Broadridge Financial Solutions

Broadridge Financial Solutions: My Vote – Proxy Score 64

Broadridge Financial SolutionsBroadridge Financial Solutions, Inc. (BR) is a provider of investor communications and technology-driven solutions to banks, broker-dealers, mutual funds and corporate issuers. They are one of the stocks in my portfolio. Their annual meeting is on November 12, 2015. ProxyDemocracy.org had collected the votes of two funds when I checked and voted. I voted with the Board’sProxyDemocracy.orgrecommendations 64% of the time. View Proxy Statement

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

Broadridge Financial Solutions: ISS Rating

From Yahoo! Finance: Broadridge Financial Solutions, Inc.’s ISS Governance QuickScore as of Oct 1, 2015 is 1. Scores range from “1” (low governance risk) to “10” (higher governance risk). The pillar scores are Audit: 1; Board: 1; Shareholder Rights: 2; Compensation: 2. 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. 

Broadridge Financial Solutions: Compensation

Broadridge Financial Solutions’ Summary Compensation Table shows the highest paid named executive officer (NEO) was CEO Richard J. Daly at about $17.3M. I’m using Yahoo! Finance to determine market cap ($7B) and Wikipedia’s rule of thumb regarding classification.Broadridge Financial Solutions 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 pay is well above that. Broadridge Financial Solutions’ shares outperformed the S&P 500 over the most recent one, two, five and ten periods.GMIAnalyst

The MSCI GMIAnalyst report I reviewed gave Broadridge Financial Solutions 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.

Even though performance was substantially above average, pay was even more so. Therefore, I voted against the pay package. As is my practice, I also voted against members of the compensation committee because they recommended the pay package to the board: Alan J. Weber, Chair, Robert N. Duelks, and Maura A. Markus.

Broadridge Financial Solutions: Accounting

There is no reason to believe the auditor has rendered an inaccurate opinion or is engaged in poor accounting practices. I voted for the auditor.

Broadridge Financial Solutions: Board Proposals

As indicated above, I voted against the pay plan and several directors.

Broadridge Financial Solutions: Shareholder Proposals

None. Although I submitted a proxy access proposal, Broadridge preempted the shareholder’s meeting by adopting a lighter version of proxy access. I agreed to withdraw my proposal because I viewed even their lite version as substantial progress. See my post Broadridge Adopts Proxy Access: Another Victory

Broadridge Financial Solutions: CorpGov Recommendations Below – Votes Against Board Position in Bold

# PROPOSAL TEXT CorpGov CALVERT  CBIS
1a Elect Director Leslie A. Brun For For For
1b Elect Director Richard J. Daly For For For
1c Elect Director Robert N. Duelks Against For For
1d Elect Director Richard J. Haviland For For For
1e Elect Director Brett A. Keller For For For
1f Elect Director Stuart R. Levine For For For
1g Elect Director Maura A. Markus Against For For
1h Elect Director Thomas J. Perna For For For
1i Elect Director Alan J. Weber Against For For
2 Ratify Named Executive Officers’ Compensation Against For For
3 Ratify Deloitte & Touche LLP as Auditors For For Against

Broadridge Financial Solutions: Issues for Future Proposals

 Looking at SharkRepellent.net for provisions unfriendly to shareowners:

  • No action can be taken without a meeting by written consent.
  • Shareholders cannot call special meetings.
  • Supermajority vote requirement (80%) to amend certain charter provisions.

Broadridge Financial Solutions: Mark your Calendar

Any stockholder who desires to have a proposal considered for presentation at the 2016 annual meeting of stockholders, and included in the proxy statement and form of proxy used in connection with our 2016 annual meeting, must submit the proposal in writing to our Secretary so that it is received no later than June 4, 2016. The proposal must also comply with the requirements of Rule 14a-8 under the Exchange Act.

Warnings

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.

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