stockholders to track our progress and hold the Company accountable for our efforts. In 2022, we engaged our internal audit function to review the safety and other non-financial metrics disclosed in our Sustainability Report. That internal review resulted in a set of new, documented controls that are in place today.
Our governance is designed to ensure accountability for our management of environmental and safety risks and commitments.
The Board is responsible for the oversight of Directors recommends that the Company’s stockholders oppose this proposalongoing assessment and instead adopt the Special Meeting Right in Proposal 4, which protects the long-term interestsmanagement of material risks impacting our business. The CGPR Committee has primary responsibility for overseeing our environmental sustainability efforts, including our efforts to address climate change, and dedicates significant time to evaluating climate risks and opportunities. The CGPR Committee is also responsible for oversight of the CompanyCompany’s implementation of our Human Rights Policy. At the management level, our CEO formally oversees our climate change strategy and its stockholdersworks with our dedicated Vice President for Sustainability, as well as other team members, to direct the implementation of our climate change and related sustainability goals.
The Board’s Safety Committee oversees implementation of, and compliance with, our Safety Policies, as well as the Company’s culture related to safety. The Safety Committee is in linealso charged with market practice.reviewing the Company’s safety management systems, including our approach to handling and response to safety incidents. The Safety Committee works with our CEO, Chief Operating Officer and Vice President for Safety to set safety expectations and oversee compliance with our Safety Policies.
The Board of Directors believes that allowing stockholders who hold, inOf particular relevance to the aggregate, at least 20%stockholder proposal, the Audit Committee of the voting powerBoard reviewed the results of both the 2022 internal audit of the outstanding shares of the CompanyCompany’s environmental and social disclosures and work by our independent accountant, KPMG LLP, in 2023 to call a special meeting of stockholders achieves a reasonable balance between enhancing stockholder rightsprovide assurance on certain 2022 GHG emissions.
We conduct regular audits and adequately protecting the long-term interests of the Company and its stockholders. After careful consideration, on February 20, 2018, the Board of Directors:
adopted a resolution setting forth an amendment to the Company’s Certificate of Incorporation in order to remove the existing prohibition on the right of stockholders to call a special meeting and instead permit stockholders who hold, in the aggregate, at least 20% of the voting power of the outstanding shares of the Company to call a special meeting of stockholders (the “Charter Amendment”), and
approved amendments to the Company’s Second Amended and Restated Bylaws in order to permit stockholders who hold, in the aggregate, at least 20% of the voting power of the outstanding shares of the Company to call a special meeting of stockholders, which shall become effective upon the effectiveness of the Charter Amendment.
At the Annual Meeting, we are recommending that our stockholders approve the Charter Amendment, in order to allow stockholders who hold, in the aggregate, at least 20% of the voting power of the outstanding shares of the Company to call a special meeting of stockholders.
A 20% special meeting ownership threshold is in line with market practice and, in fact, is less restrictive than the majority of the special meeting rights adoptedaudited by companies in the S&P 500. As of March 27, 2018, we understand that 302 of the companies included in the S&P 500 afford stockholders the right to call a special meeting. Of those companies, 67% have set the ownership threshold for allowing stockholders to call a special meeting at 25% or greater, while only 16% have adopted a 10% ownership threshold.
A 20% ownership threshold provides a procedural safeguard against abuse, corporate waste and investors with short-term goals. A lower 10% ownership threshold will risk giving a stockholder or small group of stockholders a disproportionate amount of influence over the Company’s affairs.
Our Special Meeting Right as set forth in Proposal 4 strikes the appropriate balance between ensuring that stockholders have the ability to call a special meeting to act on extraordinary and urgent matters, while at the same time protecting against a misuse of this right by one stockholder or a small number of stockholders whose interests may not be aligned with the remaining 90% of our stockholders.
Failure to aggregate sufficient stock ownership to reach the 20% ownership threshold is a strong indicator that sufficient interest among the majority of stockholders does not exist to call a special meeting. Lowering this threshold risks giving a single stockholder or a very small group of stockholders a disproportionate amount of influence over the Company’s affairs.
Convening a special meeting of stockholders imposes significant costs, both administrative and operational. Our Board members, management and employees must devote a significant amount of time and attention to preparing for a special meeting, which distracts them from their primary focus of operating our business in the best interest of stockholders in order to maximize long-term financial returns. In addition, with each special meeting, we must incur significant expenses in order to prepare the disclosures required for such meeting, print and distribute materials, solicit proxies and tabulate votes. As a result, special meetings of stockholders should be limited to circumstances where a substantial number of stockholders believe a matter is sufficiently urgent and extraordinary to justify calling a special meeting.
The Company’s Special Meeting Right also serves as a protective mechanism against investors with short-term goals. Event-driven hedge funds or other activists may pursue a special meetingthird parties with the goal of being disruptive toensuring compliance with our business or to propose matters that facilitate their own short-term exit strategies over the long-term interests of the restsafety standards.
On a regular and ongoing basis, we perform safety audits of our stockholders. A 20% special meeting threshold ensures that a special meeting may only be called by a stockholder or groupown operations and those of stockholders with a substantial stakeour contractors against the safety standards in our Company. SMS. Our regular safety audits are based on the risk level inherent to the activities of each group, and we perform out-of-cycle audits when an incident occurs or we otherwise have evidence that there may be a gap in a specific activity leading to a possible safety concern.
Since launching our continuous Pilot Line Operations Safety Audit (“LOSA”) program in 2017, we have been sending highly trained pilot observers onto the flight deck to better understand how pilot practice reflects our expectations. We are also the only U.S. airline to implement a Cabin LOSA program, designed to help us keep the cabin safe for crew members and passengers. Observing our frontline team members in action and gathering safety-related data on environmental conditions, operational complexities and crew performance in real time provides us with valuable insights for enhancing safety and resilience.
The Special Meeting Right appropriately safeguards stockholder interestsFAA oversees American’s safety program, including the wide range of audits we perform. They do this through ongoing surveillance and prevents corporate waste, while atby participation in our regularly scheduled safety meeting. Also, on a biannual basis, American undergoes the same time ensuringInternational Air Transport Association’s Operational Safety Audit, which is an internationally recognized evaluation system designed to assess the operational management and control systems of an airline. And as a contractor for the U.S. Department of Defense (“DoD”), American is also subject to the DoD’s biannual operational safety audit.
We believe this interlocking and continuous system of audits, reviews of audit findings and development of mitigation plans is effective in detecting and reducing safety risks. Layering in an additional audit, as the proponent suggests, we believe is likely to cause confusion and introduce an ill-advised distraction from the vigilance that stockholders havewe exercise every day which is designed to oversee, assess and mitigate the abilityrisk in our operations.
We stand by our Human Rights Statement and respect the freedom of association of all employees.
We pride ourselves on conducting business in a socially responsible and ethical manner that is consistent with human rights principles. Our comprehensive Human Rights Statement, which is available on our website2, applies to call special meetings when appropriate.
all team members and contractors, employees of our wholly owned carriers and our suppliers and other business relationships.
| 2 | https://www.aa.com/i18n/customer-service/about-us/human-rights-statement.jsp |
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2018 Proxy Statement |
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