Google $GOOG – Proxy Score 53

Google (GOOG) is one of the stocks in my portfolio. Their annual meeting is coming up on 6/6/2013. ProxyDemocracy.org had collected the votes of three funds when I checked on 5/23/2013.  I voted with management 53% 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. The rationale for peer group benchmarking is a mythological market for CEOs.

Google’s Summary Compensation Table shows Nikesh Arora, Sr. VP, was the highest paid named executive officer (NEO) at about $51M in 2012. I’m using Yahoo! Finance to determine market cap ($293B) and Wikipedia’s rule of thumb regarding classification. Google is a mega-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.

Google’s pay is above median when we factor inflation and consider Eric E. Schmidt’s $101M in 2011. Apparently, Schmidt’s $101M award is for  advising new CEO Larry Page. The stock will vest over a four-year period with no performance requirements or restrictions. It is very difficult to justify why such as award, not tied to performance, was made to someone who, together with Brin, already owns a controlling share of the company.Therefore, I would have voted against the pay package, if given the opportunity. Since I wasn’t, I voted against the compensation committee chair, Paul S. Otellini and what appears to be its only other member, L. John Doerr.

I joined with Calvert, Domini and CBIS in voting against the auditor.

There are lots of governance issues at Google but the main one involves the tri-class share structure (dual class wasn’t good enough; they had to issue completely non-voting stock). John Chevedden’s proposal to recapitalise the firm to allow one-vote per share is the proposal that really matters, especially when there are bumps down the road. I wish I could have voted for it ten times over. 

Of course, I also voted in favor of my own proposal to adopt a policy requiring senior executives to retain a significant percentage of shares acquired through equity pay programs until reaching normal retirement age. I want them to pass on a great company, not just build one. Holding until retirement age will ensure long-term thinking and strategies.

Also voted in favor of Pax World’s proposal for a report on batteries. Yes, Google may be doing a wonderful job already. If so, such a report will be a snap and will be great publicity. I’m betting they will also learn something  useful by going through this exercise. I also voted in favor of the Laborers’ District Council and Contractors’ Pension Fund of Ohio’s report on succession planning. Again, if they are doing it, this should be a snap and releasing such a report to shareowners would certainly be reassuring.

How I voted (CorpGov) below:

NUM. PROPOSAL TEXT MGMT CorpGov Calvert Domini CBIS
1.1 Elect Director Larry Page For For For For For
1.2 Elect Director Sergey Brin For For For For For
1.3 Elect Director Eric E. Schmidt For For For Withhold For
1.4 Elect Director L. John Doerr For Withhold For For For
1.5 Elect Director Diane B. Greene For For For For For
1.6 Elect Director John L. Hennessy For For For For For
1.7 Elect Director Ann Mather For For Withhold For For
1.8 Elect Director Paul S. Otellini For Withhold For For For
1.9 Elect Director K. Ram Shriram For For For For For
1.10 Elect Director Shirley M. Tilghman For For For For For
2 Ratify Auditors For Against Against Against Against
3 Report on Reducing Lead Battery Health Hazards Against For For For For
4 Recapitalization Plan to One-vote per Share Against For For For For
5 Adopt Retention Ratio for Executives Against For For For For
6 Adopt Policy on Succession Planning Against For For For For

Stockholders may present proper proposals for inclusion in our proxy statement and for consideration at the next annual meeting of stockholders by submitting their proposals in writing to Google’s Corporate Secretary in a timely manner. For a stockholder proposal to be considered for inclusion in our proxy statement for our 2014 Annual Meeting of Stockholders, the Corporate Secretary of Google must receive the written proposal at our principal executive offices no later than December 25, 2013. If we hold our 2014 Annual Meeting of Stockholders more than 30 days before or after June 6, 2014 (the one-year anniversary date of the 2013 Annual Meeting of Stockholders), we will disclose the new deadline by which stockholders proposals must be received under Item 5 of Part II of our earliest possible Quarterly Report on Form 10-Q or, if impracticable, by any means reasonably determined to inform stockholders. In addition, stockholder proposals must otherwise comply with the requirements of Rule 14a-8 under the Exchange Act. Such proposals also must comply with SEC regulations under Rule 14a-8 regarding the inclusion of stockholder proposals in company-sponsored proxy materials. Proposals should be addressed to:

Google Inc., Attn: Corporate Secretary, 1600 Amphitheatre Parkway, Mountain View, California 94043

(650) 618-1806

[email protected]

  Looking at SharkRepellent.net, Google has a plurality vote standard to elect directors with no resignation policy. No action can be taken without a meeting by written consent. Special meetings can only be called by shareholders holding not less than 20% of the voting power. Supermajority vote requirement (66.67%) to amend certain charter provisions.

Google Inc.’s ISS Governance QuickScore as of May 1, 2013 is 8. The pillar scores are Audit: 1; Board: 8; Shareholder Rights: 10; Compensation: 5. 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.

, , , , , , , , ,

Comments are closed.

Powered by WordPress. Designed by WooThemes