Google Inc. (GOOG), a technology company that builds products and provides services to organize the information, is one of the stocks in my portfolio. Their annual meeting is coming up on 6/3/2015. ProxyDemocracy.org had the vote of one fund when I checked and voted on 5/28/2015. I voted with management 39% of the time and assigned Google Inc. a proxy score of 39.
View Proxy Statement. Read Warnings below. What follows are my recommendations on how to vote the Google Inc. 2015 proxy in order to enhance corporate governance and long-term value.
Google Inc. ISS Rating
From Yahoo! Finance: Google Inc.’s ISS Governance QuickScore as of May 1, 2015 is 10. The pillar scores are Audit: 2; Board: 9; Shareholder Rights: 10; 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… board, shareholder rights, and compensation.
Google Inc. Compensation
Google Inc. Summary Compensation Table (p. 38) shows the highest paid named executive officer (NEO) was Executive Chairman of the Board of Directors Eric E. Schmidt, at about $108.7M in 2014. I’m using Yahoo! Finance to determine market cap ($363.3B) and Wikipedia’s rule of thumb regarding classification.
Google Inc. is a large-cap company. According to Equilar (page 6), the median CEO compensation at large-cap corporations was $10.1 million in 2013, so Google Inc.’s pay is substantially above that number. Google Inc. shares substantially under-performed in comparison to the NASDAQ over the most recent one and two year periods. Therefore, it is hard to give the CEO credit for performance.
The GMIAnalyst report I reviewed gave Google Inc. an overall grade of ‘F.’ According to the report:
- 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.
With relative pay far above median, poor performance and the above issue, I voted against the omnibus stock plan.
Google Inc. Board of Directors and Board Proposals
Generally, when I vote against a pay package I also vote against the compensation committee, since they recommended the pay package to the full board: L. John Doerr, Paul S. Otellini, and K. Ram Shriram. Additionally, I voted against Ann Mather who I believe is overboarded, since she sits on 4 boards. I am also very concerned that 4 out of 11 directors have served for more than 15 years and only 2 have served for less than 10 years.
Google Inc. Accounting
I voted not to ratify Google’s auditor since it appears more than 25 percent of total audit fees paid are attributable to non-audit work.
Shareholder Proposals at Google Inc.
With regard to shareholder proposals, of course I voted in favor of the proposal I (James McRitchie) co-filed with John Chevedden and the NorthStar Asset Management to restructure our stock so that each share gets one vote. Until that happens, shareholders are no more than beggars at the foot of royalty. All shares should have an equal voice. Please vote FOR the Recapitalization Plan.
I also voted in favor of Walden Asset Management’s proposal to report on lobbying. Citizens United v FEC limited the government’s ability to constrain corporate political expenditures. Justice Kennedy’s majority opinion in justifies the Court’s by pointing to the Internet.
With the advent of the Internet… Shareholders can determine whether their corporation’s political speech advances the corporation’s interest in making profits, and citizens can see whether elected officials are ‘in the pocket’ of so-called moneyed interests.
Yet, corporations are not required to make the disclosures to shareowners as Justice Kennedy seems to have believed. How can we, as shareowners, hold corporate managers accountable when we do not know what candidates or measures they are supporting? Please vote in favor of this proposal.
I also voted in favor of the Firefighters’ proposal to move to simple majority voting. As they say, under the Company’s current standard, a nominee for the board can be elected with as little as a single affirmative vote, even if a substantial majority of the votes cast are “withheld” from the nominee. Again, shareholders have only the rights of beggars at Google Inc. Please vote FOR.
I voted AGAINST Shelton Ehrlich’s request for a report in an attempt to stop Google Inc. from purchasing renewable electricity. We have global climate change and oceans growing so acidic many areas will no longer support diverse life. This is not the time to move back to coal… even if that is cheap in the short-run.
For similar reasons, I voted AGAINST the National Center for Public Policy Research’s proposal on climate change regulations.
CorpGov Recommendations for Google Inc. – Votes Against Board Position in Bold
| # | PROPOSAL TEXT | CorpGov | CBIS |
|---|---|---|---|
| 1.1 | Elect Director Larry Page | For | For |
| 1.2 | Elect Director Sergey Brin | For | For |
| 1.3 | Elect Director Eric E. Schmidt | For | For |
| 1.4 | Elect Director L. John Doerr | Withhold | For |
| 1.5 | Elect Director Diane B. Greene | For | For |
| 1.6 | Elect Director John L. Hennessy | For | Withhold |
| 1.7 | Elect Director Ann Mather | For | For |
| 1.8 | Elect Director Alan R. Mulally | Withhold | For |
| 1.9 | Elect Director Paul S. Otellini | Withhold | For |
| 1.10 | Elect Director K. Ram Shriram | Withhold | For |
| 1.11 | Elect Director Shirley M. Tilghman | For | For |
| 2 | Ratify Ernst & Young LLP as Auditors | Against | Against |
| 3 | Amend Omnibus Stock Plan | Against | Against |
| 4 | Recapitalization Plan for all Stock to Have One-vote per Share | For | For |
| 5 | Report on Lobbying Payments and Policy | For | For |
| 6 | Adopt Simple Majority Vote | For | For |
| 7 | Report on Costs of Renewable Energy Investments | Against | Against |
| 8 | Report on Risks Associated with Repeal of Climate Change Policies | Against | Against |
Governance Issues at Google Inc.
Looking at SharkRepellent.net for provisions unfriendly to shareowners:
- Plurality vote standard to elect directors with no resignation policy.
- No action can be taken without a meeting by written consent.
- Special meetings can only be called by shareholders holding not less than 20% of the voting power.
- Supermajority vote requirement (66.67%) to amend certain charter provisions.
Mark your Calendar to Submit Future Proposals at Google Inc.
Stockholders interested in presenting a proposal for consideration at Google’s annual meeting of stockholders in 2016 must follow the procedures found in SEC Rule 14a-8 and the Company’s Bylaws. To be eligible for possible inclusion in the Company’s 2016 proxy materials, all qualified proposals must be received by Google’s Corporate Secretary no earlier than October 14, 2015, nor later than 5:00 p.m. Eastern Time November 13, 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.
6/3 preliminary vote results are that our proposal to Recapitalization Plan for all Stock to Have One-vote per Share won 25.7% of the vote. Considering that insiders control 54%, that means we won almost 56% of the non-insider vote. Will Google get the message?
My proposal was not anti-renewable energy. A technology I played a role in inventing and commercializing is the leading source of biomass electricity in California. I asked that Google tell us what renewables cost when compared with the cost of plugging into the local utility.
As you pointed out re. McRitchie’s proposal the three “bosses” can spend shareholder $ on anything they choose. I argued they should tell us the cost of their renewables since no competitor can take advantage of the number.