The Hain Celestial Group (HAIN): How I Voted – Proxy Score 9

HAINThe Hain Celestial Group $HAIN is one of the stocks in my portfolio. Their annual meeting is coming up on 11/19/2013. had collected the votes of 2 funds when I checked on 11/15/2013 (there have been more since).  I voted with management 9% 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.

HAIN’s Summary Compensation Table shows Irwin D. Simon, Founder, President, CEO and Chairman of the Board, was the highest paid named executive officer (NEO) at about $24.4M in 2013. I’m using Yahoo! Finance to determine market cap ($4B) and Wikipedia’s rule of thumb regarding classification. HAIN is a mid-cap company. According to Equilar (page 6), the median CEO compensation at median-cap corporations was $4.7 million in 2012. HAIN is at the lower end of mid-caps by market cap, so the pay is even more out of line.

GMIAnalystThe GMIAnalyst report I reviewed gave HAIN a ‘D’ rating for pay. They point out, the CEO’s total pay was more than three times the median pay for the company’s other named executive officers, “raising concerns regarding the role of the CEO and ability of the board to apply effective and appropriate oversight.” In my opinion, such a high ratio is not good for morale either and many indicate lack of succession planning. GMI also raised questions over golden parachutes and severance vesting. I voted against the pay package, the stock plan, and all members of the compensation committee – Richard C. Berke, Chairperson, Jack Futterman, Scott M. O’Neil and David Schechter.

Additional concerns after reading the GMIAnalyst report:

  • Multiple related party transactions and other potential conflicts of interest involving the company’s board or senior managers should be reviewed in greater depth, as such practices should generally be avoided, even when limited to current market rates.
  • HAIN has failed to split the roles of CEO and chairman, which may compromise the board’s independence from current management interests.
  • The Board currently does not have a lead independent director. Yikes! With the founder CEO also occupying the board chair position, HAIN is looking too much like a dictatorship to me.
  • Half of the Board has served for 11 years or longer. I question their independence.
  • Brett C. Icahn serves on 4 boards, in addition to working for as a Portfolio Manager of the Sargon Portfolio of Icahn Capital LP. I question whether or not he has the time necessary to be an effective board member at HAIN.
  • Irwin D. Simon, our CEO/Chair, serves on the board of two other public companies and “several” private companies. How can he possibly devote the time necessary at HAIN to be both an effective CEO and board chair?  The Council of Institutional Investors has the following relevant policy: 2.11  “Absent unusual, specified circumstances, directors with full-time jobs should not serve on more than two other boards. Currently serving CEOs should not serve as a director of more than one other company, and then only if the CEO’s own company is in the top half of its peer group. No other director should serve on more than five for-profit company boards.” I voted against Simon.

Too many things wrong. In the end, I joined with Calvert and CBIS in voting against the entire board. How I voted (CorpGov) below:

1.1Elect Director Irwin D. SimonWithholdWithholdWithhold
1.2Elect Director Richard C. BerkeWithholdWithholdWithhold
1.3Elect Director Jack FuttermanWithholdWithholdWithhold
1.4Elect Director Marina HahnWithholdWithholdWithhold
1.5Elect Director Andrew R. HeyerWithholdWithholdWithhold
1.6Elect Director Roger MeltzerWithholdWithholdWithhold
1.7Elect Director Scott M. O’NeilWithholdWithholdWithhold
1.8Elect Director Lawrence S. ZilavyWithholdWithholdWithhold
2Ratify NEO CompensationAgainstAgainstAgainst
3Amend Omnibus Stock PlanAgainstAgainstAgainst
4Ratify AuditorsForForAgainst

Mark your calendar:

Stockholder proposals intended to be included in the Proxy Statement relating to our 2014 Annual Meeting of Stockholders pursuant to Rule 14a-8 under the Exchange Act (“Rule 14a-8”) must be in writing addressed to the Corporate Secretary of the Company and delivered to the Corporate Secretary at our principal executive offices, no later than June 7, 2014, and must otherwise comply with Rule 14a-8.

  Looking at, I see they maintain a plurality vote standard to elect directors with no resignation policy. They should move to a majority vote standard for directors. Clearly, getting only one vote in an uncontested election shouldn’t entitle anyone to a board seat. Special meetings can only be called by shareholders holding not less than 25% of the voting power. I’d like to see that lowered to 15%. Splitting CEO and chair positions might be an even higher priority.

From Yahoo! Finance, The Hain Celestial Group, Inc.’s ISS Governance QuickScore as of Oct 1, 2013 is 5. The pillar scores are Audit: 1; Board: 9; Shareholder Rights: 4; Compensation: 3. 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 disclosures.

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