How I Voted: Ford (F) – Proxy Score 64%

Ford ($F) is one of the stocks in my portfolio. Their annual meeting is coming up on 5/9/2013. ProxyDemocracy.org had collected the votes of four funds when I checked on 5/3/2013.  I voted with management 64% 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.

Ford’s Summary Compensation Table (why not just label it that way in the index?) shows Alan Mulally, CEO & Chairman was the highest paid named executive officer (NEO) at about $21M in 2012. I’m using Yahoo! Finance to determine market cap ($15B) and Wikipedia’s rule of thumb regarding classification. Ford 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.

Ford’s pay is above median, even if we factor inflation. CEO Alan Mulally received yet another mega-grant of stock options in fiscal 2012. The CEO received 1,275,510 stock options after receiving 884,433 in 2011, 1,040,221 in 2010, 5,000,000 in 2009, and 3,561,274 in 2008. Despite his equity substantial equity holdings, Chairman Ford received 595,238 options in 2012 after receiving 1,806,190 in 2010 and 3,470,000 in fiscal 2009. Market-priced stock options may provide rewards due to a rising market alone, regardless of individual performance. Therefore, I voted against the pay package and members of the compensation committee: Richard A. Manoogian (Chair), Anthony F. Earley, Jr., Jon M. Huntsman, Jr., Ellen R. Marram, and John L. Thornton.

I voted in favor of the The Ray T. and Veronica G. Chevedden Family Trust recapitalization plan to give each share an equal vote and John Chevedden’s proposal to reduce the requirement to hold a special meeting to 10%.

How I voted (CorpGov) below:

#PROPOSALCorpGovCBISAFSCMETRILLIUMCALVERT 
1.1Stephen G. ButlerForForForAgainstFor
1.2Kimberly A. CasianoForForForAgainstFor
1.3Anthony F. Earley, Jr.AgainstForForAgainstFor
1.4Edsel B. Ford IIForForAgainstAgainstFor
1.5William Clay Ford, Jr.ForN/AN/AN/AFor
1.6Richard A. GephardtForForForAgainstAgainst
1.7James H. Hance, Jr.ForForForAgainstAgainst
1.8William W. Helman IVForForForAgainstFor
1.9Jon M. Huntsman, Jr.AgainstForForAgainstFor
1.10Richard A. ManoogianAgainstAgainstAgainstAgainstAgainst
1.11Ellen R. MarramAgainstForAgainstAgainstFor
1.12Alan MulallyForForAgainstAgainstFor
1.13Homer A. NealForForAgainstAgainstFor
1.14Gerald L. ShaheenForForForAgainstFor
1.15John L. ThorntonAgainstForAgainstAgainstFor
2Ratify AuditorsForAgainstAgainstForFor
3NEO CompensationAgainstForAgainstAgainstFor
4Executive Incentive Bonus PlanAgainstN/AN/AN/AAgainst
5Omnibus Stock PlanAgainstAgainstAgainstAgainstAgainst
6Tax Benefits Preservation PlanForForForForFor
7Recapitalization Plan: One-vote per ShareAgainstForForForFor
8Call Special MeetingsAgainstN/AN/AN/AFor

Unless the Board of Directors determines otherwise, next year’s annual meeting will be held on May 8, 2014. Any shareholder proposal intended for inclusion in the proxy materials for the 2014 annual meeting must be received by the Company’s Secretary no later than November 28, 2013, and can be sent via facsimile to 313-248-8713.

 Looking at SharkRepellent.net, I see 30% of share voting power is required to call special meetings and, of course, there is unequal voting of shares.  The number of votes per share of Class B shares is calculated each year so these shares as a class account for 40% of total votes outstanding. Maybe if we win those items the year, we won’t have to think about introducing proposals next year.

Ford Motor Co.’s ISS Governance QuickScore as of Apr 1, 2013 is 9. The pillar scores are Audit: 1; Board: 10; Shareholder Rights: 7; Compensation: 9. 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.  Our board is aged and entrenched. Maybe it is time to get together on Sharegate.com and chart a new course.

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One Response to How I Voted: Ford (F) – Proxy Score 64%

  1. James McRitchie May 9, 2013 at 4:20 pm #

    66.6% of shareholders voted against the stock proposal to recapitalize the stock; 80.6% opposed the special meetings.

    John Chevedden said the proposal that one share equal one vote is “believed to have received the highest vote ever at Ford for a shareholder proposal at 33%.”

    “This is particularly significant given that the Ford family controls about 40% of the vote,” he told the Free Press in an e-mail following the meeting.

    “It means a significant majority of independent Ford shareholders supported Proposal 7,” Chevedden said.

    “Dual shares are not right, just on principle,” said a Chevedden family spokesman who attended the meeting to argue the structure will hurt long-term returns.
    Shareholders gain ground in quest for single stock structure at Ford

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