Williams-Sonoma Proxy Voting Guide by CorpGov.net. Williams-Sonoma, Inc. (WSM) operates as a multi-channel specialty retailer of various products for home. Williams-Sonoma is one of the stocks in my portfolio. ProxyDemocracy.org had collected the votes of one fund family when I checked and voted. Their annual meeting is coming up on May 31, 2017.
I voted AGAINST #5 lite proxy access, FOR #6 real proxy access, proposed by me. See how and why I voted other items below. I voted with the Board’s recommendations 57% of the time. View proxy via SEC’s EDGAR system (look for DEF 14A).
Read Warnings below. What follows are my recommendations on how to vote the proxy in order to enhance corporate governance and long-term value.
Williams-Sonoma: ISS Rating
From the Yahoo Finance profile: Williams-Sonoma, Inc.’s ISS Governance QualityScore as of May 1, 2017 is 1. The pillar scores are Audit: 1; Board: 1; Shareholder Rights: 3; Compensation: 2. 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: Shareholder Rights.
Williams-Sonomae: Compensation
Williams-Sonoma, Inc.’s Summary Compensation Table shows the highest paid named executive officer (NEO) was CEO Laura J. Alber at $13.8M in 2016. I am using Yahoo! Finance to determine the market cap ($4.3B) and I am roughly defining large-cap as $10B, mid-cap as $2-10B, and small-cap as less than $2B. Williams-Sonoma is a mid-cap company. According to EY Center for Board Matters, the 3-yr average CEO compensation at mid-cap corporations is $6.2M in 2016, so pay was well above that amount. Williams-Sonoma shares underperformed the S&P 500 over the most recent one, 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.
Williams-Sonoma 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 recommend that clients WITHHOLD votes from the members of the Compensation Committee, namely Affiliated outside directors Adrian D.P. Bellamy and Anthony A. Greener, and Independent outside director Rose Marie Bravo. 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 agreed and voted “AGAINST” the say-on-pay item. I also voted against the Compensation Committee.
Williams-Sonoma: 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 but 37 years with the same auditor is outrageously long.
Williams-Sonoma: Board Proposals
Egan-Jones also recommended against two directors:
We recommend that clients WITHHOLD votes from Affiliated outside directors Adrian D.P. Bellamy and Anthony A. Greener, current members of the Compensation and Nominations and Corporate Governance Committees of the Board. We believe that key Board committees namely Audit, Compensation, and Nominating Committees should be comprised solely of Independent outside directors for sound corporate governance practice.
That seems like excellent advice to me, although they were also on the Compensation Committee, so already covered above.
Williams-Sonoma: Board v Shareholder Proposal on Proxy Access
#5 Provide Proxy Access Right is management’s proposal. The primary difference between management’s proposal and my proposal (#6, Adopt Proxy Access Right) is that management’s proposal limits nominating groups to 20, instead of allowing groups of up to 50. The Council of Institutional Investors, whose members have over $3T in assets, says its members cannot meet the 3 year/3% threshold with a 20 members group. Since their members are mostly indexed, it may take 30 to 50 members to get there. Of course, retail investors may also need up to 50 to implement proxy access. Most of the real problems in corporate governance are at small-cap companies, where few institutional investors have positions.
Secondly, their proposal only provides up to 20% of the board, or 2 whichever is greater. My proposal allows shareholders to nominate up 25% of the board, or 2 whichever is greater. That makes no difference right now, but could if the board expands. Williams-Sonoma sets out a table in their opposition statement that pro ports to show other differences… Would not prohibit… No requirement, etc. These are non-issues. Since our shareholder proposal is limited to 500 words, we cannot cover any issue. Management is free to adopt any language they would like to address those issues.
I am voting AGAINST #5 and FOR #6 because a higher vote for #6 will demonstrate that is what shareholders prefer. Many funds, like Calvert and CalSTRS will vote for both proposals to ensure at least one passes and is adopted. No one is invoking proxy access at this time, so it is more important to get it right that just to have a weak unusable rule. Additionally, many large mainstream funds routinely vote with management. We will need a lot of independent thinkers to vote FOR #6 to offset such drone votes.
Williams-Sonoma: Votes Against Board Position in Bold 
As mentioned above, ProxyDemocracy.org had collected the votes of only one fund when I voted. Proxy Insight will soon report CalSTRS and other additional votes.
| # | PROPOSAL TEXT | CorpGov | CALVERT/CalSTRS |
|---|---|---|---|
| 1.1 | Elect Director Laura J. Alber | For | For |
| 1.2 | Elect Director Adrian D.P. Bellamy | Against | For/Against |
| 1.3 | Elect Director Rose Marie Bravo | Against | For/Against |
| 1.4 | Elect Director Anthony A. Greener | Against | For/Against |
| 1.5 | Elect Director Grace Puma | For | For |
| 1.6 | Elect Director Christiana Smith Shi | For | For |
| 1.7 | Elect Director Sabrina Simmons | For | For |
| 1.8 | Elect Director Jerry D. Stritzke | For | For |
| 1.9 | Elect Director Frits D. van Paasschen | For | For |
| 2 | Ratify Named Executive Officers’ Compensation | Against | For/Against |
| 3 | Advisory Vote on Say on Pay Frequency | One Year | One Year |
| 4 | Ratify Deloitte & Touche LLP as Auditors | For | For |
| 5 | Provide Proxy Access Right Included in 1 FocusList: Proxy Access Has 1 user-contributed link with more info | Against | For |
| 6 | Adopt Proxy Access Right Included in 1 FocusList: Proxy Access Has 1 user-contributed link with more info | FOR | For |
Williams-Sonoma: Issue for Future Proposals
Looking at SharkRepellent.net for other provisions unfriendly to shareowners. The main outstanding issue is proxy access:
- No action can be taken without a meeting by written consent unless unanimous.
- No proxy access rights.
Williams-Sonoma: Mark Your Calendar
In order to submit a proposal to be raised at the 2018 Annual Meeting that will not be included in our Proxy Statement for the 2018 Annual Meeting, stockholder proposals must comply with our Restated Bylaws. Under our Restated Bylaws a stockholder must give advance notice to our Secretary of any business, including nominations of directors for our Board, that the stockholder wishes to raise at our Annual Meeting. To be timely under our Restated Bylaws, the notice must be received by our Secretary not less than 90 days or more than 120 days prior to May 31, 2018, the anniversary of our 2017 Annual Meeting. Therefore, stockholder proposals must be received by our Secretary at our principal executive offices between January 31, 2018 and March 2, 2018 in order to be raised at our 2018 Annual Meeting.
Under Rule 14a-8 of the Securities Exchange Act of 1934, as amended, if the date of the 2018 Annual Meeting changes by more than 30 days from the anniversary of this year’s Annual Meeting, to be included in our Proxy Statement, stockholder proposals must be received by us within a reasonable time before our solicitation is made.
Under our Restated Bylaws, if the date of the 2018 Annual Meeting changes by more than 30 days from the anniversary of this year’s Annual Meeting, stockholder proposals to be brought before the 2018 Annual Meeting must be delivered not later than the 90 days prior to the 2018 Annual Meeting or the 10 day following the day on which public announcement of the date of such meeting is first made by us.
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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