Corporate governance is the system of policies, process and practices that dictate how a corporation is run. A well-governed corporation can increase company value over the long-term, while a company engaging in irresponsible governance practices can lead to under performance, which can harm shareholders.

A corporation’s board of directors is ultimately responsible for ensuring strong governance practices are in place. Members of the board are elected periodically by shareholders as their representatives, and are responsible for ensuring management abides by the company's corporate governance policies and principles. Some corporate governance practices are mandated by federal and state law, while others are generated through cooperative efforts between the board of directors, corporate management and shareholders.

The Trust has a vested interest in the governance of the companies in which it invests because better governance can translate into superior long-term performance. Through its work, the program will:

• Seek to maximize long-term shareholder value.
• Model responsible ownership.
• Focus on initiatives that set best practices and result in systematic reforms.

The Corporate Governance Program helps protect plan assets through its two main functions: compliance and engagement.

Compliance

 The Trust has rights and responsibilities as a shareholder that requires it to observe certain rules and regulations related to its corporate governance activities. Consistent with federal law, the Trust views corporate proxies (ballots) as fund assets and has a fiduciary duty not only to vote proxies at companies in its portfolio to the extent practicable, but to vote those ballots in ways that support the Trust's best interests. The Trust currently casts proxy votes at over 6,000 companies, over half of which are located outside of the United States.

 Engagement

 The Trust views corporations as citizens in the marketplace whose activities have a substantial impact on domestic and global economies. It looks to the corporate community to put in place robust corporate governance policies that ensure superior financial performance, sound risk management and oversight practices, accountability to shareholders, and compliance with various regulatory requirements in order to maximize long-term shareholder value. From time to time, the Trust will engage with stakeholders to advocate for improved corporate governance standards at companies in which the Trust invests.

The Corporate Governance Program's top priority is to promote corporate governance best practices at companies in which the Trust invests to protect and enhance long-term shareholder value for the benefit of our retiree members.

The Trust is chiefly concerned with risk oversight at the board level, and almost all of its corporate governance activities revolve around this issue. The Trust has engaged with a number of companies on various risk-related issues, including board independence, director quality, and transparency. The Trust also views executive compensation and board governance practices, such as the frequency of board nominee elections and the presence of various antitakeover devices, as important indicators of future risk.

The Trust tailors its engagement approach to individual companies versus adopting a one-size-fits-all method, with a focus on the unique governance challenges faced by corporations in specific industries. The Trust closely follows the "quiet diplomacy" model of engagement, under which staff do not publicly discuss ongoing dialogues with companies unless there is an agreement between parties to do so. We believe this is the best way to maintain good relationships with our portfolio companies while effectively addressing corporate governance issues that may impact shareholder value.