Starbucks (SBUX): How I Voted – Proxy Score 56%

Starbucks ($SBUX) is one of the stocks in my portfolio. Their annual meeting is coming up on 3/20/2013. had collected the votes of six funds when I checked on 3/15/2012.  I voted with management 56% of the time.  View Proxy Statement. Warning: Be sure to vote each item on the proxy. Any items left blank will be voted in favor of management’s recommendations. (See Broken Windows & Proxy Vote Rigging – Both Invite More Serious Crime)

I generally vote against pay packages where NEOs were paid above median in the previous year but make exceptions where something obviously warrants different treatment. 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), aggregate compensation by public companies to NEOs increased from 5 percent of earnings in 1993-1995 to about 10 percent in 2001-2003.

Few firms want to admit to having average executives. 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, with their collective pay spiraling out of control. We need to slow the pace of money going to the 1% if our economy is not to become third-world.

SBUX’s SummaryCompensation Table shows that Howard Schultz, CEO and Board Chairman, was the highest paid named executive officer (NEO) at about $29M in 2012, after getting $16M in 2011 and $22M in 2010. The CEO has realized over $191M from the exercise of options over the past four years. I’m using Yahoo! Finance to determine market cap and Wikipedia’s rule of thumb regarding classification. SBUX 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 at large-cap corporations was $10.8 million in 2010.

Even factoring inflation, SBUX’s pay is substantially above median. I voted against the compensation plan and all members of the compensation committee Kevin R. Johnson (Chair), Olden Lee, James G. Shennan, Jr., Javier G. Teruel, and Myron E. Ullman, III. I also joined with others in opposing the stock plan but voted to ratify the auditor.

I generally support proposals on political spending, but voted against my friend John Harrington’s proposal. It goes just a little too far in seeking a complete prohibition, not just full disclosure or a vote by shareowners. How I voted (CorpGov) below:

1.1Howard SchultzForAgainstForForAgainstFor
1.2William W. BradleyForForForForForFor
1.3Robert M. GatesForForForForForFor
1.4Mellody HobsonForForForAgainstForFor
1.5Kevin R. JohnsonAgainstForForForAgainstFor
1.6Olden LeeAgainstForForForForFor
1.7Joshua Cooper RamoForForForForForFor
1.8James G. Shennan, Jr.AgainstAgainstForForForFor
1.9Clara ShihForForForForForFor
1.10Javier G. TeruelAgainstForForAgainstForFor
1.11E. Ullman, IIIAgainstForForForForFor
1.12Craig E. WeatherupForAgainstForForForFor
2Ratify NEO CompensationAgainstAgainstAgainstAgainstAgainstAgainst
3Amend Omnibus Stock PlanAgainstAgainstAgainstAgainstAgainstFor
4Ratify AuditorsForForForForForFor
5Prohibit Political SpendingForAgainstAgainstForAgainstAgainst

Mark your calendar: Requirements for Shareholder Proposals to Be Considered for Inclusion in the Company’s Proxy Materials.

Pursuant to SEC Rule 14a-8, shareholder proposals intended for inclusion in our 2014 proxy statement and acted upon at our 2014 Annual Meeting of Shareholders (the “2014 Annual Meeting”) must be received by us at our executive offices at 2401 Utah Avenue South, Mail Stop S-LA1, Seattle, Washington 98134, Attention: Corporate Secretary, on or prior to September 27, 2013.

Looking at, I see SBUX has some supermajority requirements and action by written consent must be unanimous. They give a Mean Bullet Proof Rating to SBUX of 1.75. Here’s the accompanying footnote: The FactSet TrueCourse Bullet Proof Rating is a weighted average index comprised of significant components that impact takeover defenses. The rating scale is from 0 to 10 with a 10 representing the most formidable defenses. The rating system is a relative measurement and is not intended to measure the probability of a successful defense. Statistics are based upon the number of eligible and active companies in the database.

Starbucks Corporation’s ISS Governance QuickScore, reported by Yahoo! Finance as of Mar 1, 2013 is 5. The pillar scores are Audit: 1; Board: 2; Shareholder Rights: 4; Compensation: 7. Brought to you by Institutional Shareholder Services (ISS). Scores range from “1” (low governance risk) to “10” (higher governance risk). Each of the pillar scores for Audit, Board, Shareholder Rights and Compensation, are bsased on specific company disclosure. ISS, so far, has provided no detail on the relative distribution of the scores.

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