PROXY VOTING - FREQUENTLY ASKED QUESTIONS
What are proxy votes?
As shareholders of the companies in which they invest, MFS funds generally have the right to vote on matters presented at shareholder meetings. Examples of such voting matters include director elections, auditor ratifications, stock plan amendments, executive compensation, and various proposals submitted by shareholders of the company. Due to the high volume of shareholder meetings at which MFS funds may vote, the funds typically cast votes electronically by proxy rather than physically attending shareholder meetings.
How do MFS funds generally cast votes on proxy matters?
The MFS funds have delegated proxy voting to their investment advisor, MFS Investment Management. MFS casts all proxy votes in what it believes to be in the best long-term economic interest of its shareholders pursuant to the MFS Proxy Policies and Procedures, which have been approved by the funds' boards of Trustees. The MFS Proxy Policies and Procedures are available
How did MFS pooled-funds vote its
shares at a particular shareholder meeting?
Please visit the proxy voting section of the relevant MFS.com website.
Who is responsible for the proxy voting of the MFS funds?
The administration of the MFS Proxy Voting Policies and Procedures is overseen by the MFS Proxy Voting Committee, which includes senior personnel from the MFS Legal and Global Investment Support Departments. MFS also reports on proxy voting matters to the Board of Trustees of each MFS fund, which also considers possible modifications to the MFS Proxy Voting Policies and Procedures periodically.
Do the MFS funds use a third party proxy research firm?
MFS has entered into an agreement with Institutional Shareholder Services, Inc. ("ISS") to perform various proxy voting related administrative services, such as vote processing and recordkeeping functions. MFS also receives ISS research reports and vote recommendations and may use ISS research reports to identify issues such as (i) circumstances in which a board may have approved excessive executive compensation, (ii) environmental and social proposals that warrant consideration or (iii) circumstances in which a non-U.S. company is not in compliance with local governance best practices. MFS also receives research reports and vote recommendations from Glass Lewis on similar issues. Notwithstanding, MFS analyzes such issues independently and does not necessarily vote in-line the ISS or Glass Lewis recommendations on these issues. MFS may also use other research tools in order to identify the circumstances described above.
How does MFS manage potential conflicts of interest when
Due to the client focus of our investment management business, MFS believes that the potential for actual material conflict of interest issues is small. Nonetheless, MFS has developed precautions to assure that all proxy votes are cast in the best long-term economic interest of shareholders. The MFS Proxy Voting Committee does not include individuals whose primary duties relate to client relationship management, marketing, sales, or investment advice. MFS also requires its employees to avoid actual and potential conflicts of interests between personal activities and MFS' client activities. If an MFS associate identifies an actual or potential conflict of interest with respect to any voting decision, the Proxy Voting Committee is informed of the conflict and decides how to vote the proxy. Please see the "Potential Conflicts of Interest" section of the MFS Proxy Voting Policies and Procedures located
How does MFS address potentially excessive executive
We believe that the election of an issuer's board of directors, votes on stock plans, and advisory votes on pay are typically the most effective mechanisms to express our view on a company's compensation practices. MFS will not support a nominee standing for re-election if such nominee participated in the approval of senior executive compensation that MFS deems to be particularly egregious.
MFS also does not generally support executive stock plans that (1) permit the issuance of shares below fair market value, (2) allow for the re-pricing of underwater options or the automatic replenishment of shares without shareholder approval, or (3) result in excessive dilution, as outlined in the MFS Proxy Policies and Procedures. MFS generally supports proposals that would (1) require shareholder approval of any severance package for an executive officer that exceeds a certain multiple of such officer's annual compensation that is not determined in MFS' judgment to be excessive, (2) require the issuer to adopt a policy to recover the portion of performance-based bonuses and awards paid to senior executives that were not earned based upon a significant negative restatement of earnings, unless the company already has adopted a clearly satisfactory policy on the matter, and (3) expressly prohibit any future backdating of stock options.
MFS will analyze advisory votes on executive compensation on a case-by-case basis. In regard to the frequency of such advisory votes, MFS supports annual advisory votes on an issuer's executive compensation practices. MFS may also vote against certain or all board nominees if an advisory pay vote for a U.S. issuer is not on the agenda, or the company has not implemented the advisory vote frequency supported by a plurality/ majority of shareholders.
MFS generally opposes shareholder proposals that seek to set rigid restrictions on executive compensation as MFS believes that compensation committees should retain some flexibility to determine the appropriate pay package for executives. Although we support linking executive stock option grants to a company's performance, MFS also opposes shareholder proposals that mandate a link of performance-based pay to a specific metric. MFS generally supports reasonably crafted shareholder proposals that (i) require the issuer to adopt a policy to recover the portion of performance-based bonuses and awards paid to senior executives that were not earned based upon a significant negative restatement of earnings unless the company already has adopted a satisfactory policy on the matter, (ii) expressly prohibit the backdating of stock options, and (iii) prohibit the acceleration of vesting of equity awards upon a broad definition of a "change-in-control" (e.g.; single or modified single-trigger).
What other governance-related shareholder proposals does
MFS generally support?
MFS generally supports shareholder proposals that it believes are in the best long-term economic interest of its clients, including, but not limited to, (1) the de-classification of the board of directors, (2) the elimination of supermajority vote requirements wherever possible, (3) the implementation of a majority voting system in director elections, (4) the submission of poison pills to a shareholder vote, (5) the ability of shareholders owning at least 10% of the company's outstanding stock to act by written consent, (6) the ability of shareholders to call a special meeting, (7) reasonably crafted "Proxy Access" proposals at an ownership threshold of 3% for a period of 3 years; (8) the separation of the Chairman/CEO positions if we believe there are governance concerns at the issuer; and (9) the implementation of confidential voting.
Does MFS support any shareholder proposals relating to
environmental and social issues?
MFS generally supports proposals that request disclosure on the impact of environmental issues on the company's operations, sales, and capital investments. However, MFS may not support such proposals based on the facts and circumstances surrounding a specific proposal, including, but not limited to, whether (i) the proposal is unduly costly, restrictive, or burdensome, (ii) the company already provides publicly-available information that is sufficient to enable shareholders to evaluate the potential opportunities and risks that environmental matters pose to the company's operations, sales and capital investments, or (iii) the proposal seeks a level of disclosure that exceeds that provided by the company's industry peers. MFS will analyze all other environmental proposals on a case-by-case basis and will support such proposals if MFS believes such proposal is in the best long-term economic interest of the company's shareholders.
MFS will analyze social proposals on a case-by-case basis. MFS will support such proposals if MFS believes that such proposal is in the best long-term economic interest of the company's shareholders. Specifically, MFS will support shareholder proposals that (i) seek to amend a company's equal employment opportunity policy to prohibit discrimination based on sexual orientation and gender identity; and (ii) request additional disclosure regarding a company's political contributions (unless the company already provides publicly-available information that is sufficient to enable shareholders to evaluate the potential opportunities and risks that such contributions pose to the company's operations, sales and capital investments).
Does MFS engage with its portfolio companies or other
shareholders on corporate governance and proxy voting matters?
From time to time, MFS may determine that it is appropriate and beneficial for representatives from the MFS Proxy Voting Committee to engage in a dialogue or written communication with a company or other shareholder regarding certain matters on the company's proxy statement that are of concern to shareholders, including environmental, social and governance matters. A company or shareholder may also seek to engage with representatives of the MFS Proxy Voting Committee in advance of the company's formal proxy solicitation to review issues more generally or gauge support for certain contemplated proposals. Our most recent Proxy Voting and Engagement Report is available here