WDFC develops and sells maintenance products, and homecare and cleaning products. WDFC is one of the stocks in my portfolio. Their annual meeting is on December 8, 2015. ProxyDemocracy.org had collected the vote of one fund when I checked. I voted with the Board’s recommendations 100% 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.
WDFC: ISS Rating
From Yahoo! Finance: WDFC’s ISS Governance QuickScore as of Nov 1, 2015 is 2. The pillar scores are Audit: 2; Board: 1; Shareholder Rights: 2; 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: Compensation.
WDFC: Compensation
WDFC’s Summary Compensation Table shows the highest paid named executive officer (NEO) was Garry O. Ridge at $2.0M. I’m using Yahoo! Finance to determine market cap ($1.5B) and Wikipedia’s rule of thumb regarding classification. WDFC is a small-cap company. According to Equilar (page 6), the median CEO compensation at small-cap corporations was $2.7 million in 2013, so Wood is paid under that rate. WDFC shares outperformed the NASDAQ over the most recent one, two, five, and ten year time periods.
The MSCI GMIAnalyst report I reviewed gave WDFC 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.
- The company’s failure to establish and disclose specific standards regarding minimum equity retention standards for its CEO and directors may weaken the ability of equity awards to align executives’ interests with long-term value creation.
Despite these issues and given that pay that was below average, while performance was above average, I voted for the pay plan.
WDFC: 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 the auditor.
WDFC: Board Proposals
As indicated above, I voted for the pay plan. I also voted and all directors, despite the fact that 5 out of 7 have served for 10 years or more. I hope they accelerate bringing on new directors.
WDFC: Shareholder Proposals
None.
WDFC: CorpGov Recommendations Below – Votes Against Board Position in Bold
I also checked with Proxy Insight. They report the Teacher Retirement System of Texas, Colorado PERA and Calvert voted all items with management. I see from their site, CalSTRS did as well.
| # | PROPOSAL TEXT | CorpGov | CBIS |
|---|---|---|---|
| 1.1 | Elect Director Giles H. Bateman | For | For |
| 1.2 | Elect Director Peter D. Bewley | For | For |
| 1.3 | Elect Director Melissa Claassen | For | For |
| 1.4 | Elect Director Richard A. Collato | For | For |
| 1.5 | Elect Director Mario L. Crivello | For | For |
| 1.6 | Elect Director Linda A. Lang | For | For |
| 1.7 | Elect Director Garry O. Ridge | For | For |
| 1.8 | Elect Director Gregory A. Sandfort | For | For |
| 1.9 | Elect Director Neal E. Schmale | For | For |
| 2 | Advisory Vote to Ratify Named Executive Officers’ Compensation | For | For |
| 3 | Ratify PricewaterhouseCoppers LLP as as Auditors | For | Against |
WDFC: Issues for Future Proposals
Looking at SharkRepellent.net for provisions unfriendly to shareowners:
- Shareholders cannot call special meetings.
- Supermajority vote requirement (85%) to amend certain charter provisions.
WDFC: Mark Your Calendar
Stockholder proposals must be received by the Company no sooner than May 2, 2016 and not later than July 1, 2016 to be included in the proxy statement and form of proxy for the next annual meeting. Any proposal submitted outside of these dates will be considered untimely in order to be considered at the Company’s 2016 Annual Meeting of Stockholders in accordance with the Company’s Bylaws.
WD-40 Company, Corporate Secretary, 1061 Cudahy Place, San Diego, CA 92110.
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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