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Steris (STE): Proxy Vote – 100

STERIS Corporation logoSteris Corp $STE, which develops and markets surgical and critical care support products and services, is one of the stocks in my portfolio. Their next annual meeting is July 30, 2014. had collected the votes of no funds on Steris when I checked and voted on 6/17/2014. I voted with the Board’s recommendations 100% of the time. View Steris Proxy Statement. Read Warnings below. What follows are my recommendations on how to vote the Steris proxy in order to enhance corporate governance and long-term value.   ISS Rating

From Yahoo! Finance: Steris Corp.’s (STE) ISS Governance QuickScore as of Jun 1, 2014 is 1. The pillar scores are Audit: 1; Board: 2; Shareholder Rights: 2; 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. That gives us a quick idea of where to focus.


Steris’ Summary Compensation Table shows CEO Walter M. Rosebrough, Jr. was paid about $2.9M in 2013. I’m using Yahoo! Finance to determine market cap ($3.8B) and Wikipedia’s rule of thumb regarding classification. Steris 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 Steris’ pay is below that. Steris shares outperformed the S&P 500 over the most recent two year period and about matched during the most recent one and five year periods. GMIAnalyst

The GMIAnalyst report I reviewed gave Steris an overall grade of ‘C.’ However, according to the report:

  •  Unvested equity awards partially or fully accelerate upon the CEO’s termination, characteristic of 90.2% of companies in the home market. Accelerated equity vesting allows executives to realize pay opportunities without necessarily having earned them through strong performance.
  • The company pays long-term incentives to executives without requiring the company to perform above the median of its peer group, which is the case for 90.7% of companies in the Russell 3000 index. Incentive plans that pay for mediocre performance undermine the linkage between pay and performance.

Because pay was substantially below median and despite the problems noted by GMIAnalyst that are shared with most companies, I voted in favor of the pay package.


I’m concerned that Dr. Jacqueline B. Kosecoff seems to be spread thin as an Independent Director of Steris Corporation, since she also serves as a Managing Partner, Moriah Partners, LLC, a private equity firm focused on health services and technology and Senior Advisor to Warburg Pincus LLC, as well as being a member of the SAP America, Inc. Executive Advisory Board since November 2010.


I voted to ratify the the Steris auditor, Ernst & Young LLP.

Shareholder Proposals

None this year.

CorpGov Recommendations on the Steris Proxy Below – Votes Against Board Position in Bold (none)





Elect Director Richard C. Breeden



Elect Director Cynthia L. Feldmann



Elect Director Jacqueline B. Kosecoff



Elect Director David B. Lewis



Elect Director Kevin M. McMullen



Elect Director Walter M Rosebrough, Jr.



Elect Director Mohsen M. Sohi



Elect Director John P. Wareham



Elect Director Loyal W. Wilson



Elect Director Michael B. Wood



Advisory Vote to Ratify Named Executive Officers’ Compensation



Ratify Auditors



Issues for Future Proposals  

 Looking at for Steris provisions unfriendly to shareowners:

  • Plurality vote standard to elect directors with resignation policy.
  • Directors may be removed with or without cause but only by the vote of 75% of the shares entitled to vote.
  • Unanimous written consent.
  • Special meetings can only be called by shareholders holding not less than 50% of the voting power.
  •  Supermajority vote requirement (75%) to amend certain charter and bylaw provisions unless approved by 66.67% of the board.

Mark your Calendar

The deadline for shareholders to submit proposals to be considered for inclusion in the proxy statement for the 2015 Annual Meeting of Shareholders is expected to be February 12, 2015. However, if the date of the 2015 Annual Meeting is changed by more than 30 calendar days from the date on which this year’s meeting is held, a proposal must be received by the Company a reasonable time before the proxy solicitation in connection with the meeting is made.


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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