Wal-Mart Stores (WMT), is one of the stocks in my portfolio. Their annual meeting is June 6, 2014. ProxyDemocracy.org had collected the votes of one fund when I checked and voted on 5/31/2014. I voted with management 58% of the time. View Proxy Statement. Read Warnings below. What follows are my recommendations on how to vote the WMT proxy in order to enhance corporate governance and long-term value.
WMT’s Summary Compensation Table shows EVP C. Douglas McMillion was the highest paid named executive officer (NEO) at about $25.6M in 2013. I’m using Yahoo! Finance to determine market cap ($248B) and Wikipedia’s rule of thumb regarding classification. WMT 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 WMT is over that. GTAT shares underperformed the NASDAQ substantially over the one, two, and five periods.
The GMIAnalyst report I reviewed gave WMT an overall grade of ‘D.’ According to the report:
- The company has not disclosed specific, quantifiable performance target objectives for the CEO, in contrast to 73.9% of companies in its home market that have provided such metrics. Disclosure of performance metrics is essential for investors to assess the rigor of incentive programs.
Because of these issues, I voted against the pay plan and members of the compensation committee: C. Douglas McMillon, Michael T. Duke, Gregory B. Penner, and S. Robson Walton.
Other Proxy Issues
The GMIAnalyst report listed a plethora of possible issues including:
- Related Party Transactions
- Overboarded Non-Exec Directors
- Environmental Investigations
- Social Impact Events
- Social Investigations
WMT is not a signatory of the UN Global Compact. However, I didn’t get into analyzing all these issues.
I voted to ratify the auditors, since Deloitte & Touche LLP doesn’t appear to be doing any conflicting consulting work for GTAT. Since there were no other proxy issues, I didn’t do a more in-depth analysis but the Walton family owns about half of the company, so not much is likely to change.
With regard to shareowner proposals. I voted in favor of all of them. Moving to an independent chair makes sense, since the board can’t properly evaluate the CEO if the CEO is also the chair. I’ve submitted several similar proposals myself. I voted in favor of reporting on lobbying payments and policies. We need to know how our money is being spent and if it aligns with our values. The amount of funds is material.
The proposal to disclose recoupment activity re senior officers was a new one for me but it would help us know if WMT is taking action. We read of all the problems but little on what’s been done. Boards should be accountable to their shareowners by providing a sufficient amount of information on when specific corporate policies have been applied. This request is reasonable.
I submitted a proposal to WMT to allow shareowners with 10% of voting power to call a special meeting. They filed an 8-K in March to amend their bylaws to allow such meetings… under more limited conditions than what I asked for. Still, I see it as progress in the right direction.
CorpGov Recommendations Below – Votes Against Board Position in Bold
|1a||Elect Director Aida M. Alvarez||For||For|
|1b||Elect Director James I. Cash, Jr.||For||For|
|1c||Elect Director Roger C. Corbett||For||For|
|1d||Elect Director Pamela J. Craig||For||For|
|1e||Elect Director Douglas N. Daft||For||For|
|1f||Elect Director Michael T. Duke||Against||Against|
|1g||Elect Director Timothy P. Flynn||For||For|
|1h||Elect Director Marissa A. Mayer||For||For|
|1i||Elect Director C. Douglas McMillon||Against||For|
|1j||Elect Director Gregory B. Penner||Against||For|
|1k||Elect Director Steven S Reinemund||For||For|
|1l||Elect Director Jim C. Walton||For||For|
|1m||Elect Director S. Robson Walton||Against||Against|
|1n||Elect Director Linda S. Wolf||For||For|
|3||Ratify NEO Compensation||Against||Against|
|4||Require Independent Board Chairman||For||For|
|5||Disclosure of Recoupment Activity from Senior Officers||For||For|
|6||Report on Lobbying Payments and Policy||For||For|
Mark your Calendar
If you wish to submit a proposal for possible inclusion in our proxy statement relating to our 2015 Annual Shareholders’ Meeting, send the proposal, by registered, certified, or express mail to:
Gordon Y. Allison, Vice President and General Counsel,
Wal-Mart Stores, Inc.
702 Southwest 8th Street
Bentonville, Arkansas 72716-0215
Shareholder proposals intended for inclusion in our proxy statement for the 2015 Annual Shareholders’ Meeting in accordance with the SEC’s Rule 14a-8 under the Exchange Act must be received by our company in the manner described above no later than the close of business on December 24, 2014.
Issues for Future Proposals
- Board is authorized to increase or decrease the size of the board without shareholder approval.
- Directors may only be removed for cause and only by the vote of 66.67% of the shares entitled to vote.
From Yahoo! Finance: Wal-Mart Stores Inc.’s ISS Governance QuickScore as of May 1, 2014 is 5. The pillar scores are Audit: 10; Board: 9; Shareholder Rights: 5; Compensation: 1. 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.