ITC Holdings (ITC): Proxy Voting Recommendations

ITC HoldingsITC Holdings $ITC, is one of the stocks in my portfolio. Their annual meeting is coming up on 5/21/2014. had collected the votes of no funds when I checked and voted on 5/15/2014.  I voted with management 50% of the time.  View Proxy Statement. Read Warnings below. My proxy voting recommendations follow.


ITC’s Summary Compensation Table (page 40) shows CEO/Chair Joseph L. Welch, was the highest paid named executive officer (NEO) at about $8.9M in 2013. I’m using Yahoo! Finance to determine market cap ($5.8B) and Wikipedia’s rule of thumb regarding classification. ITC 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 ITC is above median. ITC shares have performed reasonably better than the S&P 500 over the one, two and five year periods.

I’m concerned that unvested equity awards partially or fully accelerate upon the CEO’s termination, potentially allowing him to realize pay opportunities without necessarily having earned them through strong performance. The company’s long term incentive compensation is not tied to financial performance. I voted against the pay package and members of the compensation committee:  O’Leary, Stephens, and Museler, Chair.


The GMIAnalyst report I reviewed gave ITC an overall grade of ‘C.’ Normally, I would go through their report and provide some highlights. However, I’m rushed with too many proxies to vote. This one is simple.

Board of Directors

Last year a proposal on the proxy from CalSTRS asked our board to move to a majority vote requirement standard for directors running unopposed. The measure passed overwhelmingly, with 74% of shares voted in favor. Our board implemented a resignation policy to go with their plurality standard, so it is similar to having the requested majority standard.

Other Proxy Issues

I voted against ratifying the auditor since it appears they provided substantial consulting services and those interests might lead them to go easier on the company audit.

I voted in favor of the employee stock purchase plan, because it is only mildly dilutive and we should encourage employees to be owners.

Of course, I voted in favor of my own proposal (James McRitchie) to give shareholders in the aggregate of 15% of our outstanding common stock the power to call a special shareowner meeting. This is a right common to most companies in the S&P 500. It is time for such rights to filter down to mid-cap companies such as ITC, which currently requires more than 50% of voting power to call a special meeting. Try getting that together in an emergency. 


CorpGov Proxy Voting Recommendations Below – Votes Against Board Position in Bold

Mark your Calendar

Any proposal by a shareholder of the Company to be considered for inclusion in the proxy statement for the 2015 annual meeting must be received by Wendy McIntyre, our Corporate Secretary, by the close of business on December 11, 2014. Such proposals should be addressed to her at our principal executive offices and should satisfy the informational requirements applicable to shareholder proposals contained in the relevant SEC rules. If the date for the 2015 Annual Meeting is significantly different than the first anniversary of the 2014 Annual Meeting, SEC Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), provides for an adjustment to the notice period described above.

Issues for Future Proposals

 Looking at 
  • Plurality vote standard to elect directors with resignation policy.
  • Cumulative voting is prohibited in the election of directors (default Michigan state statute).
  • Unanimous written consent (default Michigan state statute).
  • Special meetings can only be called by shareholders holding not less than 50.1% of the voting power.
  • Combined CEO/Chair.
From Yahoo! FinanceITC Holdings Corp.’s ISS Governance QuickScore as of May 1, 2014 is 5. The pillar scores are Audit: 1; Board: 2; Shareholder Rights: 2; Compensation: 9. 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.



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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