How I Voted: Scripps Networks Interactive (SNI) – Proxy Score 25%

Scripps Networks Interactive, Inc. ($SNI) 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 5/9/2013.  I voted with management 25% of the time.  View Proxy Statement (no hyperlinked index… no index at all). 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.

SNI’s Summary Compensation Table (page 31) shows Kenneth W. Lowe, CEO & Chairman was the highest paid named executive officer (NEO) at about $14M in 2012. I’m using Yahoo! Finance to determine market cap ($10.2B) and Wikipedia’s rule of thumb regarding classification. SNI is a large-cap company (just barely). 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.

SNI’s pay is above median, even if we factor inflation.  Pay includes generous perquisites, such as club dues and tax gross-ups. Scripps’s governance is hurt by a dual-share structure that gives the Edward W. Scripps Trust control over 93% of the company’s total voting power through a dual-class stock structure. Owning this stock is an act of faith. I’m not sure how deeply devoted I am.
Therefore, I would have voted against the pay package, if given the opportunity (perhaps not required of controlled companies?) and all the members of the compensation committee up for election: David A. Galloway, Chair and Ronald W. Tysoe. I also joined CalSTRS in withholding my vote from Jeffrey Sagansky.

How I voted (CorpGov) below:

1.1David A. GallowayWithholdForForForFor
1.2Nicholas B. PaumgartenForForForForFor
1.3Jeffrey SaganskyWithholdWithholdForForFor
1.4Ronald W. TysoeWithholdWithholdWithholdForFor

Any shareholder proposals intended to be presented at the Company’s 2014 Annual Meeting of Shareholders must be received by the Company at 9721 Sherrill Blvd., Knoxville, Tennessee 37932, on or before December 9, 2013, for inclusion in the Company’s proxy statement and form of proxy relating to the 2014 Annual Meeting of Shareholders.

 Looking at, I see SNI has a plurality vote standard to elect directors with no resignation policy. Special meetings can only be called by shareholders holding not less than 50% of the voting power. Blank check preferred stock. Of course, the biggest problem is unequal vote power.

SNI’s ISS Governance QuickScore ISS Governance QuickScore as of May 1, 2013 is 9. The pillar scores are Audit: 1; Board: 8; Shareholder Rights: 8; 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. That’s about as low as I’ve seen.

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