How I Voted: Kellogg (K) – Proxy Score 75%

Kellogg ($K) is one of the stocks in my portfolio. Their annual meeting is coming up on 4/26/2013. had the wrong date for the meeting and hadn’t posted any votes when I checked on 4/23/2013.  I voted with management 75% of the time.  View Proxy Statement. Warning: Be sure to vote each item on the proxy. Any items left blank are 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 admit to having average executives. They generally set compensation at 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.

K’s Summary Compensation Table shows CEO John Bryant was the highest paid named executive officer (NEO) at about $6.6M in 2012. I’m using Yahoo! Finance to determine market cap ($23.9B) and Wikipedia’s rule of thumb regarding classification. K 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. I voted in favor of the compensation plan, all directors and the auditor.  I voted against the long-term incentive plan based on the announced vote of Ontario Teachers’ Pension Plan.

I also voted in favor of the State of North Carolina Equity Investment Fund Pooled Trust’s proposal to declassify the board. That’s plain good governance; we need to be able to voice our vote on directors every year.  How I voted (CorpGov) below:


Mark your calendar:

Shareowner proposals submitted for inclusion in our proxy statement for the 2014 Annual Meeting of Shareowners must be received by us no later than November 11, 2013. Other Shareowner proposals to be submitted from the floor must be received by us not earlier than November 11, 2013 and not later than December 11, 2013, and must meet certain other requirements specified in our bylaws.

 Looking at, I see our company has a classified board (maybe that will change after this year’s vote), plurality (instead of majority vote standard) for director elections, no action can be taken without a meeting by written consent, shareholders cannot call special meetings, supermajority vote requirement (66.67%) to approve mergers not approved by a majority of continuing directors, supermajority vote requirement (66.67%) to amend certain charter and certain bylaw provisions.

Kellogg Company’s ISS Governance QuickScore as of Apr 1, 2013 is 7. The pillar scores are Audit: 1; Board: 7; Shareholder Rights: 10; Compensation: 3.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 based on specific company disclosure. ISS, so far, has provided no detail on the relative distribution of the scores. The board’s poor rating provides support for a proxy access proposal. Additionally, 7 of the 11 directors are long-tenured with over a decade of service, five of whom are at least 70 years old – which may signal succession planning concerns. I see a shareowner revolt brewing.  Perhaps we should meet on Sharegate to do some more analysis.

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