How I Voted: 3M Co (MMM) – Proxy Score 47%

3M Co ($MMM) is one of the stocks in my portfolio. Their annual meeting is coming up on 5/14/2013. had collected the votes of four funds when I checked on 5/6/2013.  I voted with management 47% 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.

3M’s Summary Compensation Table shows Inge G. Thulin, CEO & Chairman was the highest paid named executive officer (NEO) at about $14.8M in 2012. I’m using Yahoo! Finance to determine market cap ($74.6B) and Wikipedia’s rule of thumb regarding classification. 3M 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.

3M’s pay is above median, even if we factor inflation.  Former CEO George W. Buckley was paid $25,391,738 in 2012, more than five times the median ($4,968,006) of the other named executive officers, much of it not tied to company performance.  He is entitled to a potential payment of about $53.8 million in a kind of severance pay and has over $13 million in non-qualified deferred compensation plans.
As for the new CEO, Mr. Thulin’s annual target cash compensation consist of $1.3 million in base salary and target annual incentive compensation of $2 million. For 2012, his annual long-term incentive grant will have a target value of $8 million consisting of market-priced stock options and performance shares. Typically, these options simply vest over time and the performance shares are based on annual performance, which undermines the intent of long-term incentive awards. Taken together, these facts suggest that compensation practices are not well-aligned with shareholder interests.
Therefore, I voted against the pay package and members of the compensation committee: Vance D. Coffman, Chair, Aulana L. Peters, Edward M. Liddy, Robert J. Ulrich, and Robert S. Morrison. Additional concerns, Lead Director Vance D. Coffman and four other directors have a minimum of a decade of service and eight of the ten directors serve on at least two other boards.

Of course, I voted in favor of my own proposal to provide the right to act by written consent. A good governance measure. Although sympathetic to the idea of limiting political expenditures, I think the proposal from David Rodgers and Clean Yield may be a bit over the top but I voted for it.

How I voted (CorpGov) below:

1aElect Director Linda G. AlvaradoForForForForFor
1bElect Director Vance D. CoffmanForForForForAgainst
1cElect Director Michael L. EskewForForForForFor
1dElect Director W. James FarrellForForForForFor
1eElect Director Herbert L. HenkelForForForForFor
1fElect Director Muhtar KentForForForForFor
1gElect Director Edward M. LiddyForForForForAgainst
1hElect Director Robert S. MorrisonForForForForAgainst
1iElect Director Aulana L. PetersForForForForAgainst
1jElect Director Inge G. ThulinForAgainstForForFor
1kElect Director Robert J. UlrichForForForForAgainst
2Ratify AuditorsForForAgainstForFor
3Ratify Named Executive Officers’ CompensationForAgainstForForAgainst
4Provide Right to Act by Written ConsentAgainstForForForFor
5Study Feasibility of Prohibiting Political ContributionsAgainstAgainstAgainstAgainstFor

In order for a stockholder proposal to be considered for inclusion in 3M’s Proxy Statement for next year’s Annual Meeting, our Corporate Secretary must receive the proposal by November 27, 2013. Such proposals must be sent via registered, certified, or express mail (or other means that allows the stockholder to determine when the proposal was received by the Company) to: Gregg M. Larson, Deputy General Counsel and Secretary, 3M Company, 3M Center, Building 220-13E-34, St. Paul, MN 55144-1000. Such proposals must comply with the Securities and Exchange Commission’s regulations regarding the inclusion of stockholder proposals in Company sponsored proxy materials, such as the stockholder continuing to own a minimum number of shares until the Annual Meeting and appearing in person or through an authorized representative at the meeting to present the proposal.

 Looking at, I see no action can be taken without a meeting by written consent and special meetings can only be called by shareholders holding not less than 25% of the voting power.

3M Company’s ISS Governance QuickScore as of May 1, 2013 is 2. The pillar scores are Audit: 1; Board: 2; Shareholder Rights: 2; Compensation: 4. 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