How I Voted: Gilead Sciences, Inc. (GILD) – Proxy Score 50%

Gilead Sciences, Inc. ($GILD) is one of the stocks in my portfolio. Their annual meeting is coming up on 5/8/2013. had collected the votes of six funds when I checked on 4/30/2013.  I voted with management 50% 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.

GILD’s Summary Compensation Table shows CEO/Chair John C. Martin was the highest paid named executive officer (NEO) at about $15.3M in 2012. I’m using Yahoo! Finance to determine market cap ($77B) and Wikipedia’s rule of thumb regarding classification. GILD 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.

GILD’s pay is above median, even if we factor inflation. Therefore, I voted against the pay package, the omnibus stock plan, and members of the compensation committee: John W. Madigan (chair), Kevin E. Lofton, Nicholas G. Moore, and Per Wold-Olsen.

Of course, I voted in favor of my own proposal to split the CEO and Chair positions, as well as John Chevedden’s proposal to provide shareowners the right to act by written consent. Both measures are simple good corporate governance.

How I voted (my vote in parentheses) below:


1.1Elect Director John F. Cogan4 – 2 (For)
1.2Elect Director Etienne F. Davignon3 – 3 (For)
1.3Elect Director Carla A. Hills3 – 3 (For)
1.4Elect Director Kevin E. Lofton4 – 2 (Against)
1.5Elect Director John W. Madigan4 – 2 (Against)
1.6Elect Director John C. Martin4 – 2 (For)
1.7Elect Director Nicholas G. Moore4 – 2 (Against)
1.8Elect Director Richard J. Whitley3 – 3 (For)
1.9Elect Director Gayle E. Wilson3 – 3 (For)
1.10Elect Director Per Wold-Olsen4 – 2 (Against)
2Ratify Auditors4 – 2 (For)
3Amend Omnibus Stock Plan4 – 2 (Against)
4Increase Authorized Common Stock4 – 2 (For)
5Advisory Vote to Ratify Named Executive Officers’ Compensation5 – 1 (Against)
6Require Majority of Independent Directors on Board6 – 0 (For)
7Provide Right to Act by Written Consent6 – 0 (For)
Mark your calendar:

You may submit proposals for consideration at future stockholder meetings. For a stockholder proposal to be considered for inclusion in our proxy statement for the annual meeting next year, the Corporate Secretary must receive the written proposal at our principal executive offices no later than November 20, 2013. Such proposals also must comply with SEC regulations under Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), regarding the inclusion of stockholder proposals in company proxy materials. Proposals should be addressed to: Corporate Secretary, Gilead Sciences, Inc., 333 Lakeside Drive, Foster City, California 94404, Fax: (650) 578-9264.

 Looking at, I see no action can be taken by written consent and 20% of shares are required to call special meetings.

Five directors are long-tenured with over a decade of service and six directors are at least 70 years old, which may signal succession planning concerns. If the company terminates the executive’s employment without “cause,” they are entitled to receive a lump sum severance payment equal to three times his annual salary and three times his annual bonus, in addition to other benefits.

Gilead Sciences Inc.’s ISS Governance QuickScore as of Apr 1, 2013 is 8. The pillar scores are Audit: 1; Board: 5; Shareholder Rights: 4; 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. Unless compensation and board scores improve, it may be worth gathering on to determine the feasibility of submitting a proxy access proposal next year.

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