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Board of Directors / Annual Shareholder Meetings
Boards of directors are the cornerstones of corporate governance, and as such they play a key role in bringing together the interests of the shareholders and the management teams at companies. Here are some of the guidelines we will use when voting on issues facing Boards of Directors or shareholders:
The Sierra Club Mutual Funds would like to see corporations have strong, active and independent boards that both communicate with and make their meetings accessible to their shareholders.
The owners of the company elect / re-elect the members of the board of directors at annual shareholder meetings. These annual meetings must be held in accessible locations that should alternate regionally to give all shareholders an equal chance to participate in person. It is essential for accountability that all directors are elected on an annual basis. We will oppose any resolution that attempts to weaken this process by staggering director's terms or classifying the board. During annual elections, in the case of open seats on the board, there should be more candidates than there are seats so that the shareholders may pick the candidate they feel will best represent their views. It is important for the board of directors to engage in dialogues with the shareholders. We will support any resolution that enables such communication.
We also support any resolution that aims to increase the independence of a board. Such resolutions might include the separation of the positions of chief executive and chairman of the board, or the introduction of the requirement for
the chairman of the board to be an
outside director who has never served as the company's senior managing officer. We will also support resolutions to amend the corporate by-laws with the approval of a majority of independent directors. Any shareholder resolutions to intensify the conditions defining a director's independence will similarly gain our support.
We will, however, oppose any management proposals to amend the corporate bylaws with clauses that require shareholder supermajority votes on certain issues. Supermajorities can be used to set unreasonable standards for shareholder approval of measures that have majority support.
We insist that corporations are held accountable for their actions, and will oppose any resolutions that seek to weaken that accountability. Specifically, we will vote against indemnification policies that serve to limit the fiduciary liability of directors and the ability of shareholders to bring suit against them either as members of the Board or as individuals. We will also oppose any resolutions that seek to make it mandatory for directors to own shares in the company because such a provision may eliminate otherwise qualified candidates who are not in the financial position to purchase stock. We will support resolutions for stock option grants to board members, provided that these grants include a vesting schedule. For example, schedules that make vesting conditional upon a company reaching performance milestones (see Compensation / Financial Accounting for more information) we consider reasonable.
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