3D Systems Corporation $DDD, is one of the stocks in my portfolio. Their annual meeting is coming up on 5/19/2014. ProxyDemocracy.org had collected the votes of no funds when I checked and voted on 5/13/2014. I voted with management 64% of the time. View Proxy Statement. Read Warnings below.
Compensation
3D’s Summary Compensation Table shows CEO Abraham N. Reichental was the highest paid named executive officer (NEO) at about $10.9M in 2013. I’m using Yahoo! Finance to determine market cap ($5.14B) and Wikipedia’s rule of thumb regarding classification. 3D is a mid-cap company. According to Equilar (page 6), the median CEO compensation at mid-cap corporations was $4.7 million in 2012, so 3D is above median. 3D shares have performed well in comparison with the NASDAQ over the two and five year periods but has slipped over one year.
I’m concerned that unvested equity awards partially or fully accelerate upon the CEO’s termination and that 3D has not disclosed specific, quantifiable performance target objectives for the CEO, in contrast to 74% of companies that have. Additionally, failure to establish and disclose specific standards regarding minimum equity retention standards for its CEO and directors means incentives aren’t properly aligned with long-term value. It was close, but I voted against the pay package and against members of the compensation committee:
- Karen E. Welke, Chair
- G. Walter Lowenbaum, II
- Daniel S. Van Riper
GMIAnalyst
The GMIAnalyst report I reviewed gave 3D an overall grade of ‘C.’ In addition to some of the information on pay cited above a few highlights from the report stood out:
The company has not adopted a full majority director election standard, greatly limiting the ability of company shareholders to hold members of the board accountable in uncontested elections…
The company has been flagged for its failure to utilize an environmental management system or to seek ISO 14001 certification for some or all of its operations…
It does not currently report on its sustainability policies and practices via the Global Reporting Initiative, a commonly used and highly effective standard for such reporting, nor has it become a voluntary signatory of the UN Global Compact, yet another commonly employed global standard for achieving and maintaining more effective sustainability practices. 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.
Board of Directors
Two thirds of the directors have served for 10 years or more and, according to Calvert, the board includes no minorities.
Other Proxy Issues
There were no shareowner proposal. I voted to ratify the auditor, since 3D did little business with them outside the audit.
| # | PROPOSAL TEXT | CorpGov | CALVERT | CBIS |
|---|---|---|---|---|
| 1.1 | Elect Director William E. Curran | For | Withhold | Withhold |
| 1.2 | Elect Director Peter H. Diamandis | For | Withhold | Withhold |
| 1.3 | Elect Director Charles W. Hull | For | Withhold | Withhold |
| 1.4 | Elect Director Jim D. Kever | For | Withhold | Withhold |
| 1.5 | Elect Director G. Walter Loewenbaum, II | Withhold | Withhold | Withhold |
| 1.6 | Elect Director Kevin S. Moore | For | Withhold | Withhold |
| 1.7 | Elect Director Abraham N. Reichental | For | Withhold | Withhold |
| 1.8 | Elect Director Daniel S. Van Riper | Withhold | Withhold | Withhold |
| 1.9 | Elect Director Karen E. Welke | Withhold | Withhold | Withhold |
| 2 | Ratify Auditors | For | For | For |
| 3 | Ratify NRO Compensation | Against | Against | For |
Mark your Calendar
Under Rule 14a-8 of the Exchange Act, certain stockholder proposals may be eligible for inclusion in our 2015 Proxy Statement and form of proxy. The date by which we must receive stockholder proposals to be considered for inclusion in the Proxy Statement and form of proxy for the 2015 Annual Meeting of Stockholders is December 2, 2014 or (if the date of our 2015 Annual Meeting is changed by more than 30 days from May 19, 2015) a reasonable time before we begin to print and mail the proxy materials for the 2015 Annual Meeting.
Issues for Future Proposals
Looking at SharkRepellent.net: - Plurality vote standard to elect directors with no resignation policy.
- Special meetings can only be called by shareholders holding not less than 50.1% of the voting power.
Warnings
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.
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