Medtronic PLC: How I Voted – Proxy Score 44

MedtronicMedtronic PLC ($MDT) manufactures and sells device-based medical therapies worldwide. Medtronic is one of the stocks in my portfolio. Their annual meeting is on December 11, 2015. had collected the votes of two funds when I checked.  I voted with the Board’s recommendations 44% 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. 

Medtronic PLC: ISS Rating

From Yahoo! Finance: Medtronic PLC’s ISS Governance QuickScore as of Nov 1, 2015 is 2. The pillar scores are Audit: 2; Board: 4; Shareholder Rights: 3; Compensation: 3. 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.

Medtronic PLC: Compensation

Medtronic’s Summary Compensation Table shows the highest paid named executive officer (NEO) was Omar Ishrak at $39.5M. I’m using Yahoo! Finance to determine market cap ($108.1B) and Wikipedia’s rule of thumb regarding classification. Medtronic 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 pay is well above that. Medtronic shares outperformed the S & P 500 over the most recent one, two, and five year time periods, but underperformed during the latest ten year time period.GMIAnalyst

The MSCI GMIAnalyst report I reviewed gave Medtronic an overall grade of ‘F.’ According to the report:

  • 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 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 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.

Given these issues and pay that was substantially above average, I voted against the plan and the directors on the compensation committee: Kendall J. Powell, Chair; Craig Arnold, Denise M. O’Leary, Richard H. Anderson, and Scott C. Donnelly.  

Medtronic PLC: 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.

Medtronic PLC: Board Proposals

As noted above, I voted against the pay plan and all directors on the compensation committee. I also voted against   Nabel, Reddy and Levitt, since none of them own any shares in our company. In my opinion, no one should serve as a company director without owning shares, especially directors who have served more than three years. Directors with skin in the game are more committed. I voted for the one-year frequency for say-on-pay.

Medtronic PLC: Shareholder Proposals


Proxy Insight

Proxy Insight reported additional votes.  Calvert Canada Pension Plan Investment Board and Teachers Retirement System of Texas voted for all the directors. Calvert voted against the pay package.

Medtronic PLC: CorpGov Recommendations Below – Votes Against Board Position in Bold

1aElect Director Richard H. AndersonAgainstForFor
1bElect Director Craig ArnoldAgainstForFor
1cElect Director Scott C. DonnellyAgainstForFor
1dElect Director Randall J. Hogan, IIIForForFor
1eElect Director Omar IshrakForForFor
1fElect Director Shirley Ann JacksonForForFor
1gElect Director Michael O. LeavittAgainstForFor
1hElect Director James T. LenehanForForFor
1iElect Director Elizabeth G. NabelAgainstForFor
1jElect Director Denise M. O’LearyAgainstForFor
1kElect Director Kendall J. PowellAgainstForFor
1lElect Director Robert C. PozenForForFor
1mElect Director Preetha ReddyAgainstForFor
2Approve AuditorsForAgainstFor
3Ratify Executive CompensationAgainstForAgainst
4Advisory Vote on Say on Pay FrequencyOne YearOne YearOne Year

Medtronic PLC: Issues for Future Proposals

Medtronic is not included in the database because it is headquartered in Ireland. However, I see from MSCI GMIAnalyst, the vote required to act by written consent is 100%. 

Medtronic PLC: Mark Your Calendar

In order for a shareholder proposal to be considered for inclusion in Medtronic’s proxy statement for the 2016 Annual General Meeting, the written proposal must be received by the Company Secretary at Medtronic’s registered office no later than June 24, 2016. The proposal must comply with SEC regulations regarding the inclusion of shareholder proposals in Company-sponsored proxy materials.

All submissions to, or requests from, the Company Secretary should be made to Medtronic’s registered office at 20 on Hatch, Lower Hatch Street, Dublin 2, Ireland, Attn: Company Secretary.


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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