Reeds Delivered a Corrected Proxy for Christmas

Reeds Delivered a Corrected Proxy for Christmas

There it was under my tree, Reeds delivered a corrected proxy for Christmas!

Santa has finally been good to Reeds (REED) shareholders.

I’m tacking notification of the corrected proxy as a sign that Founder/CEO, Christopher Reed might be at the start of a new attitude toward  SEC rules and corporate governance, I changed my vote. I voted for Mr. Reed, the auditors, my own proposal to require a majority vote to elect directors and against the rest of the board and the “incentive” stock option plan. The incentive plan lack specificity.

Of course, my proxy didn’t magically appear under my Christmas tree. Reeds Inc. had to pay to have the link to their revised proxy sent out by Broadridge to brokers and banks all over the country. After being reminded several times, Reeds finally did the right thing. Unfortunately, their reluctance and delay necessitated postponing their annual meeting for more than a week but, despite the additional cost to company and shareholders (including me), it is good to see our company now following the law.

Update 12/29/2015: Yesterday I noticed the latest e-mail I got from my broker told me the meeting day is 12/30/2015 but it didn’t say where or what time and it provided a link to the corrected ballot but it did not link to the corrected proxy, only to the old uncorrected proxy, which said the meeting is on 12/21 and incorrectly titled my proxy proposal.

The original proxy was filed on 11/9/2015. Then on 11/24 a Revised definitive proxy was filed, correcting the title of my proposal #5 but not correcting the proxy card. The additional definitive proxy was filed on 12/18. It discusses the revised proxy card and corrected proposal #5. This filing also changed the date of the annual meeting from 12/21 to 12/30.

It appears that Reeds paid to have a link to the revised proxy card sent out but they did they did not pay to have Broadridge’s ProxyVote.com link to either the revised or additional definitive proxy; instead it links to the original proxy. Or, maybe Broadridge made an error? 

I’m heading out to Los Angeles now for the meeting tomorrow. I hope to see at least a few other shareholders there but, unless they have been watching the SEC filings they won’t know the meeting is at noon, 13000 South Spring Street, Los Angeles, California 90061. 

Who’s reviewing company proxies at Reeds? I’ve chronicled past mistakes, like opposing proxy access because: 

Under this proposal, a special interest group could elect a board member who has no holdings of Reed’s stock at all.

That, when two directors on the Reeds Inc. board owned no stock… and still don’t. Telling the SEC a director was reelected, even though a majority of votes were withheld against him. If I were on the board, shareholders wouldn’t have to suffer through such blunders. It certainly doesn’t need to me. I’m sure there are plenty of others willing to serve on Reeds board who would monitor management more effectively. Oh wait, that might be hard to find if Reeds only pays an estimated $3.62/hour for board work. 

See recent analyses at Reeds Renominates Zombie Director Muffoletto and Reed’s – REED: Reject the Board.

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

Proxy Insights: Anticipating the Vote at Reeds

As I have mentioned previously, Reeds must be too small for Proxy Democracy to follow. CalPERS and CalSTRS list their votes for this proxy on their sites. Unfortunately, only a few funds report how they are voting in advance of annual meetings. However, using Proxy Insight I was able to see how some funds voted directors last year. CalSTRS voted withhold on all directors. Guggenheim Funds withheld from all except Christopher Reed. BlackRock AXA Equitable withheld from all except for the Reeds. AllianceBernstein, CalPERS, Geode Capital and Vanguard withheld from Michael Fischman. 

I anticipate a much larger turnout against directors this year, with the board renominating zombie director Muffoletto after shareholder rejected him last year. I also expect a heavy turnout in favor of my proposal to require a majority vote in director election. Of the institutions mentioned above, the following typically vote in favor of majority vote for election of directors: AllianceBernstein, AXA Equitable, BlackRock, CalPERS, CalSTRS and Geode Capital. Guggenheim Funds typically vote against such proposals, while Vanguard supports only about 40% of the time.

Reeds Delivered a Corrected Proxy for Christmas but I’m Still Recommending Against Most Directors – Votes Against Board Position in Bold

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.