In June 2020, BNY Mellon's Proxy Voting Committee, referenced herein as "BNY" or "The Proxy Voting Committee," published updates to its Voting Guidelines. Key policies are summarized in this report.

Election of Directors

The Proxy Voting Committee of BNY Mellon will generally vote for director elections. The Proxy Voting Committee also believes that a majority of a company's board members should be independent directors.

Reasons for voting against one or more directors include:

Adoption, amendment, or renewal of a poison pill without shareholder approval or commitment to obtain shareholder approval within 12 months

  • Attendance by a director at less than 75% of meetings for two consecutive years
  • Service by a director on more than six boards, or service by a CEO of a public company on more than 3 additional boards
  • Failure by the board to respond to an approved shareholder proposal

Reasons for the Proxy Voting Committee to vote against members of the compensation committee on a case-by-case basis include:

  • Excise tax gross-ups, excise tax indemnifications or "make whole" provisions in recent change-in-control or severance agreements.

Board Governance

The Proxy Voting Committee will vote for requests relating to:

  • Declassifying the board to allow for the annual election of all directors
  • Election of independent directors and independent chairperson(s)
  • Management proposals for the election of independent directors that meet listing standards and generally favors an independent chairperson
  • Management requests to change the size of the board with sound rationale and absent any evidence of entrenchment or other features disadvantageous to shareholders
  • Proposals to elect nominees by majority vote as opposed to plurality vote

BNY will vote for shareholder proposals requesting the separation of the Chairman and CEO positions; however, the Proxy Voting Committee will vote against this proposal if a Lead Director or Presiding director with appropriate authority is appointed.

Anti-Takeover Measures

“Old Style Poison Pills”

Generally, BNY Mellon generally votes for shareholder proposals to rescind a poison pill or proposals that require shareholder approval to implement a pill.

Furthermore, the Proxy Voting Committee will consider on a case-by-case basis whether to support the election of directors following the adoption or renewal of a poison pill without shareholder approval, unless the relevant BNY fund(s) was or were not a holder when the original or amended pill was enacted.

“Net Operating Loss Pills”

BNY generally votes for non-net operating loss pills if all of the following provisions are present:

  • The pill trigger is requires 20% of the outstanding shares or greater,
  • The term does not exceed 3 years in duration,
  • The plan terminates if not ratified by a majority of shareholder majority
  • There are no "dead hand" or "modified dead hand" provisions, and
  • The plan has a qualified offer clause

Shareholder Rights

BNY Mellon believes that "rights to call a special meeting and to approve and action with a simple majority vote are powerful tools for shareholders."

The Proxy Voting Committee will vote for proposals that:

  • Allow shareholders to call a special meeting if a reasonably high proportion of shareholders are required to agree before such a meeting is called:
    • BNY defines a "high proportion" as 10-15% of shareholder depending on market cap but no more than 25% of the company's outstanding share capital
  • For companies that currently permit shareholders of 25% or less of the outstanding share capital to call a special meeting (or no such right exists) BNY may vote against proposals that would effectively lower, or initially establish, the minimum threshold to less than 10% (for large cap companies) or 15% (for small cap companies) for companies that currently permit shareholders of 25% or less to call a special meeting.
  • However, for companies that currently permit shareholders of greater than 25% of the outstanding share capital to call a special meeting (or no such right exists) BNY is likely to consider on a case-by-case basis proposals that would effectively lower (or initially establish) the minimum threshold to less than 10% (for large cap companies) or 15% (for small cap companies).

In general, BNY will vote for proposals for shareholders to act by written consent if the company's bylaws or articles do not currently permit shareholders to call for a special meeting or to act by written consent.  Furthermore, the Proxy Voting Committee will vote against a shareholder proposal to adopt written consent if the company permits shareholders, to call for a special meeting.

Capital Structure

  • Generally, the Proxy Voting Committee votes for proposals for the authorization to issue additional shares of common or preferred stock if it determines that the increase is:
    • (1) not excessive relative to the industry's average rate or otherwise harmful to the long-term economic interests of shareholders, or
    • (2) necessary to avoid bankruptcy or to comply with regulatory requirements or other legally binding matters. The Proxy Voting Committee will generally vote against such proposals that would exceed the industry's average rate and/or the business purpose is not articulated sufficiently.
  • The Proxy Voting Committee will generally vote for proposals to issue preferred stock under the following circumstances:
  • The voting power of the issuance is specified as equal to or less than existing common shares
  • The Proxy Advisors and a fairness opinion also support the issuance

The Proxy Voting Committee will generally vote against proposals to continue or to adopt cumulative voting.

Social, Ethical and Environmental

BNY considers the following factors when determining how to vote on Social, Ethical, and Environmental proposals brought forth by management:

  • The long-term economic impact of the measure, including implementation expenses and cost-to-benefit considerations
  • The company's current legal and regulatory compliance status
  • The binding or advisory nature of the request
  • Whether the proposal's underlying objective is within the scope of the company's influence and control

The Proxy Voting Committee generally votes for shareholder proposals when, in its view, the proposal enhances long-term shareholder value and where management fails to meaningfully respond. BNY will vote against shareholder proposals when management does respond meaningfully and there is no evidence of:

  • Shareholder value creation
  • Regulatory non-compliance
  • A failure of oversight by the board & management in respect of the subject activity
  • The company is operating outside of industry standards
  • The proposal is overly vague or restrictive and likely to fail

Compensation and Benefits

The Proxy Voting Committee generally votes FOR proposals related to equity compensation if they:

  • Pass the Proxy Voting Committee's shareholder value transfer model
  • Require an issuance of stock or options as equal payment in lieu of cash to directors

BNY votes against equity compensation proposals when plans:

  • Fail the Proxy Voting Committee's shareholder value transfer model
  • Allow for repricing or cash buyout without shareholder approval
  • Include an evergreen provision
  • Include a "look-back" feature

The Proxy Voting Committee reviews equity compensation proposals on a case-by-case basis that:

  • Are IRC Tax Code section 162(m)-compliant plans and are administered by directors who are non-independent by listing standards
  • Fail the Proxy Voting Proxy Voting Committee's shareholder value transfer model but are required for completion of a merger or acquisition supported by or referred to the Proxy Voting Committee
  • Fail the Proxy Voting Committee's shareholder value transfer model, but have extenuating or unique circumstances
  • Permit accelerated vesting of equity-based grants without consummation of a change-in-control transaction

With regard to proposals related to the frequency of the "Say-On-Pay" vote, the Proxy Voting Committee generally vote FOR proposals that call for an annual frequency on this matter.

The Proxy Voting Committee will generally vote FOR management proposals on Say-On-Pay, but will vote on a case-by-case basis where:

  • There are excise tax gross-ups, excise tax indemnification or "make whole" provisions in recent change in control or severance agreements
  • The company's stock performance is poor relative to its peers, and its pay practices are deemed excessive relative to its peers
  • When given the opportunity, the company fails to address compensation issues identified by BNY in prior discussions
  • There appears to be an imbalance in a company's long-term incentive compensation plans specifically between performance-based and time-based awards for executive officers

Employment contracts or arrangements with “Golden Parachute” provisions

The Proxy Voting Committee generally votes FOR employment agreements that:

  • Involve payments that do not exceed three times (3X) the value of an executive's annual salary plus bonus
    • BNY votes against "Golden Parachutes" that provide for a lump-sum payment of greater than three times the executive's salary + bonus
  • Have a double trigger
  • Do not provide for a tax gross-up in the contract

The Proxy Voting Committee will vote against these agreements if these conditions are not met.

The Proxy Voting Committee will review shareholders proposals and support those that require the company to submit compensation agreements to a vote.

Miscellaneous

In the case of a proposed capital structure change the Proxy Voting Committee will consider the proposals on a case-by-case basis.