Hess Corporation (HESS) is one of the stocks in my portfolio. Their annual meeting is coming up on 5/2/2012. Voting ends 5/1 on Moxy Vote’s proxy voting platform, which listed five “good causes,” including two consolidations, when I checked and voted on 4/27. ProxyDemocracy.org had only one fund voting.
I make it a practice to vote against pay packages where NEOs were paid above median in the previous year. Yes, I know, this is pretty crude analysis. I’ll make exceptions where something obviously warrants different treatment. However, I’m concerned that NEOs are taking a greater and greater portion of wealth generated by companies.
According to Bebchuk, Lucian A. and Grinstein, Yaniv (The Growth of Executive Pay, Oxford Review of Economic Policy, Vol. 21, Issue 2, pp. 283-303, 2005), the aggregate compensation paid by public companies to their top-five executives during the period 1993-2003 totaled about $350 billion, and the ratio of this aggregate top-five compensation to the aggregate earnings of these firms increased from 5 percent in 1993-1995 to about 10 percent in 2001-2003.
At the same time, few firms want to admit to having average executives, so they seek to compensate their executives at above-average levels. They survey executive compensation at corporations and then set compensation packages that are above average for their “peer group,” which is often chosen aspirationally. While the “Lake Woebegone effect” may be nice in fictional towns, “where all the children are above average,” it doesn’t work well for society to have all CEOs considered above average and their collective pay spiraling out of control.
HESS’s SummaryCompensation Table (page 32) shows that John B. Hess, CEO and Chair was the highest paid named executive officer (NEO) at about $17.5M in 2011. I’m using Yahoo! Finance to determine market cap and Wikipedia’s rule of thumb regarding classification. According to those sources, HESS is a large-cap. According to the United States Proxy Exchange (USPX) guidelines (pages 9&10) using data from Equilar, the median CEO compensation for large-cap corporations was $10.8 million in 2010, so HESS’s pay is far above that median. I voted against the pay package and against amending the stock plan to provide bonuses. I also voted against any of the members of the compensation committee (Thomas H. Kean, Samuel W. Bodman, Nicholas F. Brady, Frank A. Olson, Ernst H. von Metzsch, and Robert N. Wilson) whose names appear on the proxy. Since they are not all on the proxy, I assume HESS has a classified board… an entrenchment device. Ah, yes I see there is a shareowner proposal to reverse that.
The shareowner proposal was submitted by the North Carolina State Treasurer with assistance from the Harvard Law School Shareholder Rights Project. Nice to see them doing such good work. Since HESS also has supermajority requirements, it takes approval by a vote of 80% of the shares of common stock outstanding to change the classified board provisions, it appears what HESS needs first is a proposal to remove supermajority requirements. Maybe they will see a proposal from me next year on that subject if no changes are made.
Because of the two entrenchment devices and the overpayment made on compensation, I decided to abstain on all incumbents that I’m not voting against. I voted as recommended by management for the auditor.
Here’s the deadline for proposals by shareowners for next year:
Proposals which stockholders wish to include in the company’s proxy materials relating to the 2013 annual meeting of stockholders must be received by the corporate secretary at the address below no later than November 23, 2012. Such proposals must meet the requirements of the SEC to be eligible for inclusion in the company’s proxy materials. Proposals should be addressed to:
1185 Avenue of the Americas
New York, N.Y. 10036
Attn: Corporate Secretary
Here’s how I voted on Moxy Vote’s proxy voting platform:
|ELECTION OF DIRECTOR: J.B. HESS|
|ELECTION OF DIRECTOR: S.W. BODMAN|
|ELECTION OF DIRECTOR: R. LAVIZZO MOUREY|
|ELECTION OF DIRECTOR: C.G. MATTHEWS|
|ELECTION OF DIRECTOR: E.H. VON METZSCH|
|RATIFICATION OF THE SELECTION OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS FOR FISCAL YEAR ENDING DECEMBER 31, 2012.|
|ADVISORY APPROVAL OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS.|
|APPROVAL OF AN AMENDMENT TO THE 2008 LONG-TERM INCENTIVE PLAN.|
|STOCKHOLDER PROPOSAL RECOMMENDING THAT THE BOARD OF DIRECTORS TAKE ACTION TO DECLASSIFY THE BOARD.|