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Trillium Successfully Withdraws Board Diversity Proposal at PANW

OCTOBER 8, 2015: Trillium Asset Management is pleased to announce that it has successfully withdrawn a shareholder proposal at Palo Alto Networks (NYSE: PANW) following the company’s agreement to institutionalize a commitment to board diversity inclusive of gender, race and national origin.

At the time of the filing, Palo Alto had no woman on its board of directors and did not disclose that diversity, inclusive of gender or race, was part of its board nominee search process.

Trillium’s shareholder proposal asked the company to:

“[R]eport to shareholders on plans to increase diverse representation on the Board as well as an assessment of the effectiveness of these efforts. The report should include a description of how the Nominating and Corporate Governance Committee takes every reasonable step to include women and minority candidates in the pool from which Board nominees are chosen.”

Numerous studies have underscored the nexus between greater board and management diversity, and improved corporate governance and financial performance.

Following a successful dialogue with the company this summer, Palo Alto’s board agreed to amend its Corporate Governance Guidelines, Nominating & Corporate Governance Committee Charter and 2015 proxy statement to include a definition of diversity, inclusive of gender and race, and make diversity an intentional part of board nominee search criteria. Subsequently, Trillium withdrew its proposal.

In its 2015 proxy statement, Palo Alto’s Nominating & Corporate Governance Committee will hold itself accountable to goals and responsibilities that include:

“…[S]eeking out qualified and diverse director candidates, including women and individuals from minority groups, to include in the pool from which director candidates are chosen. Any search firm retained by our nominating and corporate governance committee to find director candidates would be instructed to take into account all of the considerations used by our nominating and corporate governance committee including diversity.”

“It’s clear venture-backed companies in Silicon Valley run by men are slow to add women to their Boards,” said Susan Baker of Trillium Asset Management. “We commend Palo Alto for engaging in productive dialogues with Trillium and the California State Teachers’ Retirement System that resulted in meaningful revisions to its corporate governance documents and a stronger focus, we believe, on building a more diverse board,” she continued.

The infrequency with which companies look to refresh their board is often cited as a reason women have not moved into boardrooms at a faster pace. Therefore, committing to an annual review of the skills, backgrounds, the diversity inclusive of gender and race, among other attributes was a critical element of our dialogue, as was urging companies to look beyond traditional talent pools for board candidates.

“CalSTRS applauds the company’s move toward a more diverse board and we hope they would, in the future, also consider diversity of age, educational background, business experience and sexual preference as future criteria,” said CalSTRS Director of Corporate Governance Anne Sheehan. “We also welcome the company and its search firms to consider using the Diverse Director DataSource, a rich source for qualified and diverse candidates, which CalSTRS developed in partnership with CalPERS, and which is managed by GMI.”

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For more information: Randy Rice, Trillium Asset Management, rrice@trilliuminvest.com, (617) 515-6889

Founded in 1982, Trillium Asset Management is the oldest independent investment advisor focused exclusively on sustainable and responsible investing. Trillium manages over $2.2 billion in assets for clients including individuals, foundations, endowments, religious institutions, and other non-profits. To learn more, please visit www.trilliuminvest.com.

The California State Teachers’ Retirement System (CalSTRS), with a portfolio valued at $184 billion as of August 31, 2015, is the largest educator-only pension fund in the world. CalSTRS administers a hybrid retirement system, consisting of traditional defined benefit, cash balance and voluntary defined contribution plans. CalSTRS also provides disability and survivor benefits. CalSTRS serves California’s 879,000 public school educators and their families from the state’s 1,700 school districts, county offices of education and community college districts. Follow us on Twitter @CalSTRS

The views expressed are those of the authors as of the date referenced and are subject to change at any time based on market or other conditions. These views are not intended to be a forecast of future events or a guarantee of future results. These views may not be relied upon as investment advice. The information provided in this material should not be considered a recommendation to buy or sell any of the securities mentioned. It should not be assumed that investments in such securities have been or will be profitable. To the extent specific securities are mentioned, they have been selected by the authors on an objective basis to illustrate views expressed in the commentary and do not represent all of the securities purchased, sold or recommended for advisory clients. The information contained herein has been prepared from sources believed reliable but is not guaranteed by us as to its timeliness or accuracy, and is not a complete summary or statement of all available data. This piece is for informational purposes and should not be construed as a research report.

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