To access Northeast Investors Trust’s proxy voting record for the 12 month period ending June 30, 2020, either click the link below or access the Download Forms/Reports tab on this website.
The Trustees of Northeast Investors Trust (the “Trust”) are responsible for voting proxies for investments held in the Trust’s portfolio. In voting proxies, the Trustees must act in the best interest of its shareholders and must exercise their best judgement as fiduciaries to vote in the manner which will most maximize shareholder value.
The guidelines outlined below have been established for proxy voting by the Board of Trustees of the Trust. The purpose of these guidelines is to promote the accountability of a company’s management and board of directors to its shareholders; to align the interests of management with those of shareholders; and to increase disclosure of a company’s business and operations.
Northeast Investors Trust proxy voting guidelines generally address proposals submitted to shareholders in the following categories:
Proposals for the election of directors
The Trust generally supports management’s recommendations in selecting director nominees as the Trust believes the company is in the best position to recommend and evaluate a qualified board. Directors should be competent, qualified individuals and should be accountable, responsive to shareholders and should exercise reasonable judgement. The Trust generally supports a board of directors comprised of a majority of independent directors and prefers committees such as audit and nominating committees to also board comprised and independent members. A board comprised of a majority of independent directors helps provide objective decision making and accountability to shareholders. The Trust will generally withhold votes for non-independent directors who serve on the audit, compensation, and/or nominating committees of the board. The Trust will generally vote for proposals to declassify boards and will vote against efforts by companies to adopt classified board structures in which only part of the board is elected each year.
Proposals for the approval of independent auditors
The Trust generally will rely on the audit committee’s recommendation in selecting independent auditors who will provide the best service to the company. The Trust believes the relationship between the company and its auditors should be independent and will vote against proposed auditors whose independence may be compromised.
Proposals seeking approval of equity-based compensation, including stock option plans
Companies often offer compensation plans for its officers and employees as a means to attract or maintain desirable employees. These plans may include equity-based compensation (stock options or restricted stock) or other bonuses. In general, the Trust will vote for stock-related compensation plans that are reasonably designed and that align the interest of management with those of shareholders by providing officers and employees with an incentive to maximize shareholder value. While the Trust evaluates plans on a case-by-case basis, it generally will vote against the adoption of plans or plan amendments if:
- The plans are unreasonable or excessively dilutive to the company’s outstanding common stock.
- The plans allow the ability to re-price stock options (including the replacement, cancellation and exchange of options) without shareholder approval.
- The plans establish restriction periods under three years for restricted stock awards.
- The plans provide for accelerated or immediate vesting of stock options or awards in the event of change of control of the economy.
- The plans do not reasonably associate stock awards to the performance of the company.
Bonus plans should have clearly defined performance criteria and include maximum dollar awards. Bonus plans with awards that are excessive in both absolute terms and relative to comparative groups may not be supported.
The Trust believes that executive compensation matters are best left to the discretion of the directors, not the shareholders. The Trust will generally vote against advisory votes on executive compensation (Say-on-Pay) unless such compensation is deemed problematic or does not appear aligned with shareholder interests. The Trust will vote on a case-by-case basis on proposals to ratify golden parachutes or executive compensation agreements. The Trust will generally abstain from voting on the frequency of nonbinding advisory votes on executive compensation (Say-on-Frequency).
Proposals relating to changes in coporate control
The Trust generally opposes measure that are designed to prevent or obstruct corporate takeovers. Such measures tend to entrench current management, discourage other offers for the company and depress shareholder value. In most cases, the acquisition or takeover of a company-hostile or otherwise-will increase shareholder value and therefore must be permitted to occur.
Shareholder Rights Plans (Poison Pills)
Shareholder Rights Plans or Poison Plans are instigated by an unwanted takeover attempt and can ultimately make the company appear financially less attractive to potential and can ultimately make the company appear financially less attractive to potential suitors. Typically, directors have used poison pills without shareholder approval. The Trust will generally vote against all forms of poison pills unless backed by sound business strategy that will likely result in a greater benefit to the shareholders.
Increases in Authorized Common Stock
The Trust will generally approve of increases in authorized shares, provided that the increase will not expose shareholders to excessive dilution and is sought for appropriate corporate purposes such as: additional stock to accommodate stock dividends and splits, additional stock to create a required reserve upon the exercise of employee stock option plans or additional stock required for a proposed acquisition.
“Blank Check” Preferred Stock
The term “blank check” preferred stock gives the board of directors the power to issue shares of preferred stock with voting, conversion, dividend and other rights of which are determined at the discretion of the Board at the time of issuance. Although “blank check” preferred stock typically is used for legitimate financing needs, it also can be issued in an anti-takeover situation. In most instances, the Trust will vote against “blank check” preferred stock proposals unless the proposal discloses that the stock is specifically required to be issued for valid corporate financing objectives.
Classified or Staggered Boards
A classified board structure prevents shareholders from electing a full slate of directors at annual meetings as the directors terms are staggered for more than on year and only a segment of the board stands for election in any year. Although these types of board structures may provide stability and continuity of board members, they can also be viewed as anti-takeover devices; therefore the Trust will generally vote against classified or staggered boards.
Proposals that affect shareholder rights, including voting rights.
The Trust views the exercise of shareholders’ rights-including the rights to act by written consent, to call special meetings and to remove directors-to be fundamental corporate governance.
The ability of shareholders to cumulate their votes for the election of directors-that is, cast more than one vote for a director about whom they feel strongly -generally increases minority shareholders’ rights to effect change in the management of a corporation. The Trust generally supports proposals to adopt cumulative voting and will generally vote against proposals to eliminate cumulative voting which may constitute an anti-takeover measure.
The Trust generally supports proposals to require that voting be confidential because they increase the independence of shareholders who are voting. Confidential voting also allows shareholders to vote their shares without concern that corportae management may try to contact them in an effort to change or influence their decision.
A supermajority provision requires a supermajority (66-90%) to vote and approve any acquisition of the company or other important matters. The Trust favors simple majority votes by shareholders on matters submitted for their approval and generally will vote in support of shareholder proposals that eliminate supermajority-voting requirements. The requirement of a supermajority vote can limit the ability of shareholders to effect change by essentially providing a veto to a large minority shareholder or group of minority shareholders.
Dual Class or Super Voting Share Class Capitalizations
Classes of common stock with disproportionate voting rights limit the rights of certain shareholders and are often proposed in conjunction with other anti-takeover measures. The Trust will generally vote against the adoption of a dual or super voting share class capitalization structures that provide disparate voting rights to different groups of shareholders with similar economic investments.
Proposals relating to social and corporate responsibility issues
The Trust will generally vote with management’s recommendations on proposals pertaining to social, moral, ethical or corporate matters. These proposals are primarily initiated by shareholders and the effect on shareholder value of such proposals is often unclear, and therefore the Trust will rely on management’s assessment of the economic effect of such proposals.
Potential Conflicts of Interest
In the event that any matter for which a proxy is solicited creates a potential conflict of interest between interests of the shareholders of the Trust, on the one hand, and any affiliated person of the Trust, on the other, the voting of such proxy will be referred to the Trustees of the Trust who are not “interested persons” of the Trust as such term is defined under the Investment Company Act of 1940 (the “independent Trustees”); if the potential conflict is with an independent Trustee, such Trustee will abstain from voting on the matter.
No set of guidelines can anticipate all situations that may arise. With respect to proposals not mentioned above, The Trust will act in the best interest of the shareholders and vote in manner which will enhance the value of the investment and maximize shareholder value. The above guidelines are just that; guidelines-but they are not hard and fast rules, simply because corporate governance issues are so varied, and individual judgement should be exercised on a case-by-case basis.