Invesco Ltd. (IVZ) provides investment management services to retail clients, institutional clients, high-net worth clients, public entities, corporations, unions, non-profit organizations, endowments, foundations, pension funds, financial institutions, and sovereign wealth funds. Most shareholders do not vote because reading through 70 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.
Invesco: ISS Rating
From the Yahoo Finance profile: Invesco Ltd.’s ISS Governance QualityScore as of April 30, 2018 is 5. The pillar scores are Audit: 1; Board: 2; Shareholder Rights: 5; Compensation: 7.
Invesco: Board Proposals
1. Invesco Proxy Voting Guide: Directors
Egan-Jones Proxy Services recommends “For,” with the exception of: Joseph R. Canion (1.2) and Denis Kessler (1.6). both serve major committees, where independence is required. Both have Board tenure of 10 years or more, so are considered affiliated, with the exception of diverse nominees.
E-J believes key Board committees namely Audit, Compensation and Nominating committees should be comprised solely of Independent outside directors for sound corporate governance practice. That sounds like a good policy but I’m not ready to fully embrace but did in this case. I also voted against any Compensation Committee members since they recommended pay that was too high: Sarah E. Beshar, C. Robert Henrikson (Chair), Ben F. Johnson III, Denis Kessler, Nigel Sheinwald, G. Richard Wagoner, Jr., Phoebe A. Wood.
Vote Against: Sarah E. Beshar, Joseph R. Canion, C. Robert Henrikson (Chair), Ben F. Johnson III, Denis Kessler, Nigel Sheinwald, G. Richard Wagoner, Jr., Phoebe A. Wood. Vote For: Martin L. Flanagan
2. Invesco: Executive Compensation
Invesco’s Summary Compensation Table shows the highest paid named executive officer (NEO) was CEO Martin L. Flanagan at $13.8M. I’m using Yahoo! Finance to determine market cap ($11.7B) and I am roughly defining large-cap as $10B, mid-cap as $2-10B, and small-cap as less than $2B. Invesco 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 above that amount. Invesco shares underperformed the S&P500 over the most recent one, two, and five year time periods. Invesco also appears 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. I may cut back my investment unless I see improvement in both governance and management practices.
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. “Neutral” is their rating given on compensation issues for Invesco Egan-Jones concludes:
We believe 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. Therefore, we recommend a vote FOR this Proposal.
Given continued underperformance and above median pay, I voted “AGAINST” the say-on-pay item.
3. Invesco: 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 the auditor has been serving the Company for seven years or more, so their independence is compromised. They also noted several other issues. I also believe that the companies should consider the rotation of their audit firm to ensure auditor objectivity, professionalism and independence. I have not set a specific number of years but in this case agree, so voted AGAINST.
Invesco: Shareholder Proposals
4. Proxy Access Bylaw Amendment
This is my proposal (James McRitchie), so of course I voted FOR. Invesco requires a supermajority vote of 75% to amend or repeal bylaws and for other purposes.
RESOLVED, Invesco Ltd shareholders request that our board take each step necessary so that each voting requirement in our charter and bylaws that calls for a greater than simple majority vote be eliminated, and replaced by a requirement for a majority of the votes cast for and against applicable proposals, or a simple majority in compliance with applicable laws. This means the closest standard to a majority of the votes cast for and against such proposals consistent with applicable laws. It is important that our company take each step necessary to adopt this proposal topic. It is also important that our company take each step necessary to avoid a failed vote on this proposal topic.
It is notable that Invesco takes no position on the proposal, so it is very likely to pass. However, a key provision is “that our company take each step necessary to avoid a failed vote on this proposal topic.” I have had similar proposals pass at other companies but too frequently they do not make an adequate effort to solicit adequate shareholder votes to change the bylaws. A high vote might persuade Invesco to make the needed effort.
Vote FOR. Egan-Jones also recommended FOR.
Proxy Democracy is apparently still down. Proxy Insight reported on Canada Pension Plan (CPPIB), Texas Teachers, Calvert and Christian Brothers (CBIS), which I report below. My recommended votes that differ from what the Board recommends are noted in bold.
|#||PROPOSAL TEXT||CorpGov||CPPIB||Texas Teachers||CALVERT||CBIS|
|1.1||Elect Director Sarah E. Beshar||For||For||Against||Against|
|1.2||Elect Director Joseph R. Canion||For||For||Against||Against|
|1.3||Elect Director Martin L. Flanagan||For||For||For||Against||Against|
|1.4||Elect Director C. Robert Henrikson||For||For||Against||Against|
|1.5||Elect Director Kevin R. Elect Director Ben F. Johnson, III||For||For||Against||Against|
|1.6||Elect Director Jorgen Vig KnudstorElect Director Denis Kessler||For||For||Against||Against|
|1.7||Elect Director Nigel Sheinwald||For||For||Against||Against|
|1.8||Elect Director G. Richard Wagoner, Jr||For||For||Against||Against|
|1.9||Elect Director Phoebe A. Wood||For||For||Against||Against|
|2||Ratify Named Executive Officers’ Compensation||Against||Against||Against|
|3||Ratify PricewaterhouseCoopers LLP as Auditors||For||Against||Against|
|4||Eliminate Supermajority Vote Requirement||For||For|
Invesco: Issues for Future Proposals
Looking at SharkRepellent.net for other provisions unfriendly to shareowners:
- Unanimous written consent.
- Proxy access lite provision whereby a shareholder, or a group of up to 20 shareholders, holding at least 3% of the outstanding common stock for at least three years may nominate one director, so long as the number of directors elected via proxy access does not exceed 20% of the board. Nominators whose candidates receive less than 25% of the vote are prohibited from nominating again for the next two annual meetings (75% to amend/repeal).
- Supermajority vote requirement (75%) to approve mergers (default Non-U.S. state statute).
- Supermajority vote requirement (75%) to amend certain bylaw provisions.
Invesco: Mark Your Calendar
In accordance with the rules established by the SEC, any shareholder proposal submitted pursuant to Rule 14a-8 under the Exchange Act intended for inclusion in the proxy statement for next year’s annual general meeting of shareholders must be received by Invesco no later than 120 days before the anniversary of the date of this proxy statement (e.g., not later than November 27, 2018). Such proposals should be sent to our Company Secretary in writing to Invesco Ltd., Attn: Office of the Company Secretary, 1555 Peachtree Street N.E., Atlanta, Georgia 30309, or by email to firstname.lastname@example.org. To be included in the Proxy Statement, the proposal must comply with the requirements as to form and substance established by the SEC and our Bye-Laws, and must be a proper subject for shareholder action under Bermuda law.
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.