Please explain why you do not engage directly and do not require external managers to engage with companies on ESG factors.
What drives governance improvements and sets up a leverage with which investors can hold boards and management accountable is the
important mechanism of proxy voting at shareholder meetings. Dimensional broadly incorporates governance considerations into the
investment management process through its proxy voting, as well as communicating with portfolio companies to share Dimensional
policies and areas of focus with regard to governance practices. Without an annual vote, creditors generally do not have such a mechanism
to influence a company’s governance. In addition, different rights held by bondholders and shareholders can not only introduce potential
conflicts of interest, but also different governance priorities when it comes to certain issues like capital allocation and distribution policies.
This said, Dimensional’s corporate governance approach promotes best governance practices in areas such as board effectiveness,
executive compensation, and corporate integrity, where interests between equity and debt holders are closely aligned.