Union Pacific (UNP): How I Voted – Proxy Score 13

Union Pacific (UNP) is one of the stocks in my portfolio. Their annual meeting is coming up on 5/10/2012. Voting ends 5/9 on Moxy Vote’s proxy voting platform, which listed nine “good causes,” but three were consolidations, when I checked and voted on 5/7. ProxyDemocracy.org had 1 fund voting.UNP scores 13 out of 100, since I voted with management on only 13% of the proxy.

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.

UNP’s SummaryCompensation Table shows that James R. Young, CEO & Chair was the highest paid named executive officer (NEO) at over $19M in 2011. I’m using Yahoo! Finance to determine market cap and  Wikipedia’s rule of thumb regarding classification. According to those sources, UNP is a large-cap company. 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 UNP’s pay is above that median.  I voted against the pay package and against the members of the compensation committee (Erroll B. Davis, Jr., Thomas J. Donohue, Thomas F. McLarty III, Steven R. Rogel, Jose H. Villarreal) as well as directors per the consensus of those announcing their votes on Moxy Vote’s proxy voting platform.

I voted in favor of AFSCME’s proposal #4, requesting disclosure of lobbying efforts and expenses, including payments to trade associations like the US Chamber of Commerce, which worked so hard to overturn proxy access. I see it as a good governance measure.

I also voted in favor of John Chevedden’s proposal #5, requesting adoption of a policy requiring that senior executives retain a significant percentage of stock acquired through equity pay programs until at least 1 year after their employment with the company ends. That should provide a strong incentive for executives to work for the long-term benefit of shareowners, or at least reduce the likelihood of leaving their replacements in a bind through accounting trickery.

On other matters (ratifying the auditor), I voted with management.

Here’s the deadline for proposals by shareowners for next year:

Under SEC rules, any shareholder who wishes to present a proposal to be included in our Proxy Statement and introduced at our 2013 Annual Meeting of Shareholders must submit the proposal to the Secretary of the Company so that it is received no later than the close of business on November 26, 2012, and must satisfy the other requirements of SEC Rule 14a-8.

And here’s how I actually voted, using Moxy Vote’s proxy voting platform.

1 ELECTION OF DIRECTOR: A.H. CARD, JR.
2 ELECTION OF DIRECTOR: E.B. DAVIS, JR.
3 ELECTION OF DIRECTOR: T.J. DONOHUE
4 ELECTION OF DIRECTOR: A.W. DUNHAM
5 ELECTION OF DIRECTOR: J.R. HOPE
6 ELECTION OF DIRECTOR: C.C. KRULAK
7 ELECTION OF DIRECTOR: M.R. MCCARTHY
8 ELECTION OF DIRECTOR: M.W. MCCONNELL
9 ELECTION OF DIRECTOR: T.F. MCLARTY III
10 ELECTION OF DIRECTOR: S.R. ROGEL
11 ELECTION OF DIRECTOR: J.H. VILLARREAL
12 ELECTION OF DIRECTOR: J.R. YOUNG
13 RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE AS THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.
14 AN ADVISORY VOTE ON EXECUTIVE COMPENSATION ( SAY ON PAY ).
15 SHAREHOLDER PROPOSAL REGARDING LOBBYING ACTIVITIES IF PROPERLY PRESENTED AT THE ANNUAL MEETING.
16 SHAREHOLDER PROPOSAL REGARDING EXECUTIVE STOCK OWNERSHIP IF PROPERLY PRESENTED AT THE ANNUAL MEETING.

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