Marrone Bio Innovations, Inc. $MBII provides bio-based pest management and plant health products for the agriculture, turf, and ornamental and water treatment markets in the United States and internationally. Marrone Bio is one of the stocks in my portfolio. Their annual meeting is on December 17, 2015. ProxyDemocracy.org had collected the votes of one fund when I checked. I voted with the Board’s recommendations 33% 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.
Marrone Bio Innovations: ISS Rating
From Yahoo! Finance: Marrone Bio Innovations, Inc.’s ISS Governance QuickScore as of Jul 1, 2015 is 9. The pillar scores are Audit: 2; Board: 10; Shareholder Rights: 9; Compensation: 5. Brought to us 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 and Shareholder Rights.
Marrone Bio Innovations: Compensation
Marrone Bio’s Summary Compensation Table shows the highest paid named executive officer (NEO) was Pamela G. Marrone at $311,973. I’m using Yahoo! Finance to determine market cap ($27.2M) and Wikipedia’s rule of thumb regarding classification. Marrone Bio is a nano-cap company. According to Equilar, the median CEO compensation at small-cap corporations was $2.7 million in 2013. Nano-caps are considerably smaller. However, Marrone Bio’s pay is probably lower than median for the period. Marrone Bio shares underperformed the NASDAQ over the most recent one, two, and five year time periods by a wide margin.
Marrone Bio is apparently too small to be included in the MSCI GMIAnalyst database or to be required to provide a say-on-pay.
Marrone Bio Innovations: Accounting
I have no reason to believe the auditor has rendered an inaccurate opinion or is engaged in poor accounting practices, so voted to confirm.
Marrone Bio Innovations: Board Proposals
I voted against both directors. Marrone Bio lost 69% of its value this year so far and further declines might be expected. Although Marrone Bio finally restated their finances, we can probably expect a class-action suit. I’m certainly not pleased with the current board.
Marrone Bio Innovations: Shareholder Proposals
Marrone Bio Innovations: CorpGov Recommendations Below – Votes Against Board Position in Bold
|1.1||Elect Director Timothy Fogarty||Withhold|
|1.2||Elect Director Richard Rominger||Withhold|
|2||Ratify Ernst & Young as Auditors||For|
Looking at SharkRepellent.net for provisions unfriendly to shareowners:
- Classified board with staggered terms.
- Plurality vote standard to elect directors with no resignation policy.
- Directors may only be removed for cause and only by the vote of 66.67% of the shares entitled to vote.
- No action can be taken without a meeting by written consent.
- Shareholders cannot call special meetings.
- Supermajority vote requirement (66.67%) to amend certain charter provisions. Supermajority vote requirement (66.67% or 80%) to amend all bylaw provisions.
Marrone Bio Innovations: Mark Your Calendar
They don’t make it easy to figure out when proposals are due.
Our stockholders are entitled to present proposals for action at a forthcoming meeting if they comply with the requirements of our bylaws and the rules established by the SEC. We anticipate that the date of our 2016 annual meeting of stockholders will be more than 30 days before the anniversary date of this year’s meeting. As a result, to be considered for inclusion in the proxy statement for our 2016 annual meeting of stockholders, stockholder proposals must be delivered to our principal executive offices not later than the close of business on the later of the 45th day prior to such annual meeting or the 10th day following the day on which public announcement of the date of such meeting is first made. Any stockholder proposal (including a proposal to nominate a candidate for director) that is not submitted for inclusion in the proxy statement for our 2016 annual meeting of stockholders must be delivered to or mailed and received at the principal executive offices of the Corporation not less than 45 days prior to the date of the annual meeting. Proposals should be addressed to our Corporate Secretary at 1540 Drew Ave., Davis, California 95618. You are also advised to review our bylaws, which contain additional requirements about advance notice of stockholder proposals and director nominations.
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.