How I Voted: Canadian National Railway (CNI) – Proxy Score 13%

Canadian National Railway ($CNI) is one of the stocks in my portfolio. Their annual meeting is coming up on 4/23/2013. had collected the votes of three funds when I checked on 4/21/2013.  I voted with management 13% 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 if warranted. According to Bebchuk, Lucian A. and Grinstein, Yaniv (The Growth of Executive Pay), 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 set compensation packages that are above average for their “peer group,” 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.

CNI’s SummaryCompensation Table (p. 56) shows that CEO Claude Mongeau was the highest paid named executive officer (NEO) at about $8M in 2012. I’m using Yahoo! Finance to determine market cap ($41B) and Wikipedia’s rule of thumb regarding classification. CNI 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. CNI’s pay is below median.

I don’t know why CalSTRS and Trillium are voting against all the directors. I do see CNI’s board is old, white, entrenched and somewhat overboarded. Six directors have served 17 years or more. This is where reputation comes in. I’m voting with CalSTRS. How I voted (CorpGov) below:

1.1Elect Director Michael R. ArmellinoWithholdWithholdForWithholdFor
1.2Elect Director A. Charles BaillieWithholdWithholdForWithholdFor
1.3Elect Director Hugh J. BoltonWithholdWithholdForWithholdWithhold
1.4Elect Director Donald J. CartyWithholdWithholdForWithholdWithhold
1.5Elect Director Gordon D. GiffinWithholdWithholdForWithholdWithhold
1.6Elect Director Edith E. HolidayWithholdWithholdForWithholdWithhold
1.7Elect Director V. Maureen Kempston DarkesWithholdWithholdForWithholdFor
1.8Elect Director Denis LosierWithholdWithholdForWithholdFor
1.9Elect Director Edward C. LumleyWithholdWithholdForWithholdFor
1.10Elect Director David G.A. McLeanWithholdWithholdForWithholdFor
1.11Elect Director Claude MongeauWithholdWithholdForWithholdFor
1.12Elect Director James E. O’ConnorWithholdWithholdForWithholdFor
1.13Elect Director Robert PaceWithholdWithholdForWithholdFor
2Ratify KPMG LLP as AuditorsForForForForFor
3Vote on Executive Compensation ApproachForForForAgainstFor


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