Marriott 2019 Proxy Voting Guide

Marriott 2019 Proxy Voting Guide

Marriott 2019 annual meeting is May 10th. Vote by May 9 online. For optimum accountability and shareholder return vote AGAINST J.W. Marriot Jr., Mary K. Bush, Eric Hippeau, Lawrence W. Kellner Aylwin B. Lewis, George Muñoz, Steven S. Reinemund, and Susan C. Schwab, as well as auditor and say-on-pay. Vote FOR Eliminate Supermajority and Provide Right of Written Consent.

Marriott International, Inc. (MAR) is a lodging company, which engages in the operation and franchise of hotel, residential, and timeshare properties. As of April 10, 2019, it operated approximately 7,000 properties under 30 hotel brands in 130 countries and territories. The company is headquartered in Bethesda, MD.

Most shareholders do not vote.  Reading through 70+ 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 24 years and trust my judgment, skip the 9 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 54% 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.

Marriott 2019: ISS Rating

From the Yahoo Finance profile: Marriott International, Inc.’s ISS Governance QualityScore as of April 1, 2019 is 6. The pillar scores are Audit: 1; Board: 4; Shareholder Rights: 8; Compensation: 2.

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 Shareholder Rights and the Board.

Marriott 2019 Proxy Voting Guide: Board Proposals

1. Marriott 2019: Directors

Egan-Jones Proxy Services recommends Against Lawrence W. Kellner, George Muñoz, Steven S. Reinemund, since they have served for 10 years or more and can no longer be considered independent for purposes of serving as a member of the Audit, Compensation or Nominating committees. They also recommend against J.W. Marriot, Jr., since “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.”  Agreed.

Since I voted against Executive Compensation I also voted against all members of the compensation committee: Steven S Reinemund (Chair), Mary K. Bush, Eric Hippeau, Aylwin B. Lewis and Susan C. Schwab.

Vote AGAINST Mary K. Bush, Eric Hippeau, Lawrence W. Kellner Aylwin B. Lewis, J.W. Marriot Jr., George Muñoz, Steven S. Reinemund, and Susan C. Schwab.

2. Marriott 2019: Ratification of Independent Auditor

I have no reason to believe the auditor engaged in poor accounting practices or has a conflict of interest. Egan-Jones recommends voting against the auditor if they served for seven years. Independence becomes compromised by that time. Their auditor has served more than seven years. No other issues appear significant.

Vote AGAINST.

3. Marriott 2019: Executive Compensation

Marriott’s Summary Compensation Table (p. 49) shows the highest paid named executive officer (NEO) was CEO Arne M. Sorenson at $12.9M. I’m using Yahoo! Finance to determine market cap ($46B) and I define large-cap as $10B, mid-cap as $2-10B, and small-cap as less than $2B. Marriott is a large-cap company.

mylogiq_logoAccording to the Equilar Top 25 Executive Compensation Survey 2015, the median CEO compensation at large-cap corporations was $10.3M in 2014. Sorenson’s pay puts Marriott above the 75% level for the S&P 500 in 2018, according to MyLogIQ.

Marriott shares outperformed the S&P 500 over the most recent two and five year time periods, but underperformed during the most recent one year time period. The ratio of the annual total compensation of the CEO to the median of the annual total compensation of all employees was 374:1. A recent report from MyLogIQ, CEO Pay Ratios inthe S&P 500, came out before Marriott issued its proxy but it looks like that ratio may put Marriott in or near the top 20 highest ratios in the S&P 500.

Egan-JonesEgan-Jones Proxy Services uses a proprietary rating compensation system to measures wealth creation in comparison to other companies. They believe the company’s compensation policies and procedures are centered on a competitive pay-for-performance culture, aligned with the long-term interest of its shareholders and necessary to attract and retain experienced, qualified executives critical to the Company’s long-term success and the enhancement of shareholder value.

Trillium voted against and noted: “CEO pay is not tied to ESG performance.The company CEO-worker pay ratio exceeds 50:1.The previous year’s restricted shares and stock options awarded to the CEO vest over less than five years.”

Given above median pay, high CEO pay ratio, mixed performance, and my concern for growing wealth inequality, I voted against and also voted against the members of the compensation committee.

Vote AGAINST.

Marriott 2019: Management Proposals to End Supermajority Requirements 4A-4E

These proposals did not just arise out of the goodness of the Board’s hearts. The AFL-CIO filed a proposal to move to a simple majority standard last year. It won more than 65% of the vote. From 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.

This same logic applies for items 4A-4E.

Vote FOR 4A-4E. Removing supermajority standards is usually the most important measure on a proxy. This is no exception.

Marriott 2019: Shareholder Proposals

4. Shareholder Proposal: Written Consent

This good governance proposal comes from Myra Young (my wife, with proposal written by me, James McRitchie), so of course I support it. Egan-Jones advises: “We believe that the right to act by written consent will enable the shareholders to act independently of the management. We recommend a vote FOR this Proposal.”

Vote: FOR

Marriott 2019 CorpGov RecommendationsProxy Insight

Proxy Insight reported the votes of six funds as I wrote up my recommendations. Calvert voted FOR all items except Mary K. Bush. CBIS voted FOR all items except auditor. Trillium voted FOR all items, except say-on-pay. BCI voted AGAINST both Marriotts. Everence voted AGAINST say-on-pay.

Domini voted AGAINST Marriott Jr, Bush, Henderson, Kellner, Lee, Reinemund, as well as say-on-pay. Notably, they all voted FOR eliminating supermajority provisions and our proposal to provide a right to act by Written Consent.

In looking up a few funds on our Shareowner Action Handbook, I see Praxis voted AGAINST Kellner and Schwab.

CorpGov Votes:

  1. Directors: AGAINST J.W. Marriot Jr., Mary K. Bush, Eric Hippeau, Lawrence W. Kellner Aylwin B. Lewis, George Muñoz, Steven S. Reinemund, and Susan C. Schwab.
  2. Auditor: AGAINST
  3. Say-on-Pay: AGAINST
  4. Eliminate Supermajority Standards 4a-e: FOR
  5. Provide Right to Act by Written Consent: FOR

Marriott 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.
  • Supermajority vote requirement (66.67%) to amend certain charter and certain bylaw provisions.
  • Proxy Access lite.

Marriott 2019: Mark Your Calendar

To be considered for inclusion in our proxy statement for the 2020 annual meeting of stockholders, stockholder proposals must be received at our offices no later than the close of business on December 12, 2019. Proposals must comply with Rule 14a-8 under the Securities Exchange Act of 1934 (the “Exchange Act”), and must be submitted in writing to the Corporate Secretary, Marriott International, Inc., Department 52/862, 10400 Fernwood Road, Bethesda, Maryland 20817.

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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