Berry Global Group 2019

Berry Global Group 2019: Proxy Votes

Berry Global Group 2019 annual meeting is March 6, 2019. To enhance long-term shareholder value, vote AGAINST Carl Rickertsen, Thomas Salmon and Scott Ullem, as well as auditor, pay and 25% threshold for special meetings.  Vote FOR 1 year frequency for say on pay and for shareholder proposal to provide a 15% threshold for special meetings. 

Berry Global Group, Inc. (BERY) manufactures and supplies non-woven, flexible, and rigid products. Most shareholders do not vote.  Reading through 38+ pages of the proxy takes too much time. Your vote will make only a small difference but could be crucial. Below, how I voted and why.

If you have read these posts related to my portfolio and proxy proposals for the last 22 years and trust my judgment, skip the 8 minute read. See how I voted my ballot. Voting will take you only a minute or two. Every vote counts.

I voted with the Board’s recommendations 33% 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.

Berry Global Group 2019: ISS Rating

From the Yahoo Finance profile: Berry Global Group, Inc.’s ISS Governance QualityScore as of February 1, 2019 is 3. The pillar scores are Audit: 5; Board: 4; Shareholder Rights: 1; 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. We need to pay close attention to Audit, Board, and Compensation.

Berry Global Group 2019 Proxy Voting Guide: Board Proposals

1. Berry Global Group 2019: Directors

Egan-Jones Proxy Services recommends FOR, with there exception of (1B) Carl J. (Rick) Rickertsen, (1C) Thomas E. Salmon and (1G) Scott B. Ullem.

Vote AGAINST (1B) Carl J. (Rick) Rickertsen, (1C) Thomas E. Salmon and (1G) Scott B. Ullem.

2. Berry Global Group 2019: Ratify Auditors

Egan-Jones recommends voting against the auditor if they served for seven years. Independence becomes compromised by that time. No other issues appear significant.

Vote AGAINST.

3. Berry Global Group 2019: Executive Compensation

Berry’s Summary Compensation Table shows the highest paid named executive officer (NEO) was CEO Thomas E. Salmon at $4.8M. I’m using Yahoo! Finance to determine market cap ($6.8B) and I define large-cap as $10B, mid-cap as $2-10B, and small-cap as less than $2B. Berry is a mid-cap company.

According to the Equilar Top 25 Executive Compensation Survey 2015, the median CEO compensation at mid-cap corporations was $8.4M in 2014. Berry shares outperformed the S&P 500 over the most recent five year time period, but underperformed during the most recent one and two year time periods. The ratio of the annual total compensation of the CEO to the median of the annual total compensation of all employees was 118:1.

Egan-Jones Proxy Services uses a proprietary rating compensation system to measures wealth creation in comparison to other companies. “Some Concerns” is their compensation rating for Berry. They recommend a vote of AGAINST for the say-on-pay item. The recommendation is based on failure to generate good profits on invested capital. Egan-Jones

Vote AGAINST.

4. Berry Global Group 2019: Vote on Frequency of Advisory Say on Pay Vote

Management recommends three years. Egan-Jones notes, a “triennial advisory vote on executive compensation will hinder shareholders from providing the Company with direct input on their respective compensation philosophy, policies, and practices as disclosed in the proxy statement.” Agreed.

Vote For 1 Year Frequency.

5. Berry Global Group 2019: Approve an Amendment to the Restated Certificate of Incorporation to Enable Stockholders Who Hold at Least 25% of the Outstanding Common Stock to Call Special Meetings

According to Egan-Jones believes the 25% threshold is consistent with “best practices.” I disagree, especially because there is a more attractive option available. On a positive note, at least our shareholder proposal got the Board to move on the issue from not right to recommending a minimal right.

Vote AGAINST.

Berry Global Group 2019: Shareholder Proposals

6. Shareholder Proposal: Enable Stockholders Who Hold At Least 15% of the Outstanding Common Stock to Call Special Meetings

This good governance proposal comes from me (James McRitchie, on behalf of my wife Myra Young). Delaware law allows 10% of company share to call a special meeting. We think 15% is a more reasonable level and it certainly exceeds the Delaware threshold.

Vote: FOR

Berry Global Group 2019 CorpGov RecommendationsProxy Insight

Proxy Democracy is still down. I seek 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.

Proxy Insight has not reported any institutional votes cast in advance of the meeting as of this early date.

CorpGov Votes:

  1. Directors: AGAINST (1B) Carl J. (Rick) Rickertsen, (1C) Thomas E. Salmon and (1G) Scott B. Ullem.
  2. Auditors: AGAINST
  3. Executive Pay: AGAINST
  4. Frequency of Say on Pay: 1 Year
  5. Board Proposal 25% Threshold for Special Meeting: AGAINST
  6. Shareholder Proposal 15% Threshold for Special Meeting: FOR

Berry Global Group 2019: Issues for Future Proposals

SharkRepellentLooking at SharkRepellent.net for anti-shareholder provisions:

  • No action can be taken without a meeting by written consent.
  • Shareholders cannot call special meetings.

Berry Global Group 2019: Mark Your Calendar

Under the rules of the Securities and Exchange Commission, any of our stockholders wishing to have a proposal considered for inclusion in our 2019 proxy solicitation materials must set forth such proposal in writing and file it with our Secretary on or before the close of business on September 27, 2019. However, if the date of the 2019 Annual Meeting is more than 30 days before or after March 6, 2020, then the deadline for submitting any stockholder proposal for inclusion in the proxy materials relating to such Annual Meeting will be a reasonable time before we begin to print or mail such proxy materials. The inclusion of any such stockholder proposals in such proxy materials will be subject to the requirements of the proxy rules adopted under the Securities Exchange Act of 1934, as amended, including Rule 14a-8.

Berry Global Group, Inc.
101 Oakley Street
Evansville, Indiana 47710
Attention: Jason K. Greene, Chief Legal Officer and Secretary

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,” chosen by aspiration. 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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