How I Voted: ITC Holdings Corp. (ITC) – Proxy Score 50%

ITC Holdings Corp. ($ITC) is one of the stocks in my portfolio. Their annual meeting is coming up on 5/15/2013. had collected the votes of two funds when I checked on 5/9/2013.  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.

ITC’s Summary Compensation Table shows Joseph L. Welch, CEO & Chairman was the highest paid named executive officer (NEO) at about $8.8M in 2012. I’m using Yahoo! Finance to determine market cap ($4.5B) and Wikipedia’s rule of thumb regarding classification. ITC is a mid-cap company. According to the United States Proxy Exchange (USPX) guidelines (pages 9 & 10), using data from Equilar, the median CEO compensation at mid-cap corporations was $4.3 million in 2010.

ITC’s pay is above median, even if we factor inflation.  Therefore, I voted against the pay package and members of the compensation committee: William J. Museler, Hazel R. O’leary, Thomas G. Stephens, and J.C. Watts, Jr.

Of course, I voted in favor of the proposal by CalSTRS to require a majority vote to elect directors — a good governance measure.

How I voted (CorpGov) below:

Any proposal by a shareholder of the Company to be considered for inclusion in the proxy statement for the 2014 annual meeting must be received by Wendy McIntyre, our Corporate Secretary, by the close of business on December 6, 2013. Such proposals should be addressed to her at our principal executive offices and should satisfy the informational requirements applicable to shareholder proposals contained in the relevant SEC rules. If the date for the 2014 Annual Meeting is significantly different than the first anniversary of the 2013 Annual Meeting, SEC Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), provides for an adjustment to the notice period described above.

 Looking at, I see ITC has a plurality vote standard to elect directors with no resignation policy. Action by written consent is permitted. However, if the IT Holdings Partnership owns less than 35% then shareholders can only act through unanimous written consent. Special meetings can only be called by shareholders holding not less than 50.1% of the voting power.

ITC Holdings Corp.’s ISS Governance QuickScore as of May 1, 2013 is 4. The pillar scores are Audit: 1; Board: 1; Shareholder Rights: 2; Compensation: 8. 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.

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