American Express Company $AXP is one of the stocks in my portfolio. Their annual meeting is on 5/12/2014. ProxyDemocracy.org had collected the votes of three funds when I checked and voted on 5/4/2014. I voted with management 47% of the time. View AXP’s Proxy Statement, which is user friendly. My recommendations on how to vote the AXP proxy follows.
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.
AXP’s Summary Compensation Table shows Chair/CEO K.I. Chenault was the highest paid named executive officer (NEO) at about $21.8M in 2013. I’m using Yahoo! Finance to determine market cap ($92.6B) and Wikipedia’s rule of thumb regarding classification. AXP 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 AXP is over median. Therefore, I voted against the pay plan and members of the Compensation Committee: Robert D. Walter, Chairman, Ursula M. Burns, Peter Chernin, Samuel J. Palmisano, and Ronald A. Williams. I also voted against Anne Lauvergeon who recently joined the boards of Rio Tinto plc and Rio Tinto Limited as a non-executive director. Since the AXP proxy was released within a week of the board appointments, they may not have had this information for her bio at the time they released the proxy. However, that brings her number of directorships up to five and that’s too many to do a good job.
The GMIAnalyst report I reviewed gave AXP an overall grade of ‘C’ for several reasons including possible Board Integrity issues, Overboarded Directors and Severance Vesting.
With regard to shareowner proposals, I voted in favor of the New York City Comptroller’s request the Board disclose workforce diversity, which makes good economic sense. I voted in favor of Arjuna Capital/Baldwin Brothers proposal to increase customer trust by issuing a report on privacy and data security. I also voted in favor of the proposal by Myra K. Young (my wife) to allow shareowners to act by written consent, which can be especially important in emergency situations. Last, I voted in favor of Kenneth Steiner’s proposal that executives be required to retain significant stock until reaching the age of retirement. That will incentivize long-term thinking.
How I voted (CorpGov) below using bold where my vote opposes the board’s recommendation:
# | PROPOSAL TEXT | MGMT | ||||
1a | For | For | For | For | For | |
1b | For | Against | For | For | Against | |
1c | For | Against | For | For | For | |
1d | For | For | For | For | Against | |
1e | For | For | For | Against | Against | |
1f | For | For | For | For | For | |
1g | For | For | For | For | For | |
1h | For | For | For | For | For | |
1i | For | For | For | For | Against | |
1j | For | For | For | For | For | |
1k | For | For | For | For | For | |
1l | For | For | For | For | Against | |
1m | For | For | For | For | Against | |
2 | For | For | Against | For | For | |
3 | For | Against | For | For | For | |
4 | Against | For | For | For | For | |
5 | Against | For | For | For | For | |
6 | Against | For | For | For | For | |
7 | Against | For | For | For | For |
Mark your calendar:
To be considered for inclusion in next year’s proxy statement, any shareholder proposals submitted in accordance with SEC Rule 14a-8 must be received by our Secretary at our principal executive offices no later than November 26, 2014. Any such proposals must comply with all of the requirements of SEC Rule 14a-8.
Looking at SharkRepellent.net, no action can be taken without a meeting by written consent unless unanimous (default New York state statute). Special meetings can only be called by shareholders holding not less than 25% of the voting power. From Yahoo! Finance, American Express Company’s ISS Governance QuickScore as of May 1, 2014 is 4. 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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