Ford Motor Company $F is one of the stocks in my portfolio. Their annual meeting is on 5/8/2014. ProxyDemocracy.org had collected the votes of two funds when I checked and voted on 5/4/2014. I voted with management 52% of the time. View Ford’s Proxy Statement, which is user friendly.
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.
Ford’s Summary Compensation Table shows CEO Alan Mulally was the highest paid named executive officer (NEO) at about $23.2M in 2013. I’m using Yahoo! Finance to determine market cap ($62.7B) and Wikipedia’s rule of thumb regarding classification. F 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 Ford is over median. Therefore, I voted against the pay plan, stock plan and members of the Compensation Committee:
- Richard A. Manoogian (Chair, excepting that he is not standing for reelection), Anthony F. Earley, Jr., Jon M. Huntsman, Jr., John C. Lechleiter, Ellen R. Marram, John L. Thornton
The GMIAnalyst report I reviewed gave Ford an overall grade of ‘F’ for several reasons. Members of the Ford family—including shares held by Emeritus director William Clay Ford; his son, Chairman William Clay Ford, Jr.; and his nephew, director and former executive Edsel B. Ford II—control over 30% of the company’s voting power through a dual class stock structure. Last year, the CEO received 1,275,510 stock options after receiving 884,433, 1,040,221, 5,000,000, and 3,561,274 in years prior. Despite his substantial equity holdings, Chairman Ford received a mega-grant of 595,238 options.
Market-priced stock options may provide rewards due to a rising market alone, regardless of individual performance. In addition, both men received discretionary cash bonuses: $1,325,000 for the CEO and $375,000 for the Chairman after each received even greater discretionary bonuses in the two years prior. On top of that, the CEO and Chairman each received a base salary of $2 million—which is 100% over the IRC tax deductibility limit. GMI flagged the following areas:
Related Party Transactions, Entrenched Board, Overboarded Directors, Severance Vesting, One Share One Vote, Restatements or Special Charges, and Other Social Impact Events. Two directors serves on four boards, another five. I refuse to vote for Richard A. Gephardt; five boards is too many.
Half the board has served for ten years or more. More than half the board is over 65 years old. I think the board needs new bloom.
With regard to shareowner proposals, I voted in favor of John Chevedden’s proposal to adopt a recapitalization plan for all of Ford’s outstanding stock to have one-vote per share. The current dual-class voting stock reduces accountability by allowing corporate control to be retained by insiders disproportionately to their money at risk.
As Chevedden says in his proposal,
the 2013 proposal on this topic won the all-time highest support for any Ford shareholder proposal — 1.5 Billion votes. This proposal topic is believed to have received more than 50% of the independent vote of the non-family Ford stock each year since 2011. It is time that the 58-year practice (1956-2014) of disenfranchising Ford public shareholders be changed for the common benefit of all shareholders.
Until shareowners can put in place a proposal like Chevedden’s, there is little hope for any other reforms at Ford. This is the most critical proposal. In their opposition statement, the board argues:
Through their actions over the past century, the Ford family has proven that the long-term success of the Company for the benefit of all shareholders has been, and continues to be, the primary purpose of their involvement. This long-term focus is essential for sustained success in our industry.
However, over the last ten years the price of Ford stock is up only about 10%, whereas the S&P 500 is up about 70% during the same period. Over twenty years Ford is up 50% vs 320% for the S&P 500. Over fifty years Ford is up 650% vs 1600% for the S&P 500. The Ford family has proven not the long-term success of the Company but its long-term failure.
Of course, I also voted in favor of my proposal to amend our bylaws and appropriate governing document to give shareowners of 10% of our outstanding common stock the power to call a special shareowner meeting. Shareowner input on the timing of shareowner meetings is especially important when events unfold quickly and issues may become moot by the next annual meeting.
How I voted (CorpGov) below using bold where my vote opposes the board’s recommendation:
Mark your calendar:
Unless the Board of Directors determines otherwise, next year’s annual meeting will be held on May 14, 2015. Any shareholder proposal intended for inclusion in the proxy materials for the 2015 annual meeting must be received by the Company’s Secretary no later than November 28, 2014, and can be sent via facsimile to 313-248-8713.
Looking at SharkRepellent.net, no action can be taken without a meeting by written consent. Special meetings can only be called by shareholders holding not less than 20% of the voting power. From Yahoo! Finance, Ford Motor Co.’s ISS Governance QuickScore as of May 1, 2014 is 10. The pillar scores are Audit: 1; Board: 8; Shareholder Rights: 8; Compensation: 10. 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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