Waste Connections (WCN): How I Voted – Proxy Score 50

WCNWaste Connections, Inc. $WCN, is one of the stocks in my portfolio. Their annual meeting is coming up on 5/16/2014. ProxyDemocracy.org had collected the votes of no funds when I checked and voted on 5/12/2014.  I voted with management 50% of the time.  View Proxy Statement. Read Warnings below.


WCN’s Summary Compensation Table shows CEO/Chair Ronald J. Mittelstaedtwas the highest paid named executive officer (NEO) at about $3.4M in 2013. I’m using Yahoo! Finance to determine market cap ($5.6B) and Wikipedia’s rule of thumb regarding classification. WCN 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 WCN is within median. WCN shares have performed reasonably in comparison with the S&P 500 over the one, two and five year periods. 

I’m concerned that WCN has not established a formal clawback policy, which would allow the boards to recoup incentive payouts that may have been the undeserved result of erroneous or fraudulent financial reporting. Additionally, WCN has not disclosed specific, quantifiable performance target objectives for the CEO, in contrast to 74% of companies that have. Despite these concerns, I voted in favor of the pay package.


The GMIAnalyst report I reviewed gave WCN an overall grade of ‘F.’ From their report the following were listed as potential areas of concern:  

  • High Impact Governance Events – This is probably for suing John Chevedden and me for filing a shareholder proposal. Although we lost this case we have since won similar cases.

  • Related Party Transactions

  • Entrenched Board

  • Board Integrity

  • Severance Vesting

  • Asset-Liability Valuation

  • Water Use

A few highlights from the report stood out:

The company has failed to split the roles of CEO and chairman, which may compromise even further the board’s independence from current management interests. Split CEO and chairman roles are characteristic of 57.8% of companies in the Russell 3000.

Multiple related party transactions and other potential conflicts of interest involving the company’s board or senior managers should be reviewed in greater depth, as such practices, even when limited to current market rates, raise concerns regarding potential self-dealing or abuse. We note that related party transactions are flagged at a majority (50.8%) of companies in United States.

GMI has flagged the board as potentially entrenched due to a high number of long-serving directors. Of particular importance during periods of extended underperformance, the impact of an entrenched board can be particularly damaging to sustainable shareholder interests. We have also flagged this board for potential concerns regarding the integrity and effectiveness of certain directors…

These concerns are aggravated due to additional factors, e.g. , a classified board, entrenching takeover defenses, which together with the high number of long-tenured directors raises concerns about whether the board is able to provide an effective counterbalance to management. We note that only 21.9% in United States have been flagged for having an entrenched board.

 Board of Directors

Four out of five directors have served for 13 years or more and a classified board doesn’t facilitate annual accountability, especially given the combined CEO/Chair. For these reasons, and because of the issued stated above, I voted against Robert Davis, the only director up for election.

Other Proxy Issues

I voted against the stock plan as dilutive. With regard to shareowner proposals, there we none. Perhaps the Boards tactic of intimidation by suing me for daring to file a proposal is working. However, if governance changes aren’t made, I’ll be filing again.

CorpGov Recommendations Below – Votes Against Board Position in Bold
1Elect Director Robert H. DavisAgainst
2Ratify AuditorsFor
3Advisory Vote to Ratify Named Executive Officers’ CompensationFor
4Approve Omnibus Stock PlanAgainst

Mark your Calendar

To be considered for inclusion in next year’s proxy materials, stockholder proposals must be in writing and be received by the Secretary of Waste Connections, at the address set forth on the first page of this proxy statement, no later than the close of business (Central Standard Time) on December 4, 2014.

Issues for Future Proposals

 Looking at SharkRepellent.net: 
  • Classified board with staggered terms.
  • Directors may only be removed for cause.
  • No action can be taken without a meeting by written consent.
  • Shareholders cannot call special meetings.
From Yahoo! Finance: Waste Connections Inc.’s ISS Governance QuickScore as of May 1, 2014 is 2. The pillar scores are Audit: 1; Board: 5; Shareholder Rights: 3; 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.


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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