Strong capital markets are crucial to Fidelity Investments' mission to help investors meet their investment goals. Sound corporate governance practices, in turn, are crucial to maintaining investor confidence in those capital markets. At Fidelity, we know that shareholders in the Fidelity Group of Mutual Funds rightfully look to us to be responsive to matters relating to corporate governance. Many constituencies have a stake in how a company is managed—shareholders, directors, company management, employees, and the customers and communities where a company operates. We believe the best-managed companies work to maintain balance among the varied interests across these groups and have transparent and clear policies to engage with stakeholders. This balance also includes having policies that address environmental, social, and governance ("ESG") issues in the communities in which a company operates. Thus, ESG considerations are generally incorporated into our evaluation of an issuer’s investment risk or return, across all asset classes, sectors, and markets in which we invest. As a result, we present the following explanation and summary of the Proxy Voting Guidelines (the "Guidelines") for Funds advised by FMRCo. or SelectCo (the "Funds").
The Funds are managed with one overriding goal: To provide the greatest possible return to shareholders consistent with governing laws and the investment guidelines and objectives of each fund. In pursuit of this goal, the Funds take two basic types of action:
- Buy and hold securities they believe will appreciate in value; and sell securities they believe are less likely to appreciate in value.
- Interact with companies in which the funds invest through a range of activities, from conversations and meetings with senior management and company directors, to casting votes by proxy at shareholder meetings. As part of these interactions, we always strive to take into consideration corporate governance practices of companies, and how those practices will impact shareholder value over the long term.
At Fidelity, the first type of action—buying and selling securities—is based on searching the globe for investment opportunities company by company, issue by issue. In that spirit, Fidelity portfolio managers make their investment decisions—to buy, hold or sell—based on this research with the goal of maximizing the long-term value of the investments in our mutual funds.
While Fidelity protects its shareholders' interests in corporate governance matters on a day-to-day basis through regular engagement with senior management of the issuers in which it invests fund assets, Fidelity most prominently exercises the Funds' shareholder rights by casting votes by proxy at shareholder meetings. At Fidelity, the Guidelines have been established by the Funds' Boards of Trustees for proxy voting by the Funds. At a fundamental level, the purposes of the Guidelines (summarized below), are simple: (1) to promote accountability of a company's management and Board of Directors to its shareholders; (2) to align the interests of management with those of Fund shareholders by focusing on long-term performance; and (3) to promote transparency through meaningful disclosure on matters including, but not limited to, executive compensation and board actions affecting shareholder rights. The Guidelines include provisions to address conflicts of interest that may arise when Fidelity votes proxies at a shareholder meeting of a company with which Fidelity has other business relationships. When voting proxies on behalf of shareholders, Fidelity votes in a manner consistent with the best interest of shareholders and votes a company's proxies without regard to any other Fidelity relationship, business or otherwise.
While sound corporate governance should in practice achieve multiple goals, Fidelity above all believes it should focus on three key objectives:
- Accountability. There must be effective means in place to hold those entrusted with running a company's business accountable for their actions. Management of a company must be accountable to its Board of Directors; the Board, in turn, must be accountable to and focus on the shareholders, who are focused on the long-term. Promoting accountability can take many forms. These include enforcing rules and laws imposing duties on officers and directors; protecting shareholder voting rights; ensuring rigorous scrutiny of a company's financial statements by independent, outside auditors; and maintaining free and open markets to allow for the re-allocation of capital and transfers of corporate control.
- Alignment of management and shareholder interests. The interests of a company's management and Board of Directors should be aligned with the interests of the company's shareholders. This means, for example, that salary and equity-based forms of compensation paid to management should not focus on the short-term, rather, compensation mechanisms should be designed to reward management for doing a good job of creating long-term value for the shareholders of the company, using appropriate, rigorous and transparent metrics to measure the creation of that value.
- Transparency and disclosure. There must be transparency and disclosure of companies' executive compensation and effective communication and disclosure concerning board actions affecting shareholder rights. Such actions will enhance shareholder engagement, further promote board accountability, and tangibly confirm the alignment of interests among management, the Board of Directors and shareholders.
To promote these objectives, the Guidelines were approved by the Boards of Trustees of the Funds after consultation with Fidelity. (The Guidelines are reviewed periodically by Fidelity and by the Independent Trustees of the Funds, and, accordingly, are subject to change.)
The Guidelines recognize that management is entrusted with the day-to-day operations of a company, as well as longer term strategic planning subject to the oversight of the company's Board of Directors. The Guidelines also recognize that the company's shareholders—the owners of the company—must have final say over how management and directors are performing, and how shareholders' rights and ownership interests are handled. Therefore, we engage with companies' management and directors, through visits and meetings, to confer on topics, such as ESG issues, that we believe could affect long-term performance.