Columbia Sportswear (COLM) designs, sources, markets, and distributes outdoor and active lifestyle apparel, footwear, accessories, and equipment in the United States, Latin America, the Asia Pacific, Europe, the Middle East, Africa, and Canada.
3 PM Pacific June 13, 2017, 14229 NW Science Park Dr., Portland
Columbia Sportswear 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 June 13, 2017.
I voted FOR a shareholder right to Proxy Access. See how and why I voted other items below. I voted with the Board’s recommendations 50% of the time. View Proxy Statement 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.
Columbia Sportswear Company Proxy Voting Guide: ISS Rating
From the Yahoo Finance profile: Columbia Sportswear Company’s ISS Governance QualityScore as of June 2, 2017 is 4. The pillar scores are Audit: 2; Board: 7; Shareholder Rights: 2; 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: the Board and Compensation.
Columbia Sportswear Company Proxy Voting Guide: Compensation
Columbia Sportswear Company’s Summary Compensation Table shows the highest paid named executive officer (NEO) was CEO Timothy P. Boyle at $2.3M in 2016. I am using Yahoo! Finance to determine the market cap ($3.87B) and I am roughly defining large-cap as $10B, mid-cap as $2-10B, and small-cap as less than $2B. Columbia Sportswear Company is a mid-cap company. According to EY Center for Board Matters, the 3-yr average CEO compensation at mid-cap corporations is $6.2, so pay was well below that amount. Columbia Sportswear Company shares outperformed the NASDAQ over the most recent one, two, and ten year time periods, but underperformed in the most recent five year time period.
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.
Columbia Sportswear Company earned a compensation score of “Some Concerns.”
We believe that shareholders should not support the passage of this plan as proposed by the board of directors. Excessive compensation packages have been an on-going cause of concern among shareholders and investors. We believe that the board should seek to define CEO and employee pay more clearly as well as link that pay with the performance of the company and work to reduce the potential cost of any similar plan that may be proposed in the future. Therefore, we recommend a vote AGAINST this Proposal.
It was close for me but I voted FOR.
Columbia Sportswear Company 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.
Columbia Sportswear Company Proxy Voting Guide: Board Proposals
As mentioned above, I voted “For” the pay package.
Election of Directors
Egan-Jones recommended against CEO Timothy P. Boyle 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.
I agree, but am not ready to go there yet. Maybe I will next year. They also recommended against the compensation committee members for the pay plan. Although I voted for the pay plan, I agreed with them with regard to committee members because of #5, the Stock Plan and voted with Egan-Jones recommendations:
The Company’s 1997 Stock Incentive Plan and Executive Incentive Compensation Plan earn an AGAINST recommendation due to its dilutive effect to the interests of the shareholders, as such, we recommend that clients WITHHOLD votes from the members of the Compensation Committee, namely Affiliated outside directors Murrey R. Albers, Stephen E. Babson, and Walter T. Klenz. 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. Moreover, Egan-Jones believes that the Compensation Committee should be held accountable for such disapproval and that the board as a whole should seek to align CEO and employee pay more clearly as well as link that pay with the performance of the company, and work to reduce the potential cost of any similar plan that may be proposed in the future.
Egan-Jones offered the following advice:
After taking into account the maximum amount of shareholder equity dilution this proposal could cause, as well as both the quantitative and qualitative measures outlined below, we believe that shareholders should not support the passage of this plan as proposed by the board of directors. We recommend the board seek to align CEO pay more closely with the performance of the company and work to reduce the cost of any similar plan that may be proposed in the future. Therefore, we recommend a vote AGAINST this Proposal.
I agreed and voted Against.
#6 Approve Executive Incentive Bonus Plan
Egan-Jones offered the following advice:
After taking into account the maximum amount of shareholder equity dilution this proposal could cause, as well as both the quantitative and qualitative measures outlined below, we believe that shareholders should not support the passage of this plan as proposed by the board of directors. Excessive compensation packages have been an on-going cause of concern among shareholders and investors. We believe that the board should seek to define CEO and employee pay more clearly as well as link that pay with the performance of the company and work to reduce the potential cost of any similar plan that may be proposed in the future. Therefore, we recommend a vote AGAINST this Proposal.
Given the dilution and that the plan only covers up to 13 people, I agreed and voted Against.
Columbia Sportswear Company Proxy Voting Guide: Shareholder Proposals
#7 Adopt Proxy Access Right
My wife is the proponent, so you know I voted ‘FOR.’ Egan-Jones advises its clients:
We believe that because the board of directors serves as the representatives of shareholders, shareholders should have the right to nominate their own representatives. As such, we recommend a vote FOR this Proposal.
Proposal #5 is advisory. The Board has flexibility in implementing (or not implementing) the proposal, wether it is passed or not, and modifying it as they see fit. The majority of large-cap companies offer proxy access. The trend is now moving down to mid-cap companies like Columbia Sportswear. Such bylaws facilitate competition among board members with heightened awareness they owe their office and fiduciary duty to shareholders, not the CEO. While proxy access encourages debate around candidate qualifications and issues, bylaws provide the mechanism to ensure they cannot be used to change control of our company. Shareholders would be limited to nominating only up to 25% or the board, or two, whichever is greater. Vote FOR #5.
Columbia Sportswear Company Proxy Voting Guide: Votes Against Board Position in Bold
Columbia Sportswear Company Proxy Voting Guide: Votes Against Board Position in BoldAs mentioned above, ProxyDemocracy.org had collected the votes of only one fund when I voted. Proxy Insight is expected to collect others by the end of the week.
| # | PROPOSAL TEXT | CorpGov | CALVERT |
|---|---|---|---|
| 1.1 | Elect Director Gertrude Boyle | For | Withhold |
| 1.2 | Elect Director Timothy P. Boyle | For | Withhold |
| 1.3 | Elect Director Sarah A. Bany | For | Withhold |
| 1.4 | Elect Director Murrey R. Albers | Withhold | Withhold |
| 1.5 | Elect Director Stephen E. Babson | Withhold | Withhold |
| 1.6 | Elect Director Andy D. Bryant | Withhold | Withhold |
| 1.7 | Elect Director Edward S. George | Withhold | Withhold |
| 1.8 | Elect Director Walter T. Klenz | Withhold | Withhold |
| 1.9 | Elect Director Ronald E. Nelson | For | Withhold |
| 1.10 | Elect Director Malia H. Wasson | For | Withhold |
| 2 | Ratify Deloitte & Touche LLP as Auditors | For | For |
| 3 | Advisory Vote to Ratify Named Executive Officers’ Compensation | For | For |
| 4 | Advisory Vote on Say on Pay Frequency | One Year | One Year |
| 5 | Amend Omnibus Stock Plan | Against | Against |
| 6 | Approve Executive Incentive Bonus Plan | Against | For |
| 7 | Adopt Proxy Access Right Has 1 user-contributed link with more info | FOR | For |
Columbia Sportswear Company Proxy Voting Guide: Issue for Future Proposals
Looking at SharkRepellent.net for other provisions unfriendly to shareowners. The main outstanding issue is proxy access:
- Plurality vote standard to elect directors with no resignation policy.
- Unanimous written consent (default Oregon state statute).
- Shareholders cannot call special meetings.
- No proxy access provisions.
Columbia Sportswear Company Proxy Voting Guide: Mark Your Calendar
Shareholder Proposals to be Included in Columbia’s Proxy Statement. To be considered for inclusion in proxy materials for our 2018 annual meeting of shareholders, a shareholder proposal must be received by Columbia by December 28, 2017.
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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