American Express Proxy Voting Guide. American Express Company (AXP), together with its subsidiaries, provides charge and credit payment card products and travel-related services to consumers and businesses worldwide. It operates through four segments: U.S. Consumer Services, International Consumer and Network Services, Global Commercial Services, and Global Merchant Services. American Express is one of the stocks in my portfolio. ProxyDemocracy.org had collected the votes of three fund families when I checked and voted. Their annual meeting is coming up on May 1, 2017
I voted FOR Written Consent and Gender Pay Equity. See how and why I voted other items below. I voted with the Board’s recommendations 63% of the time. View Proxy Statement via SEC’s EDGAR system (look for DEF 14A).
American Express Proxy Voting Guide: ISS Rating
From the Yahoo Finance profile: American Express Company’s ISS Governance QualityScore as of April 1, 2017 is 4. The pillar scores are Audit: 2; Board: 4; Shareholder Rights: 4; Compensation: 7. 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.
American Express Proxy Voting Guide: Compensation
AXP’s Summary Compensation Table shows the highest paid named executive officer (NEO) was Chairman and CEO K.I. Chenault at $17.5M in 2016. I am using Yahoo! Finance to determine the market cap ($72.5B) and I am roughly defining large-cap as $10B, mid-cap as $2-10B, and small-cap as less than $2B. AXP is a large-cap company. According to the Equilar Top 25 Executive Compensation Survey 2015, the median CEO compensation at large-cap corporations was $10.3M in 2015, so pay was well above that amount. AXP shares outperformed the S&P 500 over the most recent one year time period, but underperformed in the most recent two, five, and ten year time periods.
Egan-Jones Proxy Services takes various measures to arrive at a proprietary rating compensation score, which measure wealth creation in comparison to other widely held issuers.
AXP earned a compensation score of “Needs Attention,”
We believe that shareholders cannot support the current compensation policies put in place by the Company’s directors. Furthermore, we believe that the Company’s compensation policies and procedures are not effective or strongly aligned with the long-term interest of its shareholders. Therefore, we recommend a vote AGAINST this Proposal.
We note that Company earns a compensation score of Needs Attention, and as such, we recommend that clients WITHHOLD votes from the members of the Compensation Committee, namely Independent outside director Samuel J. Palmisano; and Affiliated outside directors Peter Chernin, Robert D. Walter and Ronald A. Williams. Egan-Jones believes that the Compensation Committee should be held accountable for such a poor rating and should ensure that the Company’s compensation policies and procedures are centered on a competitive pay-for-performance culture, strongly aligned with the long-term interest of its shareholders and necessary to attract and retain experienced, highly qualified executives critical to the Company’s long-term success and the enhancement of shareholder value.
I voted “AGAINST” the say-on-pay item. The “Lake Woebegone effect,” where everyone is above average and the averages are recalculated upward every year, has to stop. We cannot just keep voting in favor of higher and higher pay packages. I could understand paying more than median, since Starbucks has done well but that much more. I also voted against all the compensation committee member.
American Express Proxy Voting Guide: Accounting
I have no reason to believe the auditor has rendered an inaccurate opinion, is engaged in poor accounting practices, or has a conflict of interest. However, Egan-Jones recommends voting against, favoring auditor rotation after seven years. I am not quite ready to set that as the bar, so voted FOR.
American Express Proxy Voting Guide: Board Proposals
As mentioned above, I voted “Against” the pay package. As is my habit, when I vote against the pay package, I also vote against/withhold on the compensation committee.
Egan-Jones also recommended that clients
WITHHOLD votes from the Company’s Chairman and CEO, Inside director Kenneth I. Chenault for holding more than one other public directorship. We believe that the CEO, being the most critical role in a company, should hold no more than one other public directorship to ensure the effective and prudent exercise of his fiduciary duties as a CEO and that his integrity and efficiency are not compromised. Moreover, Mr. Chenualt is current Chairman of the Board and CEO of the Company and combined with the Board Rating of Needs Attention, the Company has received we recommend that clients WITHHOLD votes from him. We believe that there is an inherent potential conflict, in having the CEO or former CEO serve as the Chairman of the Board. Consequently, we prefer that companies focus on the following areas to improve its corporate governance practices: separate the roles of the Chairman and CEO, hold annual director elections, have one class of voting stock only, have key board committees consisting of independent directors and majority of independent directors on board and include non-binding compensation vote on agenda to further ensure board independence and accountability.
That seems like good advice to me, but I’m not quite there yet. I reluctantly voted FOR Mr. Chenualt.
American Express Proxy Voting Guide: Shareholder Proposals
James McRitchie (that’s me) is the proponent. I voted ‘FOR.’
We have determined that it is a positive corporate governance measure to allow the stockholders to have the ability to take action by written consent, if such written consent or consents sets forth the action to be taken and is signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote on the matter were present and voted. As such, we recommend a vote FOR this Proposal.
A shareholder right to act by written consent and to call a special meeting are two complimentary ways to bring an important matter to the attention of both management and shareholders outside the annual meeting cycle. Both are associated with increased governance quality and shareholder value.
It takes 25% of American Express shares outstanding to call a special meeting at AXP. New York law would allow 10% of shares outstanding to call a special meeting without mandating a net long requirement. Therefore, the right to act by written consent is more important at AXP than it would be if they required a lower threshold to hold a special meeting. Vote FOR #5.
On this item Egan-Jones largely repeats AXP’s arguments against and recommends voting against due to the cost. I think the expense of the requested report is minimal. A Glassdoor study finds an unexplained 6.4% gender pay gap in the financial services industry after statistical controls. Approximately 57% of AXP’s U.S. employees are women, but women account for only 30% of leadership. The requested report will give us a better idea of what gaps exist and why.
As mentioned above, ProxyDemocracy.org had collected the votes of 3 funds when I voted. Proxy Insight reported additional votes from Teacher Retirement System of Texas (TRS), and others. All voted FOR #5 right of written consent. The additional funds were split on #6 gender pay report.
|1a||Elect Director Charlene Barshefsky||For||For|
|1b||Elect Director John J. Brennan||For||For|
|1c||Elect Director Ursula M. Burns||For||For|
|1d||Elect Director Kenneth I. Chenault||For||For|
|1e||Elect Director Peter Chernin||Against||For|
|1f||Elect Director Ralph de la Vega||For||For|
|1g||Elect Director Anne L. Lauvergeon||For||For|
|1h||Elect Director Michael O. Leavitt||For||For|
|1i||Elect Director Theodore J. Leonsis||For||For|
|1j||Elect Director Richard C. Levin||For||For|
|1k||Elect Director Samuel J. Palmisano||Against||For|
|1l||Elect Director Daniel L. Vasella||For||For|
|1m||Elect Director Robert D. Walter||Against||For|
|1n||Elect Director Ronald A. Williams||Against||For|
|2||Ratify PricewaterhouseCoopers LLP as Auditors||For||Against|
|3||Advisory Vote to Ratify Named Executive Officers’ Compensation||Against||Against|
|4||Advisory Vote on Say on Pay Frequency||One Year||One Year|
|5||Provide Right to Act by Written Consent||For||For|
|6||Report on Gender Pay Gap||For||For|
American Express Proxy Voting Guide: Issue for Future Proposals
Looking at SharkRepellent.net for other provisions unfriendly to shareowners. The main outstanding issue is proxy access:
- Unanimous written consent (default New York state statute).
- Special meetings can only be called by shareholders holding not less than 25% of the voting power determined to be Net Long Shares.
- Proxy access provision whereby a shareholder or group of no more than 20 shareholders holding at least 3% of the outstanding common stock continuously for at least three (3) years may nominate directors, so long as the number of directors elected via proxy access does not exceed 20% of the board. Nominees who receive less than 25% of the votes would be ineligible for nomination under the proxy access provision for the next two (2) annual meetings.
American Express Proxy Voting Guide: Mark Your Calendar
To be considered for inclusion in next year’s proxy statement, any shareholder proposals submitted in accordance with SEC Rule 14a-8 must be received by our Secretary at our principal executive offices no later than November 20, 2017. Any such proposals must comply with all of the requirements of SEC Rule 14a-8.
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.