Marrone Bio Innovations, Inc. provides bio-based pest management and plant health products primarily for agricultural and water markets in the United States and internationally. Without changes, Marrone Bio is likely to continue to lag the Nasdaq, as it has done for the last one, two and five year time periods. While the Nasdaq has gone up over 100% in the last five years, Marrone Bio has gone down over 90%. Proxy access could make our board more directly accountable to shareholders.
The annual meeting that was supposed to be held in 2017 is set for January 31, 2018 in Davis, California. There is very little data available though my usual sources because Marrone Bio is such a small company. I voted with the Board’s recommendations 67% of the time. View Proxy Statement via SEC’s EDGAR system (look for DEF 14A).
Most shareholders don’t vote because reading through almost 100 pages of the proxy AND many more pages of appendices isn’t worth the time for the small difference your vote will make. Below, I tell you how I voted and why. If you have read these posts related to my portfolio for the last 22 years and trust my judgment (or you don’t want to take the time to read my full post), go immediately to see how I voted my ballot. Voting will take you only a minute or two and every vote counts.
Marrone Bio: Too Small for Rating
Marrone Bio is too small to receive an Institutional Shareholder Services (ISS) Governance QualityScore. Information is scarce. Proxy Insight and Proxy Democracy both seem to track but nothing posted yet.
Marrone Bio Proxy Voting Guide: Board Proposals
1. Marrone Bio Proxy Voting Guide: Directors
I voted FOR Dr. Marrone, since she is the most integral person on the Board. Marrone Bio is apparently too small to be rated by Egan Jones, although they may do so if I request.
2. Marrone Bio: Ratify Auditors
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. I agree, so voted FOR.
3. Marrone Bio: Executive Compensation
Marrone Bio’s Summary Compensation Table shows the highest paid named executive officer (NEO) was President and Chief Financial Officer James B. Boyd at $589K in 2016. I’m using Yahoo! Finance to determine market cap ($38.6M) and I am roughly defining large-cap as $10B, mid-cap as $2-10B, and small-cap as less than $2B. Marrone Bio is a small-cap company. According to the Equilar Top 25 Executive Compensation Survey 2015, the median CEO compensation at small-cap corporations was $3M in 2014, so pay was well under that amount. Marrone Bio shares underperformed the Nasdaq over the most recent recent one, two and five year time periods. I voted FOR.
4 and 5. Marrone Bio: Debt Refinancing
I voted FOR, since without it our company would probably go under.
5. Marrone Bio: Increase Authorized Shares
I ABSTAINED. The recent Tax Cuts and Jobs Act eliminates the performance-based exception to the $1 million per-executive annual limit on the deductibility of compensation for certain public company executives under §162(m). This change will result in a significant increase in disallowed tax deductions. While this may alter compensation considerations for covered employees, boards must continue to use appropriate business judgment to make compensation decisions to attract and retain the executives that will best serve the needs of the corporation. I have not analyze how the Act may or may not impact this proxy item.
Marrone Bio: Shareholder Proposals
6. Marrone Bio: Amend Proxy Access Bylaws
This proposal is mine. The vast majority of S&P 500 companies now have proxy access, the ability of 3% shareholders to place a small number of nominees directly on proxy without resorting to an expensive proxy contest. However, proxy access is more sorely needed at micro-cap companies like Marrone Bio, which almost went out of business due to an accounting scandal and lawsuit. Where was the compensation committee when incentives were approved? Where were the internal auditors and the audit committee? How do we really know the problems have been fixed? I voted FOR.
Marrone Bio: Issues for Future Proposals
Looking at SharkRepellent.net for other provisions unfriendly to shareowners:
- Classified board with staggered terms.
- No action can be taken without a meeting by written consent.
- Shareholders cannot call special meetings.
- Supermajority vote requirement (66.67%) to amend certain charter provisions. Supermajority vote requirement (66.67% or 80%) to amend all bylaw provisions.
Marrone Bio: Mark Your Calendar
Our stockholders are entitled to present proposals for action at a forthcoming meeting if they comply with the requirements of our bylaws and the rules established by the Securities and Exchange Commission, or the SEC. We anticipate that the date of our 2018 annual meeting of stockholders will be more than 30 days before the anniversary date of this year’s meeting. In addition, under the Securities Purchase Agreement, we are required to hold our 2018 annual meeting of stockholders within 180 days after the date of consummation of the Transactions. As a result, to be considered for inclusion in the proxy statement for our 2018 annual meeting of stockholders, stockholder proposals must be delivered to our principal executive offices not later than the close of business on the later of the 45th day prior to such annual meeting or the 10th day following the day on which public announcement of the date of such meeting is first made. Any stockholder proposal (including a proposal to nominate a candidate for director) that is not submitted for inclusion in the proxy statement for our 2018 annual meeting of stockholders must be delivered to or mailed and received at the principal executive offices of the Corporation not less than 45 days prior to the date of the annual meeting. Proposals should be addressed to our Corporate Secretary at 1540 Drew Ave., Davis, California 95618. You are also advised to review our bylaws, which contain additional requirements about advance notice of stockholder proposals and director nominations.
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. For more on the subject, see CEO Pay Machine Destroying America.