The following summarizes some of the key components of the Guidelines.
Shareholders in public companies typically have voting rights associated with their stock holdings. These voting rights allow shareholders (including institutions such as Fidelity on behalf of all mutual funds it manages) to vote at annual and special company meetings. Most shareholders, including the Fidelity Funds, generally submit votes by proxy rather than attend each meeting.
The typical agenda for each company meeting will include more than one proposal, such as election of Directors, adoption of a stock option plan, or approval of a merger or acquisition. Proposals are most commonly put forth by the company's management, but may be submitted by a shareholder as well. The company's management may provide a voting recommendation for each proposal, and each proposal is evaluated separately by Fidelity relative to our proxy voting guidelines.
Fidelity votes on behalf of the Fidelity Funds according to the Proxy Voting Guidelines that have been approved by the Board of Trustees of the Fidelity Funds. Fidelity's approach to proxy voting decisions is consistent with our approach to investment decisions: we generally evaluate proposals on economic merit and support those that are reasonably likely to enhance shareholder returns.
To the extent that a company's management is committed and incentivized to maximize shareholder value, we generally vote in favor of management proposals. However, adhering to our proxy voting guidelines does in fact result in our submitting proxy votes that are contrary to management recommendations every proxy voting season. One example involves our voting against overly dilutive stock compensation plans that do not adequately align management and shareholder interests. Fidelity can ultimately voice its opinions on the policies of management through the level of ownership the Fidelity funds maintain in the individual companies.
In addition, Fidelity may choose not to exercise its voting rights at certain company meetings in instances where trading restrictions are placed on voted shares. This situation occurs most often in foreign countries in which voted shares cannot be traded from the time the vote is cast until the day after the meeting.
Fidelity index funds are sub-advised by Geode Capital Management, LLC. Geode votes in accordance with policies that also have been approved by the funds' Board of Trustees.
Certain Fidelity funds managed by FMR and Strategic Advisers, Inc. are sub-advised by third parties. These third-party sub-advisers vote in accordance with policies that also have been approved by the funds' Board of Trustees. The proxy voting guidelines for these funds are available by calling 800-544-6666.
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 FMR (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:
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:
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.
The following summarizes some of the key components of the Guidelines.
In uncontested elections, Fidelity will generally vote in favor of incumbent and nominee directors except where a director has failed to exercise reasonable judgment. Fidelity will generally withhold authority on the election of all directors or directors on responsible committees if the directors acted contrary to certain aspects of the Guidelines during the period.
Fidelity believes that strong management creates long-term shareholder value and we generally support management of companies in which the funds’ assets are invested. In contested elections, Fidelity will vote on a case-by-case basis, taking into account factors such as management's track record and strategic plan for enhancing shareholder value; the long-term performance of the target company compared to its industry peers; the qualifications of the shareholder's and management's nominees; and other factors. Ultimately, Fidelity will vote for the outcome it believes has the best prospects for maximizing shareholder value over the long term.
Fidelity will generally vote to ratify executive compensation unless such compensation appears misaligned with shareholder interests or otherwise problematic. Fidelity believes that (i) compensation received should align with company performance; (ii) performance should be measured based on key business metrics that align with corporate goals and strategy; (iii) the long-term element of the compensation program should be evaluated over at least a three-year period; (iv) compensation policies should align the interests of executives with those of shareholders and should not encourage excessive risk taking; (v) a significant proportion of compensation should be performance-based and measurement of that performance should be based on appropriate, rigorous and transparent metrics; and (vi) the compensation program should be disclosed in a transparent and timely manner.
Fidelity encourages the use of reasonably designed stock-related compensation plans that align the interests of corporate management with those of shareholders by providing officers and employees with incentives to increase long-term shareholder value. Fidelity will generally vote against equity compensation plans or amendments that are, based on the company's recent equity granting practices, too dilutive to existing shareholders, permit stock options to be granted below fair market value, include evergreen provisions, provide for the acceleration of vesting of equity awards even though an actual change in control may not occur, permit options repricing without shareholder approval, or otherwise appear misaligned with the interests of shareholders.
The Guidelines recognize that there are arguments both in favor of and against shareholder rights plans, also known as poison pills, because they can prevent someone from buying more than a certain percentage of a company's stock without management approval. We believe the best approach is for the company to put its case to shareholders by letting them vote on a plan. Fidelity will generally vote against a proposal to adopt or approve the adoption of an anti-takeover plan unless the plan includes a number of provisions that are designed to protect shareholders, as detailed in the Guidelines.
No set of guidelines can anticipate all situations that may arise. Proposals not covered by the Guidelines and relating to economic matters, and proposals involving special circumstances that have the potential of significantly impacting the value of a Fund's investment in a company will be evaluated on a case-by-case basis, with an eye toward maximizing the long-term interests of shareholders, with input from the appropriate portfolio manager or analyst.
Fidelity believes that there is a strong correlation between sound corporate governance and enhancing shareholder value. Fidelity, through the implementation of the Guidelines, puts this belief into action through consistent engagement with portfolio companies on matters contained in the Guidelines, and, ultimately, through the exercise of voting rights by the funds.