Corporate Governance

As an independent asset management firm, we are committed to encouraging good corporate governance practices at the companies in which we invest. We seek to impact governance in several ways, including through proxy voting and listening to companies held in the portfolios we manage. We also seek to improve internal processes through research on governance matters and participation in industry surveys and events.

For questions about our corporate governance activities or policies, visit the links below or contact us at corporategovernance@dimensional.com.

Policies

  • Introduction

    At Dimensional Fund Advisors, our efforts to add value do not end once the portfolios we manage invest in a company. Our activity in corporate governance is an additional way that we seek to make a positive impact on the overall investment process.

    The mission of our corporate governance (CG) group is to maximize shareholder value. While shareholder value can be a broad concept, we believe that the primary goal of good governance is to ensure that shareholders are properly represented. This is best accomplished by having a competent and fairly compensated board of directors and putting in place a governance structure that minimizes the potential for conflicts of interest between shareholders on the one hand, and board members or management on the other hand. If conflicts are unavoidable, transparency and disclosure should be robust and meaningful so that shareholders can adequately assess the need for, and the potential impact of, the conflict of interest.

    We seek to encourage good governance practices in a variety of ways, including through the implementation of our proxy voting policy, by listening to companies held in the portfolios we manage, and sharing with such companies Dimensional policies regarding certain key areas of focus, such as executive compensation, proxy contests, mergers and spin-offs, and anti-takeover devices (including poison pills and staggered boards).

  • Anti-takeover provisions

    We believe that the market for corporate control, which often results in acquisitions that are accretive to shareholders, should be able to function without undue restrictions. Takeover defenses such as poison pills and classified boards can lead to entrenchment of management and reduced accountability at the board level.

    Poison Pills. In general, we intend to vote the shares of the portfolios we manage against poison pills, as well as all directors that put a poison pill in place without first obtaining shareholder approval. We generally intend to vote against those directors not only at the company whose board adopted the poison pill but also against such directors if they serve on boards of other companies held in the portfolios we manage. In considering a poison pill for approval, we may take into account the existence of ‘qualified offer’ and other shareholder-friendly provisions. For pills designed to protect net operating losses, we may take into consideration a variety of factors, including but not limited to the size of the available operating losses and the likelihood that they will be utilized to offset gains.

    Classified Boards. We believe that shareholders should be given the right to vote on the entire slate of directors on an annual basis and encourage boards to conduct annual elections for all sitting directors.

  • Related Party Transactions

    Related-party transactions have played a significant role in several high-profile corporate scandals and failures. Transfers of value from shareholders to management, or parties connected to management, are sometimes difficult to evaluate on their merits. As a result, even potentially beneficial transactions can reduce shareholder value due to the mere appearance of impropriety. As such, we believe related party transactions should be minimized and, when such transactions are determined to be fair to the company and its shareholders in accordance with the company’s policies and governing law, should be thoroughly disclosed in public filings.

  • General Industry Best Practices

    Dimensional’s policies and approach with regard to corporate governance also reflect certain industry best practices which seek to minimize undue limitations on shareholder rights. Examples of what we believe to be industry best practices in a few areas include:

    • Majority (rather than plurality) voting standard for election of directors
    • Majority (rather than supermajority) voting standard for other items such as bylaw amendments and mergers
    • Shareholder rights to call special meetings (25% threshold) and take action by written consent
    • Avoidance of dual class share structures
  • Responsible Investment Policy

    Responsible Investment Statement

    Dimensional*

    General Statement

    Dimensional’s investment philosophy is based on the belief that in liquid capital markets, prices reflect all available information about fundamental values. As such, Dimensional’s view is that traded securities in those markets are fairly priced and reflect the aggregate risk and return expectations of all market participants.

    This belief in markets means that Dimensional expects any value or long-term profitability attributable to a company’s current environmental, social, and governance (“ESG”) efforts to be already reflected in a company’s price. A company can, however, improve its ESG practices. Dimensional believes the most effective way to achieve this is through the promotion of good corporate governance practices, with strong boards representing shareholders’ interests, including the avoidance of unnecessary environmental and social risks. Dimensional believes these efforts may be reflected in increased valuations through a combination of lower discount rates and higher cash flows. For this reason, Dimensional primarily focuses its responsible investment efforts on improving governance practices in companies within the investment portfolios it manages on behalf of its clients.

    Further, Dimensional believes that investors, particularly long-term shareholders with significant positions, are well positioned to positively influence a company’s governance practices. We believe that shareholders have a right to be heard by company management and that it is our responsibility as an investment manager to judiciously exercise shareholder voting rights on behalf of portfolios, taking into account both the costs and potential benefits.  Dimensional broadly incorporates ESG considerations into the investment management process and seeks to influence governance practices through proxy voting and sharing Dimensional policies and governance focus areas with portfolio companies.  Also, Dimensional improves its internal processes through selected projects and research.

    United Nations Principles for Responsible Investment (“UNPRI”)

    As part of its commitment to encouraging strong governance, Dimensional became a signatory to the UNPRI in August 2012. The UNPRI provides a framework for incorporating ESG considerations into investment management practices. Dimensional commits to adopt and implement the following six principles where consistent with its fiduciary duty to clients.

    Principle 1: Dimensional will incorporate ESG issues into investment analysis and decision-making processes.

    Principle 2: Dimensional will incorporate ESG issues into relevant policies and practices.

    Principle 3: Dimensional will seek appropriate disclosure on ESG issues from relevant portfolio companies.

    Principle 4: Dimensional will promote acceptance and implementation of the Principles within the investment industry.

    Principle 5: Dimensional will work to enhance its effectiveness in implementing the Principles.

    Principle 6: Dimensional will report on its activities and progress toward implementing the Principles.

    Responsible Investment Initiatives

    Corporate Governance Committee and CG Group

    Dimensional has established a Corporate Governance Committee that reports to the Investment Committee. The Corporate Governance Committee is composed of senior executives, officers, directors, and members of the portfolio management team and is responsible for administering Dimensional’s proxy voting policy, considering complex proxy voting cases, and overseeing the Corporate Governance Group.

    A Corporate Governance Group is a day-to-day working unit, which implements policies and oversees operations. This group includes dedicated analysts and resides within Portfolio Management. The group also utilizes investment management personnel in the Portfolio Management group in engagement calls to portfolio companies.

    Investment Management

    While Dimensional’s primary responsible investment focus is on improving governance practices in investee companies, Dimensional also takes ESG principles into consideration across all the portfolios it manages where those principles may impact performance.

    As an example, Dimensional excludes closely held companies from its universe of eligible securities for its clients on governance grounds, since companies with large strategic shareholders may not represent the interests of a broad set of shareholders. Dimensional may also choose not to purchase companies for its clients where, based on public information, in its judgment, there is a heightened concern of fraudulent or other behaviour or situations that may make market information unreliable.

    Where clients have particular social and/or environmental preferences, Dimensional can implement negative screens or overlays to its underlying investment strategies to provide those clients with tailored investment solutions. Many of these preferences are incorporated into Dimensional’s social funds and sustainability funds.

    In social funds, Dimensional seeks to incorporate social considerations into investment strategies by identifying and screening companies to reflect the values of its clients. Dimensional may utilize research from independent third-party vendors, depending on the requirements of each portfolio, to systematically exclude restricted securities.

    In sustainability funds, Dimensional seeks to address the sustainability issues important to investors while maintaining sound investment principles. Sustainability considerations are integrated within a robust investment solution that pursues higher expected returns through increased weighting to smaller market cap, lower relative price, and higher profitability securities. Using data collected by Dimensional and research from independent third-party vendors on company business practices, companies are systematically evaluated with regard to sustainability. Investment in those companies is emphasized, reduced, or excluded based on how they fare on key sustainability metrics, including the primary sustainability impact considerations of high greenhouse gas emissions or reserves that may produce those emissions. Dimensional’s approach to sustainability can offer investors the ability to pursue their sustainability and investment goals simultaneously.

    With regard to social and/or environmental considerations, it is Dimensional’s belief that investors decide whether those preferences should be aligned with their investment decisions, but that choice should not have to come at the expense of sound investment principles. These views are reflected in Dimensional’s social and sustainability funds.

    Influencing Corporate Governance

    • Proxy Voting

    Proxy voting is the act of exercising shareholder voting rights on behalf of clients. This is Dimensional’s main tool for influencing the board of directors elected to manage a company on shareholders’ behalf. Dimensional may engage external vendors for voting execution and recommendations for certain shareholder meetings but remains responsible for the voting decision. Dimensional takes into consideration the costs associated with voting and generally will vote in instances where the expected economic benefit of doing so outweighs the costs for a given portfolio.

    • Company Communications

    When there is potential to increase shareholder value, Dimensional will listen to the management of companies or other shareholders to seek to improve corporate governance.

    • Industry Participation

    Dimensional may join or participate in events with relevant industry groups where an opportunity exists to improve its internal processes.

    • Internal Projects and Research

    Dimensional may conduct research on the implications of certain governance practices and what it means for a company to have good governance policies and practices.

    Disclosures and Reporting

    Dimensional discloses information concerning its proxy voting records on its website and in other governance-related materials as appropriate, and updates such information as new information becomes available from time to time. Dimensional also posts detailed proxy voting records on its website where required in accordance with applicable regulations.

    Dimensional will annually report on its progress towards implementing the UNPRI as required.

    Corporate Responsibility

    Dimensional is committed to improving its sustainability practices globally by seeking to understand the impact of its business operations on the environment and develop offices, plans, and processes that minimize those impacts. Dimensional’s corporate headquarters was awarded a three-star rating by Austin Energy Green Building (AEGB).

    * “Dimensional” refers to the Dimensional separate but affiliated entities generally, rather than one particular entity. These entities are Dimensional Fund Advisors LP, Dimensional Fund Advisors Ltd., DFA Australia Limited, Dimensional Fund Advisors Canada ULC, Dimensional Fund Advisors Pte. Ltd., and Dimensional Japan Ltd.

  • Japan Stewardship Code

    Principles for Responsible Institutional Investors

    This statement describes Dimensional's adherence to the principles of the Japan Stewardship Code.

    Principle 1: Institutional investors should have a clear policy on how they fulfill their stewardship responsibilities, and publicly disclose it.

    Dimensional's Proxy Voting Guidelines are published on our website and a summary of our Proxy Voting Policies and Procedures is available to our clients on request (the Guidelines and the Policies and Procedures being together "Dimensional's Proxy Voting Policies"). These documents explain our voting policy and how we deal with conflicts of interest and are reviewed and updated at least annually.

    Principle 2: Institutional investors should have a clear policy on how they manage conflicts of interest in fulfilling their stewardship responsibilities and publicly disclose it.

    We explain our approach to managing conflicts of interest in Dimensional's Proxy Voting Policies and Procedures, which are available as set out above.

    Principle 3: Institutional investors should monitor investee companies so that they can appropriately fulfill their stewardship responsibilities with an orientation towards the sustainable growth of the companies.

    Dimensional monitors the corporate governance of the companies in which our portfolios invest, or "investee companies," primarily through the proxy voting process. Dimensional's Proxy Voting Policies have been formulated to encourage our investee companies to adopt and maintain corporate governance policies that are consistent with our clients' best interests and the maximization of the value of their investments. Proxy voting agents provide analysis and vote recommendations in accordance with our Proxy Voting Guidelines for securities for which we have proxy voting authority. Although Dimensional may consider the proxy voting recommendations, we remain ultimately responsible for all proxy voting decisions. Dimensional also reserves the right to vote counter the Proxy Voting Guidelines if we believe that the best interests of our clients would be served by such a vote. Our Proxy Voting Guidelines are available on our website.

    Principle 4: Institutional investors should seek to arrive at an understanding in common with investee companies and work to solve problems through constructive engagement with investee companies.

    We seek to enhance corporate governance at investee companies through proxy voting. We see corporate governance as a way to add value to the investment process and believe that stronger governance practices will be reflected in better company and stock performance. By exercising our voice to inform companies of our views on good governance, we believe that we can help promote their sustainable growth.

    Principle 5: Institutional investors should have a clear policy on voting and disclosure of voting activity. The policy on voting should not be comprised only of a mechanical checklist; it should be designed to contribute to the sustainable growth of investee companies.

    Dimensional's Proxy Voting Guidelines are available on our website and a summary of our Proxy Voting Policies and Procedures is available to our clients on request. We disclose our voting activity to the extent required by any applicable regulatory authorities. For separate account clients, we report our proxy voting activity if required in the client's agreement with us.

    Principle 6: Institutional investors in principle should report periodically on how they fulfill their stewardship responsibilities, including their voting responsibilities, to their clients and beneficiaries.

    We disclose our voting publicly each year as detailed in our statement regarding Principle 5, above. We also provide our clients periodic updates on our voting activities if required in our agreements with them.

    Principle 7: To contribute positively to the sustainable growth of investee companies, institutional investors should have in-depth knowledge of the investee companies and their business environment and skills and resources needed to appropriately engage with the companies and make proper judgments in fulfilling their stewardship activities.

    Dimensional's Corporate Governance Committee includes many of the firm’s most senior investment personnel. The Committee oversees the firm’s governance activities and is responsible for the firm’s corporate governance policy. Dimensional also has a Corporate Governance Group which includes members of the firm’s global Portfolio Management team. Dimensional uses a number of external resources to deepen its knowledge of business and governance practices at investee companies, including daily market news, proxy voting research, and external corporate governance networks.

  • Frequently Asked Questions

    Who is responsible for Corporate Governance at Dimensional?

    Dimensional’s global corporate governance activities are managed by the Corporate Governance (CG) group, which sits within Dimensional’s Portfolio Management department. The group implements policies, monitors day-to-day operations, and researches governance issues and industry trends. Our Corporate Governance Committee, comprised of senior management, is responsible for overseeing the CG group, formulating and recommending changes to policy, and making decisions on governance-related matters.

    What is Dimensional’s policy on proxy voting?

    Dimensional votes proxies on behalf of mutual funds as well as those separate account mandates for which clients have given us the authority to vote. Our voting activities are intended to maximize shareholder value. This involves consideration of the feasibility, costs, and expected benefits of voting for each portfolio. Our Proxy Voting Policies, summarized in the Statement of Additional Information (SAI) for the funds, further describe how we vote; answers to some specific questions are provided below. .

    Does Dimensional vote proxies at every company meeting?

    Dimensional seeks to vote, or refrain from voting, proxies in a manner that we believe is in the best interest of each portfolio. In instances where the costs—including opportunity costs—of voting exceed the expected economic benefits, we may refrain from voting. Additionally, international market restrictions—such as share blocking, re-registration, and onerous power of attorney requirements—may preclude us from voting in certain markets or at certain company meetings.

    Does Dimensional utilize any third-party services in the proxy voting process?

    Yes. Dimensional has engaged Institutional Shareholder Services (ISS) to provide information on shareholder meeting dates, research on proxy proposals, and voting recommendations based on our Proxy Voting Policies, Procedures, and Guidelines. ISS also provides vote execution through its proprietary voting platform. In addition to ISS, we may also review voting recommendations from Glass Lewis and other research providers for selected meetings. Third-party research is only one of several inputs into our voting decision on a given proposal. We retain final discretion on how to vote.

    Does Dimensional disclose its voting intentions or share ownership prior to voting?

    Dimensional generally does not disclose our voting intentions or the portfolios’ share ownership prior to voting, except as required by applicable laws and regulation.

    Does Dimensional make its proxy voting record publicly available?

    Yes. Annually, we file form N-PX, containing the full voting record for our US-based mutual funds, with the US Securities and Exchange Commission. We also disclose voting for our Canada-based mutual funds as well as summary voting information for our UK OEICs, Irish UCITs and Australian trusts on the respective regional websites.

    Is Dimensional a signatory to the United Nations Principles for Responsible Investment (UN-PRI)?

    Yes. Dimensional became a signatory to the UN-PRI in August 2012.

    How may I contact Dimensional’s Corporate Governance group?

    The group may be contacted via email: corporategovernance@dimensional.com.

Voting

  • US-based mutual funds

    2015 CALENDAR YEAR

    Voting Summary

    • Dimensional's US-based mutual funds received proxy ballots for 13,781 distinct company meetings, with 738,919 votable proposals.
    • Of these, we voted 679,850 proposals (92%) at 12,885 company meetings.1

    PROPOSAL COUNT, BY VOTE INSTRUCTION

    Proposal Count by Vote Instruction

    Matters Voted Upon

    The following statistics relate to proposals that were voted:

    • Excluding procedural matters2, board directorships (62%) and compensation (11%) were the most common matters voted upon.
    • Shareholder proposals represented 2.2% of all proposals.

    PROPOSALS VOTED ON, BY ISSUE3

    Proposals Voted on by Issue

    SUPPORT FOR MANAGEMENT AND SHAREHOLDER PROPOSALS

    Management Proposals

    Proposal Type Number of Proposals Voted Percentage Voted For Percentage Voted Against
    Antitakeover Related 6,847 81.0% 19.0%
    Capitalization 33,045 75.0% 25.0%
    Compensation 71,511 77.1% 22.9%
    Directors Related 416,410 90.8% 9.2%
    Preferred/Bondholder 92 80.0% 20.0%
    Procedural Matters 120,171 94.2% 5.8%
     Reorganization and Mergers 16,989 90.4% 9.6%
     Total 665,065 89.1% 10.9%

    Shareholder Proposals

     Proposal Type Number of Proposals Voted Percentage Voted For Percentage Voted Against
    Compensation 1,231 73.3% 26.7%
    Directors Related 8,403 40.3% 59.7%
    Procedural Matters 5,151 19.8% 80.2%
    Total 14,785 35.9% 64.1%
    1. Dimensional votes proxies wherever it is feasible and economical to do so. We may not vote in markets that have share-blocking, re-registration or other practices that impair our ability to sell voted shares. In addition, we consider the costs associated with voting (per vote charges, meeting representation fees, etc.) and vote in instances where the expected economic benefit of voting outweighs the costs for a given portfolio.
    2. Procedural matters are typically routine items such as auditor ratifications, approval of statutory reports, etc.
    3. Chart does not include categories that make up less than 0.5% of total votes. 
  • Sustainability funds

    2015 CALENDAR YEAR

    Voting Summary

    • From January 1 to December 31, 2015, Dimensional's US Sustainability funds received proxy ballots for 3,404 distinct company meetings, having 36,671 votable proposals.
    • Of these, we voted 35,770 (98%) at 3,340 company meetings.1

    PROPOSAL COUNT, BY VOTE INSTRUCTION

    Proposal Count by Vote Instruction

    Matters Voted Upon

    • Excluding procedural matters, board directorships (73%) and compensation (11%) were the most common matters voted upon.2
    • Shareholder proposals represented 2.3% of all proposals

    PROPOSALS VOTED ON, BY ISSUE3

    Proposals Voted on By Issue

    SUPPORT FOR MANAGEMENT AND SHAREHOLDER PROPOSALS

    Management Proposals

    Proposal Type Number of Proposals Voted Percentage Voted For Percentage Voted Against
    Antitakeover Related 353 77.4% 22.6%
    Capitalization 421 91.2% 8.8%
    Compensation 3,800 81.8% 18.2%
    Directors Related 25,748 93.0% 7.0%
    Procedural Matters 3,946 94.4% 5.6%
     Reorganization and Mergers 686 96.3% 3.7%
     Total 34,954 91.9% 8.1%

    Shareholder Proposals

     Proposal Type Number of Proposals Voted Percentage Voted For Percentage Voted Against
    Compensation 116 62.9% 37.1%
    Directors Related 227 63.6% 36.4%
    Procedural Matters 331 13.6% 86.4%
    Emissions and Sustainability Reporting 50 80.0% 20.0%
    Other 42 35.7% 64.3%
    Total 816 42.1% 57.9%

    EMISSIONS AND SUSTAINABILITY REPORTING PROPOSALS

    In 2015, Dimensional’s US Sustainability funds voted on 50 shareholder proposals related to emissions and sustainability reporting. The funds voted in favor of 80.0% of such proposals. The proposals voted for and against are listed below.

    Votes in Favor

    Company Name Proposal Description
    AGL Resources Inc. Adopt Quantitative Greenhouse Gas (GHG) Goals for Products and Operations
    Amazon.com, Inc. Report on Sustainability, Including GHG Goals
    Anadarko Petroleum Corporation Report on Plans to Address Stranded Carbon Asset Risks
    BioMarin Pharmaceutical Inc. Report on Sustainability
    BP plc Approve Strategic Climate Change Resilience for 2035 and Beyond
    C. R. Bard, Inc. Report on Sustainability, Including GHG Goals
    CLARCOR Inc. Report on Sustainability
    Commercial Metals Company Report on Sustainability, Including GHG Goals
    Devon Energy Corporation Report on Financial Risks of Climate Change
    Dillard's, Inc. Adopt Quantitative GHG Goals for Products and Operations
    Dominion Resources, Inc. Report on Methane Emissions Management and Reduction Targets
    Dominion Resources, Inc. Report on Financial and Physical Risks of Climate Change
    Emerson Electric Co. Emerson Electric Co.
    EOG Resources, Inc. Report on Methane Emissions Management and Reduction Targets
    ESCO Technologies Inc. Report on Sustainability, Including GHG Goals
    Facebook, Inc. Report on Sustainability
    FirstEnergy Corp. Adopt Quantitative Carbon Dioxide Reduction Goals
    Genworth Financial, Inc. Report on Sustainability
    Gilead Sciences, Inc. Report on Sustainability
    Great Plains Energy Incorporated Adopt Quantitative Carbon Dioxide Reduction Goals
    HD Supply Holdings, Inc. Adopt Quantitative GHG Goals for Products and Operations
    Hess Corporation Report on Plans to Address Stranded Carbon Asset Risks
    HollyFrontier Corporation Report on Sustainability, Including GHG Goals
    Kraft Foods Group, Inc. Report on Sustainability, Including GHG Goals
    Marathon Oil Corporation Report on Capital Expenditure Strategy with Respect to Climate Change Policy
    Nabors Industries Ltd. Report on Sustainability, Including Goals and ESG Link to Executive Compensation
    NOBLE ENERGY, INC. Report on Impacts of and Plans to Align with Global Climate Change Policy
    Occidental Petroleum Corporation Occidental Petroleum Corporation
    OGE Energy Corp. Report on GHG emission Reduction Scenarios
    Phillips 66 Adopt Quantitative GHG Goals for Operations
    PPL Corporation Report on GHG Emission Reduction Scenarios
    Royal Dutch Shell plc Approve Strategic Resilience for 2035 and Beyond
    Statoil ASA Implement Strategic Resilience for 2035 and Beyond
    Targa Resources Corp.. Report on Methane Emissions Management and Reduction Targets
    The Chubb Corporation Report on Sustainability, Including Quantitative Goals
    The Ensign Group, Inc. Report on Sustainability
    Time Warner Inc. Adopt Quantitative GHG Goals for Operations
    Valero Energy Corporation Adopt Quantitative GHG Goals for Products and Operations

    Votes Against


    Company Name(s) Explanation of Vote
    Dominion Resources, Inc
    Marathon Petroleum Corporation
    Exxon Mobil Corporation
    Chevron Corporation
    Wal-Mart Stores, Inc.
    Each proposal asked the company to adopt quantitative goals to reduce GHG emissions. In each case, the funds voted against the proposals because each company currently discloses sufficient information about its GHG initiatives, practices, and performance for shareholders to assess the company's management of GHG emissions.
    Australia and New Zealand Banking Group Ltd. The proposal sought to add language to the company's constitution requiring the company to provide an annual report on financed emissions. The funds voted against the proposal because shareholders already have the statutory right to bring resolutions at a company's annual meeting.
    Statoil ASA A binding proposal requesting that the company assess its resilience against climate change risk would have required the company to publicly disclose commercially sensitive information that is not part of any generally accepted standard of disclosure. An additional binding proposal asked that the company cease all exploratory operations, which would have significantly disrupted the company's operation.
    Australia and New Zealand Banking Group Ltd.
    Bank of America Corporation
    These proposals requested that the company disclose current exposure to climate change risk and adopt targets for reduction. The funds voted against the proposals because each company currently discloses significant detail on the initiatives and oversight mechanisms implemented to address climate change risk.
    1. Dimensional votes proxies wherever it is feasible and economical to do so. We may not vote in markets that have share-blocking, re-registration, or other practices that impair our ability to sell voted shares. In addition, we consider the costs associated with voting (per vote charges, meeting representation fees, etc.) and vote in instances where the expected economic benefit of voting outweighs the costs for a given portfolio.
    2. Procedural matters are typically routine items such as auditor ratifications, approval of statutory reports, etc.
    3. Chart does not include categories that make up less than 0.5% of total votes.
  • Proxy Voting Records