International Business Machines Corp. (IBM): How I Voted – Proxy Score 75

IBMInternational Business Machines Corp. $IBM, is one of the stocks in my portfolio. Their annual meeting is coming up on 4/29/2014. had collected the votes of four funds when I checked and voted on 4/22/2014.  I voted with management 75% 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

IBM’s Summary Compensation Table (page 40) shows CEO/Chair V.M. Rometty was the highest paid named executive officer (NEO) at about $14M in 2013. I’m using Yahoo! Finance to determine market cap ($194B) and Wikipedia’s rule of thumb regarding classification. IBM 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 IBM is well below median.


The GMIAnalyst report I reviewed gave IBM an overall ‘F’ for several reasons, including concerns about: possible Securities Fraud, Related Party Transactions, Board Integrity, CEOs on Board, Overboarded Directors, Severance Vesting, and Accounting Investigations. After scanning though these, I voted against Shirley Ann Jackson because I can’t believe she can be an effective director at five companies, as well as holding several other posts. I also voted against the executive incentive bonus plan because I didn’t see in the ‘objective tests’ any required performance measure against peer companies. It looks to me that if the market goes up, execs will do very well, even though their performance may be below average. And the measures included are based on a very vague – ‘may include.’

With regard to shareowner proposals, I voted in favor of Madeline Moore’s proposal asking the board for an annual report on lobbying practices, payments, memberships and decision-making process. I also voted in factor of  John Chevedden’s proposal to allow shareowners to act by written consent. This is a good governance measure, to be used in emergencies. I have introduced similar proposals at other companies. Last, I voted for Kenneth Steiner’s proposal to adopt a policy that in the event of a change in control acceleration of vesting will be limited.

How I voted (CorpGov) below with positions opposed by the board in bold:

1.1Alain J.P. BeldaForForForForAgainst
1.2William R. BrodyForForForForAgainst
1.3Kenneth I. ChenaultForForForAgainstAgainst
1.4Michael L. EskewForForForForAgainst
1.5David N. FarrForForForForAgainst
1.6Shirley Ann JacksonAgainstForForForAgainst
1.7Andrew N. LiverisForForForAgainstAgainst
1.8W. James McNerney, Jr.ForForForAgainstAgainst
1.9James W. OwensForForForForAgainst
1.10Virginia M. RomettyForForForAgainstAgainst
1.11Joan E. SperoForForForForAgainst
1.12Sidney TaurelForForForForAgainst
1.13Lorenzo H. ZambranoForForForForAgainst
2Ratify AuditorsForForAgainstForFor
3Ratify NEO CompensationForForForAgainstAgainst
4Executive Incentive Bonus PlanAgainstForForAgainstAgainst
5Employee Stock Purchase PlanForForForForFor
6Report on LobbyingForForForForFor
7Right to Act by Written ConsentForForForForFor
8Pro-rata VestingForForForForFor

Mark your calendar

Stockholder proposals may be submitted for IBM’s 2015 proxy material after the 2014 Annual Meeting and must be received at our corporate headquarters no later than November 10, 2014. Proposals should be sent via registered, certified or express mail to: Office of the Secretary, International Business Machines Corporation, 1 New Orchard Road, Mail Drop 301, Armonk, NY 10504.

  Looking at, IBM requires unanimous written consent (default New York state statute) and special meetings can only be called by shareholders holding not less than 25% of the voting power.

From Yahoo! Finance, International Business Machines Corporation’s ISS Governance QuickScore as of Apr 1, 2014 is 1. The pillar scores are Audit: 1; Board: 7; Shareholder Rights: 2; Compensation: 1. 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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