Twitter Inc (NYSE:TWTR), one of the stocks in my portfolio, operates as a global platform for public self-expression and conversation in real time. Their annual meeting is coming up on 6/3/2015. ProxyDemocracy.org had the votes of one fund when I checked on 5/19/2015. I voted with Board recommendations 50% of the time.
Twitter Inc: ISS Rating
From Yahoo! Finance: Twitter, Inc.’s ISS Governance QuickScore as of May 1, 2015 is 8. The pillar scores are Audit: 2; Board: 6; Shareholder Rights: 8; Compensation: 9. 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…. Shareholder Rights and Compensation.
Twitter Inc: Compensation
Twitter Inc Summary Compensation Table shows the highest paid named executive officer (NEO) was Senior Vice President of Product Kevin Weil at about $13M in 2014. I’m using Yahoo! Finance to determine market cap ($24B) and Wikipedia’s rule of thumb regarding classification.
Twitter 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 Twitter Inc’s pay was higher than median. Twitter Inc shares outperformed the NASDAQ over the latest 1 and 2 year periods.
The MSCI GMIAnalyst report I reviewed gave Twitter Inc an overall grade of ‘C.’ According to the report:
- 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.
- A decline has occurred in the CEO’s equity holdings in the company over last year. Diminished executive exposure to company stock may work to reduce the alignment between the CEO’s interests and those of shareholders.
- The company’s failure to establish and disclose specific standards regarding minimum equity retention standards for its CEO may weaken the ability of equity awards to align executives’ interests with long-term value creation.
I would have voted Against the pay plan but we don’t have that opportunity.
Twitter Inc: Board of Directors and Board Proposals
I normally vote against the directors on the compensation committee, since they recommended the pay package and stock plan to the full board: Peter Fenton (Chair), Peter Chernin and David Rosenblatt. Unfortunately, because the board is classified, I could not vote against Mr. Fenton or Mr. Chernin. Additionally, four board members own no stock in Twitter Inc.
I voted against both of the directors. I also voted for a say on pay frequency of one year. More frequent accountability is better than less frequent accountability.
Twitter Inc: Auditor
Seeing no potential conflicts of interest, I voted in favor of ratifying the auditor.
Shareholder Proposals at Twitter Inc
CorpGov Recommendations for Twitter Inc – Votes Against Board Position in Bold
|1.1||Elect Director David Rosenblatt||Withhold||Withhold|
|1.2||Elect Director Evan Williams||Withhold||Withhold|
|2||Advisory Vote on Say on Pay Frequency||One Year||One Year|
|3||Ratify PricewaterhouseCoopers LLP as Auditors||For||Against|
Corporate Governance Issues at Twitter Inc
Looking at SharkRepellent.net for provisions unfriendly to shareowners:
- Classified board with staggered terms.
- Plurality vote standard to elect directors with no resignation policy.
- No action can be taken without a meeting by written consent.
- Shareholders cannot call special meetings.
- Supermajority vote requirement (80%) to amend certain charter and all bylaw provisions.
Twitter Inc Proxy Proposal Deadline for Next Year
Mark your calendar to submit future proposals:
Stockholders may present proper proposals for inclusion in our proxy statement and for consideration at next year’s annual meeting of stockholders by submitting their proposals in writing to our Secretary in a timely manner. For a stockholder proposal to be considered for inclusion in our proxy statement for our 2016 annual meeting of stockholders, our Secretary must receive the written proposal at our principal executive offices not later than December 22, 2015. In addition, stockholder proposals must comply with the requirements of Rule 14a-8 regarding the inclusion of stockholder proposals in company-sponsored proxy materials. Stockholder proposals should be addressed to: Twitter, Inc., Attention: Secretary, 1355 Market Street, Suite 900, San Francisco, California 94103.
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.
Economic performance explains only 12% of variance in CEO pay. More than 60% is explained by company size, industry, and existing company pay policy. None of those are performance driven. Additional findings by Mark Van Clieaf of Organizational Capital Partners, as reported in The Alignment Gap Between Creating Value, Performance Measurement, and Long-Term Incentive Design:
- Some 75% of companies have no balance sheet or capital efficiency metrics in their disclosed performance measurement and long-term incentive plan design.
- Only 17% of companies specifically disclose return on invested capital or economic profit as a long-term performance measure for long-term executive compensation.
- Some 47% of S&P 1500 companies over the last five years (2008 – 2012) did not generate a positive cumulative economic profit or return on invested capital greater than their cost of capital.
- More than 85% of the S&P 1500 have no disclosed line of sight process metrics aligned to future value such as innovation and growth drivers.
- Only 10% of all long-term incentives have a disclosed longest performance period for named officers of greater than three years.