Bio-Rad Laboratories (BIO): Proxy Score 33

Bio-Rad LaboratoriesBio-Rad Laboratories, Inc. (BIO), which manufactures and supplies products and systems used to separate complex chemical and biological materials, as well as to identify, analyze, and purify their components for life science research, healthcare, analytical chemistry, and other markets, is one of the stocks in my portfolio. Their annual meeting is coming up on 4/28/2015. had the vote of two funds when I checked and voted on 4/22/2015. I see CalSTRS voted with management on all issues. I voted with management 33% of the time and assigned Bio-Rad Laboratories a proxy score of 33.

View Proxy Statement. Read Warnings below. What follows are my recommendations on how to vote the Boeing 2015 proxy in order to enhance corporate governance and long-term value.

Bio-Rad Laboratories ISS Rating

From Yahoo! Finance: Bio-Rad Laboratories, Inc.’s ISS Governance QuickScore as of Apr 1, 2015 is 10. The pillar scores are Audit: 10; Board: 10; Shareholder Rights: 5; 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. That gives us a quick idea of where to focus… almost everywhere.

Bio-Rad Laboratories Compensation

Bio-Rad Laboratories’s Summary Compensation Table shows the highest paid named executive officer (NEO) was CEO/Chair Norman Schwartz at  about $4.7M in 2014.  I’m using Yahoo! Finance to determine market cap ($4B) and Wikipedia’s rule of thumb regarding classification.

Bio-Rad Laboratories is a small-cap company.  According to Equilar (page 6), the median CEO compensation at large-cap corporations was $2.7 million in 2013, so Bio-Rad Laboratories’ pay is substantially more than that, even factoring for inflation. Bio-Rad Laboratories shares underperformed the S&P 500 over the most recent one, two, and five year periods. Bio-Rad Laboratories outperformed very slightly over the most recent 10 year period.


The GMIAnalyst report I reviewed gave Bio-Rad Laboratories an overall grade of ‘C.’ According to the report:

  • Bio-Rad Laboratories is a controlled company, where a single shareholder or shareholder block controls 69% of the voting power. (Ed: Perhaps that explains the high relative pay.)
  • Unvested equity awards partially or fully accelerate upon the CEO’s termination. Accelerated equity vesting allows executives to realize pay opportunities without necessarily having earned them through strong performance.
  • The company has not disclosed specific, quantifiable performance target objectives for the CEO. Disclosure of performance metrics is essential for investors to assess the rigor of incentive programs.
  • The company pays long-term incentives to executives without requiring the company to perform above the median of its peer group. Incentive plans that pay for mediocre performance undermine the linkage between pay and performance.
  • The CEO’s annual incentives did not rise or fall in line with annual financial performance, reflecting a potential misalignment in the short-term incentive design.
  • 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.
  •  The company’s failure to establish and disclose specific standards regarding minimum equity retention standards for its CEO and directors may weaken the ability of equity awards to align executives’ interests with long-term value creation.

Pay of  almost $4.7M for mediocre performance combined with the above issues doesn’t seem right. I would vote against the pay package but we don’t have the chance.

Bio-Rad Laboratories Board of Directors and Board Proposals

Generally, when I vote against the pay package I also vote against the compensation committee. Since we don’t have the opportunity to vote on pay and since I don’t like the structure that gives one person control, I voted against both up for election. Neither of the directors on the proxy own stock in out company. According to the information I have readily available, 38.60% of shares were voted against Louis Drapeau. I don’t know how to reconcile that with a single shareholder controlling 69% of the voting power but I’ve got better things to do with my time than try to figure that one. Here’s what Calvert said about their vote against board members:

The board does not include at least one minority director after the election.The nominee is an incumbent member of the board; the board does not have a formal nominating committee; and average board tenure is 12 years or greater and the company exhibits a record of poor performance.

True, but the “average” is skewed by one who has served 48 years and another who has served 20.

Bio-Rad Laboratories Accounting

I voted to ratify Bio-Rad Laboratories’ auditor, KPMG LLP, since far less than 25 percent of total audit fees paid are attributable to non-audit work.

Shareholder Proposals at Bio-Rad Laboratories

With regard to shareholder proposals, there were none.

CorpGov Recommendations for Bio-Rad Laboratories – Votes Against Board Position in Bold

1.1Elect Director Louis DrapeauAgainstAgainstAgainst
1.2Elect Director Robert M. MalchioneAgainstAgainstAgainst
2Ratify KPMG LLP as AuditorsForForFor

Corporate Governance Issues at Bio-Rad Laboratories

Looking at for provisions unfriendly to shareowners:SharkRepellent

  • Special meetings can only be called by shareholders holding not less than 50.1% of the voting power.

Bio-Rad Laboratories Proxy Proposal Deadline for Next Year

Mark your Calendar to Submit Future Proposals: 

If you want us to consider including a proposal in next year’s proxy statement, you must deliver it in writing to Attention: Corporate Secretary, Bio-Rad Laboratories, Inc. at 1000 Alfred Nobel Drive, Hercules, California 94547, no later than December 3, 2015.


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.

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