United Technologies

United Technologies Proxy Voting Guide

United Technologies (UTX) provides technology products and services to building systems and aerospace industries worldwide. Most shareholders do not vote because reading through 100+ pages of the proxy is not worth the time for the small difference your vote will make. Below, I tell you how I am voting 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 it), go immediately to see how I voted my ballot. Voting will take you only a minute or two and every vote counts.

The annual meeting is coming up on April 30, 2018. I voted with the Board’s recommendations xx% 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.

United Technologies: ISS Rating

From the Yahoo Finance profile:

United Technologies Corporation’s ISS Governance QualityScore as of April 1, 2018 is 1. The pillar scores are Audit: 1; Board: 4; Shareholder Rights: 5; Compensation: 1.

Corporate governance scores courtesy of Institutional Shareholder Services (ISS). Scores indicate decile rank relative to index or region. A decile score of 1 indicates lower governance risk, while a 10 indicates higher governance risk. Therefore, we need to pay closer attention to the board and shareholder rights.

United Technologies: Board Proposals

1. United Technologies Proxy Voting Guide: Directors

Egan-Jones Proxy Services recommends “For,” with the exception of: 1C) John V. Faraci, 1D) Jean-Pierre Garnier, 1E) Gregory J. Hayes, 1F) Ellen J. Kullman 1H) Harold W. McGraw III 1K) Brian C. Rogers. Most are opposed because they have served longer than 10 years and are no longer considered independent. Gregory J. Hayes is opposed because Egan-Jones’ Proxy Guidelines state that the Chairman of the Board should be held accountable in cases when the Company obtains the score of Needs Attention on the Cyber Security Risk Rating.

I voted against members of the compensation committee because they recommended what I believe is excessive pay. I also too Egan Jones’ advice and voted against Hayes on the cyber security issue.

VOTE AGAINST: 1C John V. Faraci, 1D Jean-Pierre Garnier, 1E Gregory J. Hayes, 1F) Ellen J. Kullman 1H) Harold W. McGraw III and 1K) Brian C. Rogers.

2. United Technologies: Executive Compensation

United Technologies Summary Compensation Table shows the highest paid named executive officer (NEO) was CEO and Chairman Gregory J. Hayes at $15.8M. I’m using Yahoo! Finance to determine market cap ($98B) and I am roughly defining large-cap as $10B, mid-cap as $2-10B, and small-cap as less than $2B. United Technologies 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 2014, so pay was well over that amount.  United Technologies shares underperformed the S&P500 over the most recent one, two, and five year time periods. At least United Technologies does not appear on As You Sow‘s list of the 100 Most Overpaid CEOs. Prior reports have shown that being on that list is correlated with lower returns in subsequent years. The 2017 total annual compensation value for Mr. Hayes was $17,027,493 and for UTC’s global median employee was $72,433, resulting in a pay ratio of 235:1.

Egan-Jones Proxy Services takes various measures to arrive at a proprietary rating compensation score, which measures wealth creation in comparison to other widely held issuers. “Good” is their rating given on compensation issues for Starbucks Corp. Egan-Jones finds:

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. Therefore, we recommend a vote FOR this Proposal.

Despite the recommendation of Egan Jones, given continued underperformance, above median pay, and my growing concern with income inequality, I voted “AGAINST” the say-on-pay item and all members of the compensation committee.

3. United Technologies: Approval of the UTC UTC 2018 Long-Term

Per Egan-Jones:

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 voted AGAINT and also voted against members of the compensation committee, because they recommended the plan.

4. United Technologies: 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.  However, Egan-Jones notes that PricewaterhouseCoopers, LLP has been serving as the Company’s auditor for more than seven years and their independence is compromised. I also believe that the companies should consider the rotation of their audit firm to ensure auditor objectivity, professionalism and independence. However, I have not set a specific number of years.  I voted FOR.

5. United Technologies: Amend Company Certificate to Eliminate Supermajority Vote Requirement

Egan-Jones: We believe that a simple majority vote will strengthen the Company’s corporate governance practice. Contrary to supermajority voting, a simple majority standard will give the shareholders equal and fair representation in the Company by limiting the power of shareholders who own a large stake in the entity, therefore, paving way for a more meaningful voting outcome. As such, we recommend a vote FOR this Proposal. I voted FOR.

United Technologies: Shareholder Proposals

6.  Reduce Threshold to Call Special Meetings from 25% to 10%

This is my proposal (James McRitchie, submitted on behalf of my wife, Myra Young) so of course we voted FOR. Moving the threshold from 25% to 10% would create a tool more likely to be used.

I voted FOR.

United Technologies CorpGov RecommendationsProxy Insight

Proxy Democracy was down as I wrote these recommendations. Proxy Insight reported on Texas Teachers, Calvert, Trillium, Domini and Australia’s Local Government Super. I expect they will report out a few more votes before the meeting. Texas Teachers and Australia’s Super voted FOR all items. Calvert voted for all except the pay package. Domini voted for all but Stephenson, pay and the stock plan. Trillium voted against directors, as well as items 3 and 5.

My votes are noted in italics above.

United TechnologiesIssues for Future Proposals

SharkRepellentLooking at SharkRepellent.net for other provisions unfriendly to shareowners:

  • Special meetings can only be called by shareholders holding not less than 25% of the voting power.
  • Proxy access provisions are Lite.  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.
  • Supermajority vote requirement (80%) to amend certain charter provisions.

United Technologies: Mark Your Calendar

To submit a shareowner proposal to be considered for inclusion in UTC’s Proxy Statement for the 2019 Annual Meeting under SEC Rule 14a-8, you must send the proposal to our Corporate Secretary. The Corporate Secretary must receive the proposal in writing by November 19, 2018.


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.


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