
The company complies with applicable energy efficiency regulations and laws, and discloses its participation in energy efficiency policies and programs, including disclosure of benchmark data, targets, and performance measures; or |
◾ |
The proponent requests adoption of specific energy efficiency goals within specific timelines. |
General Recommendation: Generally vote for requests for reports on the feasibility of developing renewable energy resources unless the report would be duplicative of existing disclosure or irrelevant to the company’s line of business.
Generally vote against proposals requesting that the company invest in renewable energy resources. Such decisions are best left to management’s evaluation of the feasibility and financial impact that such programs may have on the company.
Generally vote against proposals that call for the adoption of renewable energy goals, taking into account:
◾ |
The scope and structure of the proposal; |
◾ |
The company’s current level of disclosure on renewable energy use and GHG emissions; and |
◾ |
The company’s disclosure of policies, practices, and oversight implemented to manage GHG emissions and mitigate climate change risks. |
General Recommendation: Generally vote for requests for reports on a company’s efforts to diversify the board, unless:
◾ |
The gender and racial minority representation of the company’s board is reasonably inclusive in relation to companies of similar size and business; and |
◾ |
The board already reports on its nominating procedures and gender and racial minority initiatives on the board and within the company. |
Vote case-by-case on proposals asking a company to increase the gender and racial minority representation on its board, taking into account:
◾ |
The degree of existing gender and racial minority diversity on the company’s board and among its executive officers; |
◾ |
The level of gender and racial minority representation that exists at the company’s industry peers; |
◾ |
The company’s established process for addressing gender and racial minority board representation; |
◾ |
Whether the proposal includes an overly prescriptive request to amend nominating committee charter language; |
W W W . I S S G O V E R N A N C E . C O M | E-68 | 68 of 81 |
◾ |
The independence of the company’s nominating committee; |
◾ |
Whether the company uses an outside search firm to identify potential director nominees; and |
◾ |
Whether the company has had recent controversies, fines, or litigation regarding equal employment practices. |
General Recommendation: Generally vote for proposals requesting a company disclose its diversity policies or initiatives, or proposals requesting disclosure of a company’s comprehensive workforce diversity data, including requests for EEO-1 data, unless:
◾ |
The company publicly discloses equal opportunity policies and initiatives in a comprehensive manner; |
◾ |
The company already publicly discloses comprehensive workforce diversity data; and |
◾ |
The company has no recent significant EEO-related violations or litigation. |
Generally vote against proposals seeking information on the diversity efforts of suppliers and service providers. Such requests may pose a significant burden on the company.
Gender Identity, Sexual Orientation, and Domestic Partner Benefits
General Recommendation: Generally vote for proposals seeking to amend a company’s EEO statement or diversity policies to prohibit discrimination based on sexual orientation and/or gender identity, unless the change would be unduly burdensome.
Generally vote against proposals to extend company benefits to, or eliminate benefits from, domestic partners. Decisions regarding benefits should be left to the discretion of the company.
Gender, Race/Ethnicity Pay Gap
General Recommendation: Vote case-by-case on requests for reports on a company’s pay data by gender or race/ ethnicity, or a report on a company’s policies and goals to reduce any gender or race/ethnicity pay gaps, taking into account:
◾ |
The company’s current policies and disclosure related to both its diversity and inclusion policies and practices and its compensation philosophy on fair and equitable compensation practices; |
◾ |
Whether the company has been the subject of recent controversy, litigation, or regulatory actions related to gender, race, or ethnicity pay gap issues; |
◾ |
The company’s disclosure regarding gender, race, or ethnicity pay gap policies or initiatives compared to its industry peers; and |
◾ |
Local laws regarding categorization of race and/or ethnicity and definitions of ethnic and/or racial minorities. |
Racial Equity and/or Civil Rights Audit Guidelines
General Recommendation: Vote case-by-case on proposals asking a company to conduct an independent racial equity and/or civil rights audit, taking into account:
◾ |
The company’s established process or framework for addressing racial inequity and discrimination internally; |
◾ |
Whether the company adequately discloses workforce diversity and inclusion metrics and goals; |
◾ |
Whether the company has issued a public statement related to its racial justice efforts in recent years, or has committed to internal policy review; |
W W W . I S S G O V E R N A N C E . C O M | E-69 | 69 of 81 |
◾ |
Whether the company has engaged with impacted communities, stakeholders, and civil rights experts; |
◾ |
The company’s track record in recent years of racial justice measures and outreach externally; and |
◾ |
Whether the company has been the subject of recent controversy, litigation, or regulatory actions related to racial inequity or discrimination. |
Environment and Sustainability
General Recommendation: Vote case-by-case on requests for workplace safety reports, including reports on accident risk reduction efforts, taking into account:
◾ |
The company’s current level of disclosure of its workplace health and safety performance data, health and safety management policies, initiatives, and oversight mechanisms; |
◾ |
The nature of the company’s business, specifically regarding company and employee exposure to health and safety risks; |
◾ |
Recent significant controversies, fines, or violations related to workplace health and safety; and |
◾ |
The company’s workplace health and safety performance relative to industry peers. |
Vote case-by-case on resolutions requesting that a company report on safety and/or security risks associated with its operations and/or facilities, considering:
◾ |
The company’s compliance with applicable regulations and guidelines; |
◾ |
The company’s current level of disclosure regarding its security and safety policies, procedures, and compliance monitoring; and |
◾ |
The existence of recent, significant violations, fines, or controversy regarding the safety and security of the company’s operations and/or facilities. |
General Environmental Proposals and Community Impact Assessments
General Recommendation: Vote case-by-case on requests for reports on policies and/or the potential (community) social and/or environmental impact of company operations, considering:
◾ |
Current disclosure of applicable policies and risk assessment report(s) and risk management procedures; |
◾ |
The impact of regulatory non-compliance, litigation, remediation, or reputational loss that may be associated with failure to manage the company’s operations in question, including the management of relevant community and stakeholder relations; |
◾ |
The nature, purpose, and scope of the company’s operations in the specific region(s); |
◾ |
The degree to which company policies and procedures are consistent with industry norms; and |
◾ |
The scope of the resolution. |
General Recommendation: Generally vote for proposals requesting greater disclosure of a company’s (natural gas) hydraulic fracturing operations, including measures the company has taken to manage and mitigate the potential community and environmental impacts of those operations, considering:
◾ |
The company’s current level of disclosure of relevant policies and oversight mechanisms; |
◾ |
The company’s current level of such disclosure relative to its industry peers; |
◾ |
Potential relevant local, state, or national regulatory developments; and |
W W W . I S S G O V E R N A N C E . C O M | E-70 | 70 of 81 |
◾ |
Controversies, fines, or litigation related to the company’s hydraulic fracturing operations. |
General Recommendation: Generally vote for requests for reports on potential environmental damage as a result of company operations in protected regions, unless:
◾ |
Operations in the specified regions are not permitted by current laws or regulations; |
◾ |
The company does not currently have operations or plans to develop operations in these protected regions; or |
◾ |
The company’s disclosure of its operations and environmental policies in these regions is comparable to industry peers. |
General Recommendation: Vote case-by-case on proposals to report on an existing recycling program, or adopt a new recycling program, taking into account:
◾ |
The nature of the company’s business; |
◾ |
The current level of disclosure of the company’s existing related programs; |
◾ |
The timetable and methods of program implementation prescribed by the proposal; |
◾ |
The company’s ability to address the issues raised in the proposal; and |
◾ |
How the company’s recycling programs compare to similar programs of its industry peers. |
General Recommendation: Generally vote for proposals requesting that a company report on its policies, initiatives, and oversight mechanisms related to social, economic, and environmental sustainability, unless:
◾ |
The company already discloses similar information through existing reports or policies such as an environment, health, and safety (EHS) report; a comprehensive code of corporate conduct; and/or a diversity report; or |
◾ |
The company has formally committed to the implementation of a reporting program based on Global Reporting Initiative (GRI) guidelines or a similar standard within a specified time frame. |
General Recommendation: Vote case-by-case on proposals requesting a company report on, or adopt a new policy on, water-related risks and concerns, taking into account:
◾ |
The company’s current disclosure of relevant policies, initiatives, oversight mechanisms, and water usage metrics; |
◾ |
Whether or not the company’s existing water-related policies and practices are consistent with relevant internationally recognized standards and national/local regulations; |
◾ |
The potential financial impact or risk to the company associated with water-related concerns or issues; and |
◾ |
Recent, significant company controversies, fines, or litigation regarding water use by the company and its suppliers. |
W W W . I S S G O V E R N A N C E . C O M | E-71 | 71 of 81 |
General Recommendation: Vote against proposals restricting a company from making charitable contributions. Charitable contributions are generally useful for assisting worthwhile causes and for creating goodwill in the community. In the absence of bad faith, self-dealing, or gross negligence, management should determine which, and if, contributions are in the best interests of the company.
Data Security, Privacy, and Internet Issues
General Recommendation: Vote case-by-case on proposals requesting the disclosure or implementation of data security, privacy, or information access and management policies and procedures, considering:
◾ |
The level of disclosure of company policies and procedures relating to data security, privacy, freedom of speech, information access and management, and Internet censorship; |
◾ |
Engagement in dialogue with governments or relevant groups with respect to data security, privacy, or the free flow of information on the Internet; |
◾ |
The scope of business involvement and of investment in countries whose governments censor or monitor the Internet and other telecommunications; |
◾ |
Applicable market-specific laws or regulations that may be imposed on the company; and |
◾ |
Controversies, fines, or litigation related to data security, privacy, freedom of speech, or Internet censorship. |
ESG Compensation-Related Proposals
General Recommendation: Vote case-by-case on proposals seeking a report or additional disclosure on the company’s approach, policies, and practices on incorporating environmental and social criteria into its executive compensation strategy, considering:
◾ |
The scope and prescriptive nature of the proposal; |
◾ |
The company’s current level of disclosure regarding its environmental and social performance and governance; |
◾ |
The degree to which the board or compensation committee already discloses information on whether it has considered related E&S criteria; and |
◾ |
Whether the company has significant controversies or regulatory violations regarding social or environmental issues. |
Human Rights, Human Capital Management, and International Operations
General Recommendation: Generally vote for proposals requesting a report on company or company supplier labor and/or human rights standards and policies unless such information is already publicly disclosed.
Vote case-by-case on proposals to implement company or company supplier labor and/or human rights standards and policies, considering:
◾ |
The degree to which existing relevant policies and practices are disclosed; |
◾ |
Whether or not existing relevant policies are consistent with internationally recognized standards; |
◾ |
Whether company facilities and those of its suppliers are monitored and how; |
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Company participation in fair labor organizations or other internationally recognized human rights initiatives; |
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Scope and nature of business conducted in markets known to have higher risk of workplace labor/human rights abuse; |
◾ |
Recent, significant company controversies, fines, or litigation regarding human rights at the company or its suppliers; |
◾ |
The scope of the request; and |
◾ |
Deviation from industry sector peer company standards and practices. |
Vote case-by-case on proposals requesting that a company conduct an assessment of the human rights risks in its operations or in its supply chain, or report on its human rights risk assessment process, considering:
◾ |
The degree to which existing relevant policies and practices are disclosed, including information on the implementation of these policies and any related oversight mechanisms; |
◾ |
The company’s industry and whether the company or its suppliers operate in countries or areas where there is a history of human rights concerns; |
◾ |
Recent significant controversies, fines, or litigation regarding human rights involving the company or its suppliers, and whether the company has taken remedial steps; and |
◾ |
Whether the proposal is unduly burdensome or overly prescriptive. |
General Recommendation: Vote case-by-case on requests for a report on a company’s use of mandatory arbitration on employment-related claims, taking into account:
◾ |
The company’s current policies and practices related to the use of mandatory arbitration agreements on workplace claims; |
◾ |
Whether the company has been the subject of recent controversy, litigation, or regulatory actions related to the use of mandatory arbitration agreements on workplace claims; and |
◾ |
The company’s disclosure of its policies and practices related to the use of mandatory arbitration agreements compared to its peers. |
Operations in High-Risk Markets
General Recommendation: Vote case-by-case on requests for a report on a company’s potential financial and reputational risks associated with operations in “high-risk” markets, such as a terrorism-sponsoring state or politically/socially unstable region, taking into account:
◾ |
The nature, purpose, and scope of the operations and business involved that could be affected by social or political disruption; |
◾ |
Current disclosure of applicable risk assessment(s) and risk management procedures; |
◾ |
Compliance with U.S. sanctions and laws; |
◾ |
Consideration of other international policies, standards, and laws; and |
◾ |
Whether the company has been recently involved in recent, significant controversies, fines, or litigation related to its operations in “high-risk” markets. |
General Recommendation: Vote case-by-case on proposals calling for companies to report on the risks associated with outsourcing/plant closures, considering:
◾ |
Controversies surrounding operations in the relevant market(s); |
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◾ |
The value of the requested report to shareholders; |
◾ |
The company’s current level of disclosure of relevant information on outsourcing and plant closure procedures; and |
◾ |
The company’s existing human rights standards relative to industry peers. |
General Recommendation: Vote case-by-case on requests for a report on company actions taken to strengthen policies and oversight to prevent workplace sexual harassment, or a report on risks posed by a company’s failure to prevent workplace sexual harassment, taking into account:
◾ |
The company’s current policies, practices, oversight mechanisms related to preventing workplace sexual harassment; |
◾ |
Whether the company has been the subject of recent controversy, litigation, or regulatory actions related to workplace sexual harassment issues; and |
◾ |
The company’s disclosure regarding workplace sexual harassment policies or initiatives compared to its industry peers. |
General Recommendation: Vote against reports on foreign military sales or offsets. Such disclosures may involve sensitive and confidential information. Moreover, companies must comply with government controls and reporting on foreign military sales.
Generally vote against proposals asking a company to cease production or report on the risks associated with the use of depleted uranium munitions or nuclear weapons components and delivery systems, including disengaging from current and proposed contracts. Such contracts are monitored by government agencies, serve multiple military and non-military uses, and withdrawal from these contracts could have a negative impact on the company’s business.
General Recommendation: Vote case-by-case on proposals requesting information on a company’s lobbying (including direct, indirect, and grassroots lobbying) activities, policies, or procedures, considering:
◾ |
The company’s current disclosure of relevant lobbying policies, and management and board oversight; |
◾ |
The company’s disclosure regarding trade associations or other groups that it supports, or is a member of, that engage in lobbying activities; and |
◾ |
Recent significant controversies, fines, or litigation regarding the company’s lobbying-related activities. |
General Recommendation: Generally vote for proposals requesting greater disclosure of a company’s political contributions and trade association spending policies and activities, considering:
◾ |
The company’s policies, and management and board oversight related to its direct political contributions and payments to trade associations or other groups that may be used for political purposes; |
W W W . I S S G O V E R N A N C E . C O M | E-74 | 74 of 81 |
◾ |
The company’s disclosure regarding its support of, and participation in, trade associations or other groups that may make political contributions; and |
◾ |
Recent significant controversies, fines, or litigation related to the company’s political contributions or political activities. |
Vote against proposals barring a company from making political contributions. Businesses are affected by legislation at the federal, state, and local level; barring political contributions can put the company at a competitive disadvantage.
Vote against proposals to publish in newspapers and other media a company’s political contributions. Such publications could present significant cost to the company without providing commensurate value to shareholders.
Political Expenditures and Lobbying Congruency
General Recommendation: Generally vote case-by-case on proposals requesting greater disclosure of a company’s alignment of political contributions, lobbying, and electioneering spending with a company’s publicly stated values and policies, considering:
◾ |
The company’s policies, management, board oversight, governance processes, and level of disclosure related to direct political contributions, lobbying activities, and payments to trade associations, political action committees, or other groups that may be used for political purposes; |
◾ |
The company’s disclosure regarding: the reasons for its support of candidates for public offices; the reasons for support of and participation in trade associations or other groups that may make political contributions; and other political activities; |
◾ |
Any incongruencies identified between a company’s direct and indirect political expenditures and its publicly stated values and priorities. |
◾ |
Recent significant controversies related to the company’s direct and indirect lobbying, political contributions, or political activities. |
Generally vote case-by-case on proposals requesting comparison of a company’s political spending to objectives that can mitigate material risks for the company, such as limiting global warming.
General Recommendation: Generally vote against proposals asking a company to affirm political nonpartisanship in the workplace, so long as:
◾ |
There are no recent, significant controversies, fines, or litigation regarding the company’s political contributions or trade association spending; and |
◾ |
The company has procedures in place to ensure that employee contributions to company-sponsored political action committees (PACs) are strictly voluntary and prohibit coercion. |
Vote against proposals asking for a list of company executives, directors, consultants, legal counsels, lobbyists, or investment bankers that have prior government service and whether such service had a bearing on the business of the company. Such a list would be burdensome to prepare without providing any meaningful information to shareholders.
W W W . I S S G O V E R N A N C E . C O M | E-75 | 75 of 81 |
General Recommendation: Vote case-by-case on the election of directors and trustees, following the same guidelines for uncontested directors for public company shareholder meetings. However, mutual fund boards do not usually have compensation committees, so do not withhold for the lack of this committee.
Closed End Funds- Unilateral Opt-In to Control Share Acquisition Statutes
General Recommendation: For closed-end management investment companies (CEFs), vote against or withhold from nominating/governance committee members (or other directors on a case-by-case basis) at CEFs that have not provided a compelling rationale for opting-in to a Control Share Acquisition statute, nor submitted a by-law amendment to a shareholder vote.
Converting Closed-end Fund to Open-end Fund
General Recommendation: Vote case-by-case on conversion proposals, considering the following factors:
◾ |
Past performance as a closed-end fund; |
◾ |
Market in which the fund invests; |
◾ |
Measures taken by the board to address the discount; and |
◾ |
Past shareholder activism, board activity, and votes on related proposals. |
General Recommendation: Vote case-by-case on proxy contests, considering the following factors:
◾ |
Past performance relative to its peers; |
◾ |
Market in which the fund invests; |
◾ |
Measures taken by the board to address the issues; |
◾ |
Past shareholder activism, board activity, and votes on related proposals; |
◾ |
Strategy of the incumbents versus the dissidents; |
◾ |
Independence of directors; |
◾ |
Experience and skills of director candidates; |
◾ |
Governance profile of the company; |
◾ |
Evidence of management entrenchment. |
Investment Advisory Agreements
General Recommendation: Vote case-by-case on investment advisory agreements, considering the following factors:
◾ |
Proposed and current fee schedules; |
◾ |
Fund category/investment objective; |
◾ |
Performance benchmarks; |
◾ |
Share price performance as compared with peers; |
◾ |
Resulting fees relative to peers; |
◾ |
Assignments (where the advisor undergoes a change of control). |
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Approving New Classes or Series of Shares
General Recommendation: Vote for the establishment of new classes or series of shares.
General Recommendation: Vote case-by-case on the authorization for or increase in preferred shares, considering the following factors:
◾ |
Stated specific financing purpose; |
◾ |
Possible dilution for common shares; |
◾ |
Whether the shares can be used for antitakeover purposes. |
General Recommendation: Vote case-by-case on policies under the Investment Advisor Act of 1940, considering the following factors:
◾ |
Potential competitiveness; |
◾ |
Regulatory developments; |
◾ |
Current and potential returns; and |
◾ |
Current and potential risk. |
Generally vote for these amendments as long as the proposed changes do not fundamentally alter the investment focus of the fund and do comply with the current SEC interpretation.
Changing a Fundamental Restriction to a Nonfundamental Restriction
General Recommendation: Vote case-by-case on proposals to change a fundamental restriction to a non-fundamental restriction, considering the following factors:
◾ |
The fund’s target investments; |
◾ |
The reasons given by the fund for the change; and |
◾ |
The projected impact of the change on the portfolio. |
Change Fundamental Investment Objective to Nonfundamental
General Recommendation: Vote against proposals to change a fund’s fundamental investment objective to non-fundamental.
General Recommendation: Vote case-by-case on name change proposals, considering the following factors:
◾ |
Political/economic changes in the target market; |
◾ |
Consolidation in the target market; and |
◾ |
Current asset composition. |
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Change in Fund’s Subclassification
General Recommendation: Vote case-by-case on changes in a fund’s sub-classification, considering the following factors:
◾ |
Potential competitiveness; |
◾ |
Current and potential returns; |
◾ |
Risk of concentration; |
◾ |
Consolidation in target industry. |
Business Development Companies—Authorization to Sell Shares of Common Stock at a Price below Net Asset Value
General Recommendation: Vote for proposals authorizing the board to issue shares below Net Asset Value (NAV) if:
◾ |
The proposal to allow share issuances below NAV has an expiration date no more than one year from the date shareholders approve the underlying proposal, as required under the Investment Company Act of 1940; |
◾ |
The sale is deemed to be in the best interests of shareholders by (1) a majority of the company’s independent directors and (2) a majority of the company’s directors who have no financial interest in the issuance; and |
◾ |
The company has demonstrated responsible past use of share issuances by either: |
◾ |
Outperforming peers in its 8-digit GICS group as measured by one- and three-year median TSRs; or |
◾ |
Providing disclosure that its past share issuances were priced at levels that resulted in only small or moderate discounts to NAV and economic dilution to existing non-participating shareholders. |
Disposition of Assets/Termination/Liquidation
General Recommendation: Vote case-by-case on proposals to dispose of assets, to terminate or liquidate, considering the following factors:
◾ |
Strategies employed to salvage the company; |
◾ |
The fund’s past performance; |
◾ |
The terms of the liquidation. |
Changes to the Charter Document
General Recommendation: Vote case-by-case on changes to the charter document, considering the following factors:
◾ |
The degree of change implied by the proposal; |
◾ |
The efficiencies that could result; |
◾ |
The state of incorporation; |
◾ |
Regulatory standards and implications. |
Vote against any of the following changes:
◾ |
Removal of shareholder approval requirement to reorganize or terminate the trust or any of its series; |
◾ |
Removal of shareholder approval requirement for amendments to the new declaration of trust; |
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◾ |
Removal of shareholder approval requirement to amend the fund’s management contract, allowing the contract to be modified by the investment manager and the trust management, as permitted by the 1940 Act; |
◾ |
Allow the trustees to impose other fees in addition to sales charges on investment in a fund, such as deferred sales charges and redemption fees that may be imposed upon redemption of a fund’s shares; |
◾ |
Removal of shareholder approval requirement to engage in and terminate subadvisory arrangements; |
◾ |
Removal of shareholder approval requirement to change the domicile of the fund. |
Changing the Domicile of a Fund
General Recommendation: Vote case-by-case on re-incorporations, considering the following factors:
◾ |
Regulations of both states; |
◾ |
Required fundamental policies of both states; |
◾ |
The increased flexibility available. |
Authorizing the Board to Hire and Terminate Subadvisers Without Shareholder Approval
General Recommendation: Vote against proposals authorizing the board to hire or terminate subadvisers without shareholder approval if the investment adviser currently employs only one subadviser.
General Recommendation: Vote case-by-case on distribution agreement proposals, considering the following factors:
◾ |
Fees charged to comparably sized funds with similar objectives; |
◾ |
The proposed distributor’s reputation and past performance; |
◾ |
The competitiveness of the fund in the industry; |
◾ |
The terms of the agreement. |
General Recommendation: Vote for the establishment of a master-feeder structure.
General Recommendation: Vote case-by-case on merger proposals, considering the following factors:
◾ |
Resulting fee structure; |
◾ |
Performance of both funds; |
◾ |
Continuity of management personnel; |
◾ |
Changes in corporate governance and their impact on shareholder rights. |
W W W . I S S G O V E R N A N C E . C O M | E-79 | 79 of 81 |
Shareholder Proposals for Mutual Funds
Establish Director Ownership Requirement
General Recommendation: Generally vote against shareholder proposals that mandate a specific minimum amount of stock that directors must own in order to qualify as a director or to remain on the board.
Reimburse Shareholder for Expenses Incurred
General Recommendation: Vote case-by-case on shareholder proposals to reimburse proxy solicitation expenses. When supporting the dissidents, vote for the reimbursement of the proxy solicitation expenses.
Terminate the Investment Advisor
General Recommendation: Vote case-by-case on proposals to terminate the investment advisor, considering the following factors:
◾ |
Performance of the fund’s Net Asset Value (NAV); |
◾ |
The fund’s history of shareholder relations; |
◾ |
The performance of other funds under the advisor’s management. |
W W W . I S S G O V E R N A N C E . C O M | E-80 | 80 of 81 |
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Email [email protected] or visit www.issgovernance.com for more information.
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