Proxy Voting Policy
The Commerce Funds (the “Funds”) are managed by the Funds’ investment adviser, Commerce Investment Advisors, Inc. (the “Adviser” or “Commerce”) with the intent of maximizing shareholder value within the constraints of applicable federal laws and within the respective policies and objectives of their prospectuses. The Funds consider prudent corporate governance an integral component of this effort.
The Funds consider the proxy voting process as an essential element in supporting sound governance. The decision-making process utilized to vote proxies is critical in promoting the accountability of management to its shareholders and achieving the related goal of maximizing the value of the Funds.
In this regard, the Board of Trustees of the Funds has delegated the proxy voting function to the Adviser. The Adviser utilizes formal proxy guidelines (summarized below) to appropriately assess each proxy issue. The Adviser has established a Proxy Voting Committee to address any unusual or undefined voting issues that may arise during the year.
In addition, the Adviser utilizes Broadridge Financial Solutions, Inc. to cast proxy votes according to the Adviser’s established guidelines. Broadridge Financial Solutions, Inc. will promptly notify the Adviser of any proxy issues that do not fall under the guidelines set forth below. Commerce does not believe that conflicts of interest will generally arise in connection with its proxy voting policies. However, if any conflicts do arise the Proxy Voting Committee will consider engaging an independent third party to vote the proxy.
Generally, Commerce views that proxy proposals can be grouped into five broad categories as follows:
Election of Board of Directors
- Commerce will generally vote in support of management’s nominees for the board of directors; however, we may choose not to support management’s proposed board if circumstances warrant such consideration.
Appointment of Independent Auditors
- Commerce will support the recommendation of the respective corporation’s board of directors. In addition,
- Commerce will vote in favor of shareholder proposals for ratification of auditors and any requirements to attend annual shareholder meetings.
Issues of Corporate Structure and Shareholder Rights
- Proposals may originate from either management or shareholders, and among other things, may request revisions to the corporate bylaws that will affect shareholder ownership rights. Commerce does not generally support obstacles erected by corporations to prevent mergers or takeovers with the view that such actions may depress the corporation’s marketplace value.
- Commerce supports the following types of corporate structure and shareholder rights proposals:
- Management proposals for approval of stock repurchase programs; stock splits (including reverse splits).
- Authorization to increase shares outstanding.
- The ability of shareholders to vote on shareholder rights plans (poison pills).
- Shareholder rights to eliminate or remove supermajority provisions.
- Shareholders’ rights to call special meetings and to act by written consent.
Executive and Director Equity-Based Compensation
- Commerce is generally in favor of properly constructed equity-based compensation arrangements. We will support proposals that provide management with the ability to implement compensation arrangements that are both fair and competitive. However, Commerce may oppose management proposals that could potentially significantly dilute shareholders’ ownership interests in the corporation.
- Commerce will not support certain proposals for compensation plans as follows:
- Potential to dilute more than 20% of the corporation’s outstanding common stock.
- Ability to re-price or replace underwater options.
- Ability for options to be priced at less than 90% of the fair market value on the grant date.
- Ability to accelerate the vesting of outstanding awards.
- Allow for grants of reloaded stock options.
Corporate Social and Policy Issues
- Proposals usually originate from shareholders any may require a revision of certain business practices and policies.
- Commerce believes, however, that typical business matters that directly or indirectly effect corporate profitability are primarily the responsibility of management. Therefore, social and policy issues reflected in shareholder proposals should be subject to the approval of the corporation’s board of directors.