The Home Depot, Inc. (HD) 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 81% 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.
HD’s Summary Compensation Table shows Francis S. Blake, CEO and Chairman, was the highest paid named executive officer (NEO) at about $11M in 2012. I’m using Yahoo! Finance to determine market cap ($114B) and Wikipedia’s rule of thumb regarding classification. HD 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.
HD’s pay is substantially within median when we factor inflation. Therefore, I voted in favor of the pay package. However, I voted against the bonus and stock plans because of pay concerns. Francis S. Blake’s base salary exceeds the limit for deductibility under IRS Section 162(m). That’s not a smart move and doesn’t protect the interests of shareowners. Additionally, executives receive grants of market-priced stock options that simply vest based on the passage of time, rewarding them for a rising market, without any effort on their part. I also don’t like the potential payment of over $36 million in the event of a change in control. Combined with executive perks such as personal use of corporate aircraft, these facts suggest that compensation practices are not aligned with ISSshareholders’ interests.
At the 2011 annual meeting shareholders approved a shareholder proposal by William Steiner requesting the company to allow shareholders call special meeting with 15% of the outstanding common stock. The company took no action on his proposal and the threshold for such a meeting remains 25%. Only two out of ten board members are women.
I voted in favor of the proposal by the Benedictine Sisters for a diversity report. This seems like something HD could do for minimal cost that might add several positives.
I voted against David Brook’s well-intended proposal that HD develop a stormwater management policy. I used to head a group in California that reviewed environmental documents. I feel relatively certain this is covered in existing documents, although I could be persuaded if shown proper evidence.
How I voted (CorpGov) below:
| # | PROPOSAL TEXT | CorpGov | Domini | Calvert | CBIS |
|---|---|---|---|---|---|
| 1a | Elect Director F. Duane Ackerman | For | For | For | For |
| 1b | Elect Director Francis S. Blake | For | Against | For | For |
| 1c | Elect Director Ari Bousbib | For | For | For | For |
| 1d | Elect Director Gregory D. Brenneman | For | For | For | For |
| 1e | Elect Director J. Frank Brown | For | For | For | For |
| 1f | Elect Director Albert P. Carey | For | For | For | For |
| 1g | Elect Director Armando Codina | For | For | For | For |
| 1h | Elect Director Bonnie G. Hill | For | For | For | For |
| 1i | Elect Director Karen L. Katen | For | For | For | For |
| 1j | Elect Director Mark Vadon | For | For | For | For |
| 2 | Ratify Auditors | For | For | For | Against |
| 3 | Ratify NEO Compensation | For | Against | For | For |
| 4 | Approve Exec Bonus Plan | Against | Against | For | For |
| 5 | Amend Omnibus Stock Plan | Against | Against | Against | For |
| 6 | Prepare Employment Diversity Report | For | For | For | For |
| 7 | Adopt Stormwater Run-off Policy | Against | For | For | For |
To be considered for inclusion in next year’s Proxy Statement and form of proxy, proposals by shareholders for business to be considered at the 2014 Annual Meeting of Shareholders must be submitted in writing by December 9, 2013 and must comply with the requirements of SEC Rule 14a-8. Proposals should be submitted to: Corporate Secretary, The Home Depot, Inc., 2455 Paces Ferry Road, N.W., Building C-22, Atlanta, Georgia 30339.
Looking at SharkRepellent.net, I see special meetings can only be called by shareholders holding not less than 25% of the voting power.
The Home Depot, Inc.’s ISS Governance QuickScore as of May 1, 2013 is 1. The pillar scores are Audit: 1; Board: 4; Shareholder Rights: 2; 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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