WDFC to Allow Special Meetings

In June I submitted a proposal to WDFC to allow special meetings.

WDFC to Allow Special Meetings: The Proposal

Provide Right to Call Special Shareholder Meeting

RESOLVED: The shareholders of WD-40 Company (‘WDFC’ or ‘Company’) hereby request the Board of Directors take the steps necessary to amend our bylaws and each appropriate governing document to give holders with an aggregate of 15% net long of our outstanding common stock the power to call a special shareowner meeting. This proposal does not impact our board’s current power to call a special meeting.

SUPPORTING STATEMENT: Delaware law allows 10% of company shares to call a special meeting. A shareholder right to call a special meeting is a way 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.

A shareholder right 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. Both are associated with increased governance quality and shareholder value. Our Company makes no provisions for written consent or the right of shareholders to call a special meeting.

Currently, 64% of S&P 500 companies have adopted company bylaws, articles of incorporation, or charter provisions to allow shareholders to call a special meeting. Even more than half of all S&P 1500 companies allow shareholders this right.

The topic of providing shareholders a right to call a special meeting won 99% at American Airlines, 98.6 at Hecla Mining, 96.9 at Windstream Holdings, 97.8 at Anthem, and 99.9% at Pacific Premier Bancorp. It may be possible to adopt this proposal by simply incorporating this text into our governing documents:

“Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute, may be called by the Chairman of the Board or the President, and shall be called by the Chairman of the Board or President or Secretary upon the order in writing of a majority of or by resolution of the Board of Directors, or at the request in writing of stockholders owning 15% net long of the entire capital stock of the Corporation issued and outstanding and entitled to vote.”

Please vote for: Provide Right to Call Special Shareholder Meetings

WDFC to Allow Special Meetings: Board Adoption

Unlike many boards, the reaction of WD-40, WDFC, was not to file a no-action request with the SEC or simply gin up an opposition statement. The Board actually deliberated and agreed.

On and effective August 15, 2018, the Board of Directors (the “Board”) of WD-40 Company (the “Company”), based upon the recommendation of the Corporate Governance Committee of the Board, approved an amendment to the Company’s Bylaws (as amended and restated, the “Amended Bylaws”) to add provisions to establish the right of stockholders to request that the Company call a special meeting of stockholders.

That was part of the language contained in WDFC’s 8-K filed with the SEC.

WDFC to Allow Special Meetings: What’s Next?

I must say, it is a delight to meet WDFC’s Corporate Secretary, Richard T. Clampitt, at the annual Corporate Directors Forum and have him ask me what is next in corporate governance. The WD-40 Company is now almost up-to-date with the corporate governance proposals I typically file. One exception is that they have a supermajority provision: “The affirmative vote or consent of eighty-­five percent (85%) of the outstanding shares of Voting Stock (defined below) of the Corporation shall be required for the adoption or authorization of a Business Combination…”

I will have to think about that one. Normally, I abhor supermajority provisions but having one that reduces the likelihood of having a controlling shareholder might be a good exception. I am learning in the process. I see BlackRock owns 13% of WDFC. Does that mean they are required to file their transactions involving the company’s equity securities to the SEC within two business days on Forms 3, 4 or 5? There is so much to learn if you want to be a conscientious shareholder.

Another possibility for further examination is WDFC’s share buyback program. Often, share buybacks are simply a backdoor way to give the CEO and other NEOs a bonus by raising earnings per share. However, I see WDFC’s performance-based compensation is tied to earnings is based on earnings before interest, income taxes, depreciation (in operating departments) and amortization (“EBITDA”), not earnings per share.

I wish all the other companies in my portfolio had governance as good as WDFC. It is even more remarkable as a small-cap, since small-caps usually get less attention. Plus, I have had a 113% gain in my small investment in a little over three years. That is excellent, especially for a mature business.