NEE Nextera

NEE Nextera Energy Proxy Recommendations

NEE Nextera Energy. through its subsidiaries, generates, transmits, distributes, and sells electric power to retail and wholesale customers in North America. 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, have values aligned with mine, 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 May 24, 2018. I voted with the Board’s recommendations 44% 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.

NEE: ISS Rating

From the Yahoo Finance profile: NextEra Energy, Inc.’s ISS Governance QualityScore as of May 1, 2018 is 2. The pillar scores are Audit: 1; Board: 6; Shareholder Rights: 2; Compensation: 5.

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 Board and Compensation.

NEE: Board Proposals

1. NEE Proxy Voting Guide: Directors

Egan-Jones Proxy Services recommends Against: James L. Camaren, James L. Robo and Rudy E. Schupp. The position with regard to Robo has to do with oversight of cybersecurity. With regard Camaren and Schupp, both have served more than 10 years on the board, so should no longer be seen as independent.

Since I voted against the say-on-pay, I also voted against all members of the compensation committee, so combined with above I voted AGAINST: Kenneth B. Dunn, Kirk S. Hachigian, Amy B. Lane, James L. Robo, Rudy E. Schupp, Hansel E. Tookes, II.

2. NEE: 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 Deloitte & Touche, LLP has been serving as the Company’s auditor for seven years and their independence is compromised. They also 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.

I voted FOR.

3. NEE: Executive Compensation

NEE’s Summary Compensation Table shows the highest paid named executive officer (NEO) was CEO/Chairman James L. Robo at $18.8M. I’m using Yahoo! Finance to determine market cap ($74B) and I am roughly defining large-cap as $10B, mid-cap as $2-10B, and small-cap as less than $2B. NEE 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. NEE shares outperformed or matched the S&P 500 over the most recent one, two, and five year time periods. It 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. The ratio of the annual total compensation of the CEO to the median of the annual total compensation of all employees was 155 to 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 NEE and they recommend For the say-on-pay item.Egan-Jones

Given above median pay, the appearance on As You Sow‘s list of the 100 Most Overpaid CEOs, and my concern with growing wealth inequality,

I voted “AGAINST” the say-on-pay item and the members of the compensation committee: Kenneth B. Dunn, Kirk S. Hachigian, Amy B. Lane, Rudy E. Schupp, Hansel E. Tookes, II

NEE: Shareholder Proposals

4. Shareholder Proposal: Right to Act by Written Consent

This is my proposal (James McRitchie, written for my wife, Myra Young), so of course I voted FOR.  64% of the S&P 500 and 55% of the S&P 1500 provide for written consent.

Shareholders request that our board of directors undertake such steps as may be necessary to permit written consent by shareholders entitled to cast the minimum number of votes that would be necessary to authorize the action at a meeting at which all shareholders entitled to vote thereon were present and voting.

Supporting Statement: Shareholder rights to act by written consent and to call a special meeting are two complimentary ways to bring an important matter to the attention of both management and shareholders outside the annual meeting cycle. This is important because there could be 15-months between annual meetings.

Vote FOR.

5. Shareholder Proposal: Political Contributions Disclosure

This proposal comes from the Comptroller of the State of New York, Thomas P. DiNapoli, as trustee of the New York State Common Retirement Fund

The proposal is good governance, simply requesting a report to account on political spending. It would do nothing to prevent any such spending. As I have reminded readers in previous posts, the US Supreme Court’s decision in Citizens United v. Federal Election Commission was based on a false premise. Justice Kennedy’s majority opinion justifies the decision by pointing to the Internet.

With the advent of the Internet… Shareholders can determine whether their corporation’s political speech advances the corporation’s interest in making profits, and citizens can see whether elected officials are ‘in the pocket’ of so-called moneyed interests.

The decision also said that disclosure

permits citizens and shareholders to react to the speech of corporate entities in a proper way. This transparency enables the electorate to make informed decisions and give proper weight to different speakers and messages.

And the Court expressed enthusiasm that technology today makes disclosure “rapid and informative.” Yet, corporations are notrequired to make the disclosures of lobbying expenditures and political contributions to shareowners as Justice Kennedy seems to have believed. Vote FOR.

As I have reminded readers in previous posts, the US Supreme Court’s decision in Citizens United v. Federal Election Commission was based on a false premise. Justice Kennedy’s majority opinion justifies the decision by pointing to the Internet.

With the advent of the Internet… Shareholders can determine whether their corporation’s political speech advances the corporation’s interest in making profits, and citizens can see whether elected officials are ‘in the pocket’ of so-called moneyed interests.

The decision also said that disclosure

permits citizens and shareholders to react to the speech of corporate entities in a proper way. This transparency enables the electorate to make informed decisions and give proper weight to different speakers and messages.

And the Court expressed enthusiasm that technology today makes disclosure “rapid and informative.” Yet, corporations are not required to make the disclosures to shareowners as Justice Kennedy seems to have believed.  See also Shining a light on corporate spending in our elections.

Vote FOR.

NEE CorpGov RecommendationsProxy Insight

Proxy Democracy is still down. I am starting to look for contributions to bring it back to life. Proxy Democracy provided information on votes cast in advance of annual meetings by institutional investors at thousands of companies. If you think that is worthy of financial support, please contact me.

As I write this on May 19, Proxy Insight had reported on Texas Teachers, which both voted in favor of all items, including the shareholder proposals. CBIS voted for all items, except the auditor. Trillium voted against all items except the auditor and the two shareholder proposals. Again, all voted for both shareholder proposals.

CorpGov Votes:

  1. Directors: AGAINST Kenneth B. Dunn, Kirk S. Hachigian, Amy B. Lane, James L. Robo, Rudy E. Schupp, Hansel E. Tookes, II.
  2. Auditor: FOR
  3. Ratify Executive Pay: AGAINST
  4. Right to Act by Written Consent: FOR
  5. Report on Political Contribution Disclosure: FOR

NEE: Issues for Future Proposals

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

  • No action can be taken without a meeting by written consent.
  • Proxy access provisions are Lite. Group of 20 limits and 20% of directors, not 25%,
  • 20% to call special meetings.

NEE: Mark Your Calendar

Proposals on matters appropriate for shareholder consideration consistent with Rule 14a-8 under the Exchange Act submitted by shareholders for inclusion in the proxy statement and form of proxy for the 2019 annual meeting of shareholders must be received by the Corporate Secretary at the Company’s principal executive offices not later than December 7, 2019. The submission of such proposals by shareholders is subject to regulation by the SEC pursuant to Rule 14a-8.

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. For more on the subject, see CEO Pay Machine Destroying America.

   

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