NextEra Energy, Inc. (NEE) is one of the stocks in my portfolio. Their annual meeting is coming up on 5/23/2013. ProxyDemocracy.org had collected the votes of three funds when I checked on 5/16/2013. I voted with management 69% 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. The rationale for peer group benchmarking is a mythological market for CEOs.
NEE’s Summary Compensation Table shows Lewis Hay, III, Chairman and former CEO, was the highest paid named executive officer (NEO) at about $19M in 2012. I’m using Yahoo! Finance to determine market cap ($34.4B) and Wikipedia’s rule of thumb regarding classification. NEE is a large-cap company category. 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.
NEE’s pay is substantially above median, even if we factor inflation. Therefore, I voted against the pay package, bonus plan and members of the compensation committee: J. Brian Ferguson, Chair, Robert M. Beall, II, Kenneth B. Dunn, Toni Jennings, Rudy E. Schupp, and Hansel E. Tookes, II. J. Brian Ferguson and Oliver D. Kingsley, Jr. are stepping off the board just before the meeting.
Five board members have served for at least a decade. While there is value in experience, such members should be increasingly considered lacking independence and likely “captured” by management. Two directors serve together on the board of Brown & Brown, two on the board of Harris Corporation, and two on the board of Owens Corning. These intra-board relationships can compromise our directors’ ability to act individually and independently. Additionally, five directors are active CEOs, calling into question the time they have available to devote to the company’s board. Only two out of fourteen directors are women.
I voted against New York Common’s proposal on spent fuel rods. I would have rather seen a report or investigation than the specified action.
How I voted (CorpGov) below:
| NUM. | PROPOSAL TEXT | CorpGov | AFSCME | CBIS |
|---|---|---|---|---|
| 1a | Elect Director Sherry S. Barrat | For | Against | For |
| 1b | Elect Director Robert M. Beall, II | Against | Against | For |
| 1c | Elect Director James L. Camaren | For | Against | For |
| 1d | Elect Director Kenneth B. Dunn | Against | For | For |
| 1e | Elect Director Lewis Hay, III | For | Against | For |
| 1f | Elect Director Toni Jennings | Against | For | For |
| 1g | Elect Director James L. Robo | For | Against | For |
| 1h | Elect Director Rudy E. Schupp | Against | For | For |
| 1i | Elect Director John L. Skolds | For | For | For |
| 1j | Elect Director William H. Swanson | For | For | For |
| 1k | Elect Director Michael H. Thaman | For | For | For |
| 1l | Elect Director Hansel E. Tookes, II | Against | For | For |
| 2 | Ratify Auditors | For | Against | Against |
| 3 | Approve Executive Incentive Bonus Plan | For | Against | For |
| 4 | Advisory Vote to Ratify NEO Compensation | For | For | For |
| 5 | Minimize Pool Storage of Spent Nuclear Fuel | Against | Against | For |
Proposals on matters appropriate for shareholder consideration consistent with Rule 14a-8 under the Exchange Act submitted by shareholders for inclusion in the proxy statement and form of proxy for the 2014 Annual Meeting of Shareholders must be received by the Corporate Secretary at the Company’s principal executive offices not later than December 9, 2013. The submission of such proposals by shareholders is subject to regulation by the SEC pursuant to Rule 14a-8. Shareholder proposals should be sent to the attention of the Corporate Secretary by mail (U.S. certified mail in the case of proposals required to comply with the advance notice provisions of NextEra Energy’s Bylaws), by personal delivery to NextEra Energy, Inc., P.O. Box 14000, 700 Universe Boulevard, Juno Beach, Florida 33408-0420, or by facsimile to 561-691-7702.
Looking at SharkRepellent.net, I see no action can be taken without a meeting by written consent. Shareholders cannot call special meetings unless those with 50.1% of the voting power agree to do so. NEE has a supermajority vote requirement (75%) to amend certain charter provisions unless unanimously recommended by the board if all such directors are continuing directors. Supermajority vote requirement (75%) to amend all bylaw provisions.
I’m not the only one with compensation concerns. NextEra Energy, Inc.’s ISS Governance QuickScore as of May 1, 2013 is 9. The pillar scores are Audit: 1; Board: 5; Shareholder Rights: 6; Compensation: 10. 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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