Starbucks Corporation $SBUX, is one of the stocks in my portfolio. Their annual meeting is coming up on 3/19/2014. ProxyDemocracy.org had collected the votes of two funds when I checked and voted on 3/9/2014. I voted with management 44% 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.
SBUX’s Summary Compensation Table shows Chairman and CEO Howard Schultz, was the highest paid named executive officer (NEO) at about $17.2M in 2013. I’m using Yahoo! Finance to determine market cap ($55.2B) and Wikipedia’s rule of thumb regarding classification. SBUX is a large-cap company. According to Equilar (page 6), the median CEO compensation at large-cap corporations was $9.7 million in 2012, so SBUX is well over median. I voted in against the pay package and the compensation committee: Kevin R. Johnson (Chair), Olden Lee, James G. Shennan, Jr., Clara Shih, Javier G. Teruel, and Myron E. Ullman, III.
The GMIAnalyst report I reviewed gave SBUX an overall D for several reasons, including concerns about possible related party transactions, board integrity, overboarded non-exec directors, overboarded audit committee members, and severance vesting. I am also concerned that half the directors have been on the board for more than 10 years. How independent can they still be? Additionally:
Starbucks Corporation has been designated High Social Impact on the basis of its primary operating industry. Social impacts, policies and practices at this company are under continual review and monitoring, based on a combination of news reports, legal and regulatory filings, and the company’s own reporting commitments. A red flag in our Sustainability Board Oversight KeyMetric for this company indicates that the board has not formally acknowledged its responsibility in overseeing the company’s social impacts. Ideally the company would have established links between its incentive pay policies for company executives and the effective management of its social and environmental impacts, but this is not the case. In the area of workplace safety this company has not yet implemented OHSAS 18001 as its occupational health and safety management system, nor does it actively disclose its workplace safety record in its annual report or other reporting vehicle.
With regard to shareowner proposals, I voted in favor of John Harrington’s proposal asking the board to amend the bylaws to prohibit the use of corporate funds for political election or campaigns. While that may seem extreme to some, I think it is high time such a policy applied to all corporations.
Of course, I also voted in favor of my own proposal to require an independent board chair. I agree with the Council of Institutional Investors and the Millstein Center for Corporate Governance, “The time has come for independent chairmanship to become the default model of board leadership in corporate North America.”
How I voted (CorpGov) below:
| # | PROPOSAL TEXT | FLORIDA SBA | DOMINI | CBIS | CALVERT | CorpGov | |
|---|---|---|---|---|---|---|---|
| 1a | Director Howard Schultz | For | Against | For | For | For | |
| 1b | Director William W. Bradley | For | For | For | For | For | |
| 1c | Director Robert M. Gates | For | For | For | For | For | |
| 1d | Director Mellody Hobson | For | For | For | For | For | |
| 1e | Director Kevin R. Johnson | For | For | For | For | Against | |
| 1f | Director Olden Lee | For | For | For | For | Against | |
| 1g | Director Joshua Cooper Ramo | For | For | For | For | For | |
| 1h | Director James G. Shennan, Jr. | For | For | For | For | Against | |
| 1i | Director Clara Shih | For | For | For | For | Against | |
| 1j | Director Javier G. Teruel | For | For | For | For | Against | |
| 1k | Director Myron E. Ullman, III | For | Against | For | For | Against | |
| 1l | Director Craig E. Weatherup | For | For | For | For | For | |
| 2 | Advisory Vote to Ratify NEO Pay | Against | Against | For | For | Against | |
| 3 | Ratify Auditors | For | For | Against | For | For | |
| 4 | Prohibit Political Spending | Against | Against | Against | Against | For | |
| 5 | Require Independent Board Chairman | Against | For | For | For | For |
Pursuant to SEC Rule 14a-8, shareholder proposals intended for inclusion in our 2015 proxy statement and acted upon at our 2015 Annual Meeting of Shareholders (the “2015 Annual Meeting”) must be received by us at our executive offices at 2401 Utah Avenue South, Mail Stop S-LA1, Seattle, Washington 98134, Attention: Corporate Secretary, on or prior to September 26, 2014.
Looking at SharkRepellent.net, SBUX requires unanimous written consent (default Washington state statute) and supermajority vote requirements (66.67%) to approve mergers (default Washington state statute).
From Yahoo! Finance, Starbucks Corporation’s ISS Governance QuickScore as of Mar 1, 2014 is 1. The pillar scores are Audit: 1; Board: 4; Shareholder Rights: 1; 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. Vote “for” every item on the proxy ballot and watch those scores go up next year.
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