Union Pacific Corporation ($UNP) is one of the stocks in my portfolio. Their annual meeting is coming up on 5/16/2013. ProxyDemocracy.org had collected the votes of three funds when I checked on 5/13/2013. I voted with management 56% 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.
UNP’s Summary Compensation Table shows James R. Young, former CEO & current Chairman was the highest paid named executive officer (NEO) at about $19.1M in 2012. I’m using Yahoo! Finance to determine market cap ($71.7B) and Wikipedia’s rule of thumb regarding classification. UNP 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.
UNP’s pay is above median, even if we factor inflation. Therefore, I voted against the pay package, stock plan and members of the compensation committee: Erroll B. Davis, Jr., Chair, Thomas J. Donohue, Thomas F. McLarty III, teven R. Rogel, and Jose H. Villarreal.
I voted in favor of the proposal by AFSCME to require a report on lobbying payments and policy. I favor transparency and accountability in the use of staff time and corporate funds to influence legislation and regulation both directly and indirectly. I want to be able to see if UNP’s political agenda advances the financial and long-term ESG interests of shareowners.
How I voted (CorpGov) below:
| # | PROPOSAL TEXT | CorpGov | CBIS | AFSCME | TRILLIUM |
|---|---|---|---|---|---|
| 1.1 | Elect Director Andrew H. Card, Jr. | For | For | For | Against |
| 1.2 | Elect Director Erroll B. Davis, Jr. | Against | For | For | Against |
| 1.3 | Elect Director Thomas J. Donohue | Against | For | Against | Against |
| 1.4 | Elect Director Archie W. Dunham | For | For | Against | Against |
| 1.5 | Elect Director Judith Richards Hope | For | For | Against | Against |
| 1.6 | Elect Director John J. Koraleski | For | For | Against | For |
| 1.7 | Elect Director Charles C. Krulak | For | For | For | Against |
| 1.8 | Elect Director Michael R. McCarthy | For | For | For | Against |
| 1.9 | Elect Director Michael W. McConnell | For | For | For | Against |
| 1.10 | Elect Director Thomas F. McLarty, III | Against | For | For | Against |
| 1.11 | Elect Director Steven R. Rogel | Against | For | Against | Against |
| 1.12 | Elect Director Jose H. Villarreal | Against | For | For | Against |
| 1.13 | Elect Director James R. Young | For | For | Against | Against |
| 2 | Ratify Auditors | For | Against | Against | For |
| 3 | Advisory Vote to Ratify Named Executive Officers’ Compensation | Against | For | For | Against |
| 4 | Approve Omnibus Stock Plan | Against | For | Against | Against |
| 5 | Report on Lobbying Payments and Policy | For | For | For | For |
Under SEC rules, any shareholder who wishes to present a proposal to be included in our Proxy Statement and introduced at our 2014 Annual Meeting of Shareholders must submit the proposal to the Secretary of the Company so that it is received no later than the close of business on November 28, 2013, and must satisfy the other requirements of SEC Rule 14a-8. Any shareholder who instead wishes to bring a proposal directly before the Company’s next Annual Meeting of Shareholders (other than certain proposals submitted only pursuant to SEC Rule 14a-8) must provide written notice of the proposal to the Secretary of the Company no earlier than January 16, 2014, and no later than the close of business on February 15, 2014, and must otherwise provide the information and comply with the procedures set forth in the Company’s By-Laws, a copy of which is available on the Company’s website at www.up.com/investors/governance. Shareholders may obtain a printed copy of the Company’s By-Laws by contacting the Secretary of the Company at the address set forth on the notice page of this Proxy Statement. If a shareholder wishing to make such a proposal fails to comply with the forgoing notice provision and does not also satisfy the requirements of SEC Rule14a-4(c)(1), the Company may exercise discretionary voting authority over proxies it solicits in determining how to vote on the proposal.
Looking at SharkRepellent.net, I see UNP requires unanimous written consent (default Utah state statute for companies incorporated before 7-1-1992). That is certainly too high.
Union Pacific Corporation’s ISS Governance QuickScore as of May 1, 2013 is 1. The pillar scores are Audit: 1; Board: 7; Shareholder Rights: 1; Compensation: 2. 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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