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

    2016 CALENDAR YEAR

    Voting Summary

    • Dimensional's US-based mutual funds received proxy ballots for 14,643 distinct company meetings, with 805,488 votable proposals.
    • Of these, we voted 721,896 proposals (90%) at 13,258 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 matters, board directorships (61%) and compensation (10%) were the most common matters voted upon.2
    • Shareholder proposals represented 1.9% 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 6,845 79.7% 20.3%
    Capitalization 41,217 73.3% 26.7%
    Compensation 72,991 76.1% 23.9%
    Directors Related 433,547 89.8% 10.2%
    Procedural Matters 134,745 94.6% 5.4%
     Reorganization and Mergers 18,687 91.0% 9.0%
     Total 708,032 88.3% 11.7%

    Shareholder Proposals

     Proposal Type Number of Proposals Voted Percentage Voted For Percentage Voted Against
    Compensation 636 52.4% 47.6%
    Directors Related 7,935 33.1% 66.9%
    Procedural Matters 5,293 35.4% 64.6%
    Total 13,864 35.2% 64.8%
    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

    2016 CALENDAR YEAR

    Voting Summary

    • From January 1 to December 31, 2016, Dimensional's US Sustainability funds received proxy ballots for 3,503 distinct company meetings, having 37,304 votable proposals.
    • Of these, we voted 35,726 (96%) at 3,389 company meetings.1

    PROPOSAL COUNT, BY VOTE INSTRUCTION

    Sustainability Fund Proposal Count

    Matters Voted Upon

    • Excluding procedural matters, board directorships (73%) and compensation (11%) were the most common matters voted upon.2
    • Shareholder proposals represented 1.7% of all proposals

    PROPOSALS VOTED ON, BY ISSUE3

    Sustainability Fund Proposals Voted

    SUPPORT FOR MANAGEMENT AND SHAREHOLDER PROPOSALS

    Management Proposals

    Proposal Type Number of Proposals Voted Percentage Voted For Percentage Voted Against
    Antitakeover Related 349 73.6% 26.4%
    Capitalization 370 90.8% 9.2%
    Compensation 3,834 81.9% 18.1%
    Directors Related 25,940 91.9% 8.1%
    Procedural Matters 4,055 94.1% 5.9%
     Reorganization and Mergers 580 97.4% 2.6%
     Total 35,128 91.0% 9.0%

    Shareholder Proposals

     Proposal Type Number of Proposals Voted Percentage Voted For Percentage Voted Against
    Compensation 46 52.2% 47.8%
    Directors Related 256 51.3% 48.7%
    Procedural Matters 241 14.9% 85.1%
    Emissions and Sustainability Reporting 31 80.6% 19.4%
    Other 24 33.3% 66.7%
    Total 598 36.0% 64.0%

    EMISSIONS AND SUSTAINABILITY REPORTING PROPOSALS

    In 2016, Dimensional’s US Sustainability funds voted on 31 shareholder proposals related to emissions and sustainability reporting. The funds voted in favor of 80.6% of such proposals. The proposals voted for and against are listed below.

    Votes in Favor

    Company Name Proposal Description
    Amazon.com, Inc. Report on Sustainability, Including GHG Goals
    Anadarko Petroleum Corporation Report on Plans to Address Stranded Carbon Asset Risks
    Antero Resources Corporation Report on Methane Emissions Management 
    Berkshire Hathaway Inc. Report on Insurance Division's Response to Climate Change Risks
    CLARCOR Inc. Report on Sustainability, Including GHG Goals
    Emerson Electric Co. Adopt Quantitative Company-wide GHG Goals
    Emerson Electric Co. Report on Sustainability
    Energen Corporation Report on Methane Emissions Management
    ESCO Technologies, Inc. Report on Sustainability, Including GHG Goals
    Facebook, Inc. Report on Sustainability
    Fluor Corporation Adopt Quantitative Company-wide GHG Goals
    HD Supply Holdings, Inc. Adopt Quantitative Company-wide GHG Goals
    Hess Corporation Report on Financial Risks of Stranded Carbon Assets
    Intercontinental Exchange, Inc. Report on Sustainability, Including Quantitative Goals
    Kinder Morgan, Inc. Report on Sustainability, Including Human Rights
    Kinder Morgan, Inc. Report on Capital Expenditure Strategy with Respect to Climate Change Policy
    Kinder Morgan, Inc. Report on Methane Emissions Management
    Noble Energy, Inc. Report on Impacts of and Plans to Align with Global Climate Change Policy
    Nucor Corporation Adopt Quantitative Company-wide GHG Goals
    Occidental Petroleum Corporation Annually Assess Portfolio Impacts of Policies to Meet 2 Degree Scenario
    Occidental Petroleum Corporation
    Report on Methane and Flaring Emissions Management and Reduction Targets
    Rio Tinto plc Approve Strategic Resilience for 2035 and Beyond
    Suncor Energy Inc. Report on Climate Change
    The AES Corporation Assess Impact of a 2 Degree Scenario
    The Ensign Group, Inc. Report on Sustainability

    Votes Against


    Company Name(s)  Proposal Description Explanation of Vote

    Marathon Petroleum Corporation


    Adopt Quantitative GHG Goals for Products and Operations The proposal asked the company to adopt quantitative goals to reduce GHG emissions. The funds voted against the proposal because the company currently discloses sufficient information about its GHG initiatives, practices, and performance for shareholders to assess the company's management of GHG emissions.
    Coach, Inc.
    Apple Inc.
    Create Feasibility Plan for Net-Zero GHG Emissions Each proposal asked the company to create a plan for reaching net-zero GHG emissions by 2030. The funds voted against the proposal at each company because the company already has a GHG reduction goal and GHG emissions-related initiatives and oversight mechanisms in place.
    Franklin Resources, Inc.
    T. Rowe Price Group, Inc.
    Report on and Assess Proxy Voting Policies in Relation to Climate Change Position Each proposal asked the company to provide a report on inconsistencies between the company's policies regarding climate change and the proxy voting policies of its subsidiaries. Each company and its subsidiaries provide sufficient disclosure on their respective environmental policies. The fund voted against the proposals because the boards of each fund, rather than the boards of each company, are responsible for establishing the proxy voting policies of each fund.
    Lowe's Companies, Inc. 
    Report on Sustainability, Including Quantitative Goals The proposal asked the company to publish an annual sustainability report. The funds voted against the proposal because the company's current level of disclosure demonstrates a strong commitment to managing sustainability-related risks.
    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