The Hain Celestial Group, Inc. (NASD:HAIN), which manufactures, markets, distributes, and sells organic and natural products, is one of the stocks in my portfolio. Their annual meeting is coming up on 11/20/2014. ProxyDemocracy.org had collected the votes of two funds when I checked on 11/18/2014. Sorry for the late post. Today is the last day to vote online. I voted with management 14% of the time and assigned them a proxy score of 14. View Proxy Statement. Read Warnings below. What follows are my recommendations on how to vote the HAIN 2014 proxy in order to enhance corporate governance and long-term value.
Hain Celestial Group ISS Rating
From Yahoo! Finance: The Hain Celestial Group, Inc.’s ISS Governance QuickScore as of Nov 1, 2014 is 9. The pillar scores are Audit: 1; Board: 7; Shareholder Rights: 3; 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. That gives us a quick idea of where to focus… pay and the board.
Hain Celestial Group Compensation
Hain Celestial Group Summary Compensation Table shows the highest paid named executive officer (NEO) was CEO and Chairman Irwin D. Simon, at about $11.2M. I’m using Yahoo! Finance to determine market cap ($5.4B) and Wikipedia’s rule of thumb regarding classification. Han Celestial is a mid-cap company. According to Equilar (page 6), the median CEO compensation at mid-cap corporations was $4.9 million in 2013, so Hain Celestial’s pay is well above that, even factoring for inflation. To its credit, Hain Celestial shares outperformed the NASDAQ over the most recent one, two and five year periods, sometimes substantially.
The GMIAnalyst report I reviewed gave Procter & Gamble an overall grade of ‘D’ and an ‘F” for pay. According to the report:
- The company has not disclosed specific, quantifiable performance target objectives for the CEO. While a majority (83.9%) of companies in the home market have not disclosed these targets, disclosure of performance metrics is essential for investors to assess the rigor of incentive programs.
- The CEO’s total summary pay for the last reported period was more than three times the median pay for the company’s other named executive officers. Such disparity in pay raises concerns regarding the company’s succession planning process and the distribution of responsibilities among the executive management team.
- If you go to ProxyDemocracy.org and click on the votes of Calvert and Trillium, you will see several more reasons to vote down the pay, bonus and stock plans.
I voted against the pay, bonus and stock plans (too much going to NEOs, not enough to other employees) and the members of the compensation committee.
Hain Celestial Group Board of Directors
As indicated above, I voted against members of the compensation committee. I am also concerned that more half the board members have served 12 years or more and that, after this election, none of the directors will be minorities. Given these issues, I joined with Calvert and Trillium in voting against the board.
Hain Celestial Group Accounting
I voted to ratify the auditor since less than 25 percent of total audit fees paid are attributable to non-audit work.
Shareholder Proposals at the Hain Celestial Group
There was one shareowner proposal at the Hain Celestial Group. It was my proposal to move to majority voting for directors. Rather than have my proposal voted, the Hain Celestial Group substituted a nearly identical proposal of their own. Of course, I voted in favor of it. More at Hain Celestial Group: Win or Lose?
CorpGov Recommendations for the Hain Celestial Group Below – Votes Against Board Position in Bold
|1.1||Elect Director Irwin D. Simon||Withhold|
|1.2||Elect Director Richard C. Berke||Withhold|
|1.3||Elect Director Jack Futterman||Withhold|
|1.4||Elect Director Andrew R. Heyer||Withhold|
|1.5||Elect Director Roger Meltzer||Withhold|
|1.6||Elect Director Scott M. O’Neil||Withhold|
|1.7||Elect Director Adrianne Shapira||Withhold|
|1.8||Elect Director Lawrence S. Zilavy||Withhold|
|2||Majority Voting for Uncontested Election of Directors||For|
|3||Increase Authorized Common Stock||Against|
|4||Approve Executive Incentive Bonus Plan||Against|
|5||Advisory Vote to Ratify NEO Compensation||Against|
|6||Amend Omnibus Stock Plan||Against|
Issues for Future the Hain Celestial Group
Looking at SharkRepellent.net for provisions unfriendly to shareowners:
- Special meetings can only be called by shareholders holding not less than 25% of the voting power.
- No rights of proxy access
Mark your Calendar to Submit Future Proposals at the Hain Celestial Group
Stockholder proposals intended to be included in the Proxy Statement relating to our 2015 Annual Meeting of Stockholders pursuant to Rule 14a-8 under the Exchange Act (“Rule 14a-8”) must be in writing addressed to the Corporate Secretary of the Company and delivered to the Corporate Secretary at our principal executive offices, no later than June 12, 2015, and must otherwise comply with Rule 14a-8.
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 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 % if our economy is not to become third world. The rationale for peer group benchmarking is a mythological market for CEOs.