Analogic Corp: How I Voted – Proxy Score 80

AnalogicAnalogic Corporation ($ALOG), a technology company, designs, manufactures, and sells medical imaging, ultrasound, and security systems and subsystems to original equipment manufacturers (OEMs) and end users in the healthcare and airport security markets worldwide. Analogic is one of the stocks in my portfolio. Their annual meeting is coming up on January 21, 2016. had collected the votes of one fund when I checked.  I voted with the Board’s recommendations 80% of the time, voting only against pay and pay chair as a warning for loose pay practices. 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. 

Analogic: ISS Rating

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

Analogic: Compensation

Analogic’s Summary Compensation Table shows the highest paid named executive officer (NEO) was CEO James W. Green at $3.1M. I’m using Yahoo! Finance to determine market cap ($1.0B) and the Equilar Top 25 Executive Compensation Survey 2015 to the median CEO compensation at small-cap corporation was $3 million, so Analogic’s pay is slightly above that. Analogic shares underperformed the NASDAQ over the most recent one, two, five, and ten year time periods. GMIAnalyst

The MSCI GMIAnalyst report I reviewed gave Analogic 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 pays long-term incentives to executives without requiring the company to perform above the median of its peer group.
  • 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.
  • A decline has occurred in the CEO’s equity holdings in the company over last year. Diminished executive exposure to company stock may work to reduce the alignment between the CEO’s interests and those of shareholders.
  • The company’s failure to establish and disclose specific standards regarding minimum equity retention standards for its CEO may weaken the ability of equity awards to align executives’ interests with long-term value creation. 

Given these issues and pay that was slightly above average, I voted against the plan and only the chair of the compensation committee: Mr. Jeffrey P. Black (Chair). I hope my vote serves as a warning to the committee to address some of the loose pay practices specified above before the 2017 proxy. 

Analogic: 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.

Analogic: Board Proposals

As stated above, I voted against the pay plan and the compensation committee chair.

Analogic: Shareholder Proposals

None for this meeting.

Proxy InsightAnalogic: CorpGov Recommendations Below – Votes Against Board Position in Bold

I also checked with Proxy Insight. They report the Teacher Retirement System of Texas and CalSTRS voting with management, while Calvert voted like CBIS below.

1aElect Director Bernard C. BaileyForAgainst
1bElect Director Jeffrey P. BlackAgainstAgainst
1cElect Director James W. GreenForAgainst
1dElect Director James J. JudgeForAgainst
1eElect Director Michael T. ModicForAgainst
1fElect Director Steve OdlandForAgainst
1gElect Director Fred B. ParksForAgainst
1hElect Director Sophie V. VandebroekForAgainst
2Ratify Ernst & Young LLP as AuditorsForFor
3Ratify Executive Officers’ CompensationAgainstFor


Analogic: Issues for Future Proposals Looking at for provisions unfriendly to shareowners:

  • Requires unanimous agreement for written consent, so basically they don’t allow it.
  • Supermajority vote requirement (66.67%) to approve mergers (default Massachusetts state statute).
  • Supermajority vote requirement (80%) to amend certain charter provisions.

Analogic: Mark Your Calendar

A stockholder who intends to present a proposal for action at the 2017 annual meeting may seek to have his or her proposal included in our proxy materials for that meeting by notifying us of such intention and furnishing the text of the proposal to us. Such notice must also include the stockholder’s address and statement of the number of shares of common stock held of record or beneficially by such stockholder and the date or dates upon which such shares were acquired, and must be accompanied by documentary support for a claim of beneficial ownership. The proposal must satisfy the conditions established by the SEC for proposals to be considered for possible inclusion in the proxy materials relating to the 2017 annual meeting. To have a proposal considered for inclusion in the proxy materials for the 2017 annual meeting, a stockholder must give the notice mentioned above and submit his or her proposal no later than August 13, 2016, provided that if the 2017 annual meeting is not held within 30 days before or after the anniversary date of the 2016 annual meeting, the deadline for submitting proposals is a reasonable time before we begin to print and send our proxy materials. The notice and text should be sent to Analogic Corporation, 8 Centennial Drive, Peabody, Massachusetts 01960, Attention: John J. Fry, Senior Vice President, General Counsel, and 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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