Dreamworks Animation (DWA) ($DWA) is one of the stocks in my portfolio. Their annual meeting is coming up on 5/29/2012. Voting ends 5/28 on Moxy Vote’s proxy voting platform, which had 4 recommendations “from good causes,” including 2 consolidations, when I checked and voted on 5/22. ProxyDemocracy.org had 1 fund voting. I voted with management 64% of the time.
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.
DWA’s SummaryCompensation Table shows that Jeffrey Katzenberg, CEO/Chair, was the highest paid named executive officer (NEO) at about $4M in 2011. I’m using Yahoo! Finance to determine market cap and Wikipedia’s rule of thumb regarding classification. According to those sources, at about $1.48B DWA is a small-cap company. According to the United States Proxy Exchange (USPX) guidelines (pages 9&10), using data from Equilar, the median CEO compensation for small-cap corporations was $2.2 million in 2010, so DWA’s pay is well above that median, being actually closer to the median pay of a mid-cap, even though it came from stock grants rather than annual salary. I voted against the pay plan and the compensation committee members: Mellody Hobson, Thomas Freston, and Nathan Myhrvold.
On all other proxy items, I voted as recommended by management.
Mark your calendars; here’s the deadline for proposals by shareowners for next year:
Pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), stockholders may present proper proposals for inclusion in our Proxy Statement and for consideration at our next annual meeting of stockholders. To be eligible for inclusion in our 2013 Proxy Statement, your proposal must be received by us no later than December 12, 2012, and must otherwise comply with Rule 14a-8. While the Board of Directors will consider stockholder proposals, we reserve the right to omit from our Proxy Statement stockholder proposals that we are not required to include under the Exchange Act, including Rule 14a-8.
According to SharkRepellent.net, DWA maintains a plurality vote standard to elect directors with no resignation policy, so they are ripe for a majority vote proposal, which 93% of Dow Jones companies have adopted but which hasn’t moved down as a common practice among small-caps. Time to push good corporate governance standards down.
Additionally, DWA allows special meetings to be called but only by shareowners holding a majority of the votes, not the 10% typically requested by shareowners. And it gets complicated from there because of more than one class of shares. DWA also has supermajority requirements for amending bylaws. There appears to be plenty of areas for democratic reform.
|NUM.||PROXY ITEN||McRitcie’s Vote|
|1.1||Elect Director Jeffrey Katzenberg||For|
|1.2||Elect Director Roger A. Enrico||For|
|1.3||Elect Director Lewis W. Coleman||For|
|1.4||Elect Director Harry Brittenham||For|
|1.5||Elect Director Thomas E. Freston||Withhold|
|1.6||Elect Director Mellody Hobson||Withhold|
|1.7||Elect Director Michael Montgomery||For|
|1.8||Elect Director Nathan Myhrvold||Withhold|
|1.9||Elect Director Richard Sherman||For|
|3||Advisory Vote to Ratify Named Executive Officers’ Compensation||Against|