Twitter 2019 annual meeting is April 20th. Vote AGAINST Robert Zoellick, auditor and shareholder proposal on board nominee ideologies. FOR Pay, shareholder proposals on Simple Majority Vote and Content Enforcement Policies.
Twitter, Inc. (TWTR) operates as a platform for public self-expression and conversation in real time. The company offers various products and services, including Twitter, a platform that allows users to consume, create, distribute, and discover content; and Periscope, a mobile application that enables user to broadcast and watch video live with others. It also provides promoted products and services, such as promoted tweets, promoted accounts, and promoted trends, which enable its advertisers to promote their brands, products, and services. 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 8 minute read. See how I voted my ballot. Voting will take you only a minute or two. Every vote counts.
Twitter 2019: ISS Rating
From the Yahoo Finance profile: Twitter, Inc.’s ISS Governance QualityScore as of April 1, 2019 is 9. The pillar scores are Audit: 2; Board: 4; Shareholder Rights: 9; Compensation: 9.
Twitter 2019 Proxy Voting Guide: Board Proposals
1. Twitter 2019: Directors
Egan-Jones Proxy Services recommends FOR, except Robert Zoellick, who failed to attend at least 75% of his board and committee meetings. Agreed.
Vote Against Robert Zoellick.
2. Twitter 2019: Executive Compensation
Twitter’s Summary Compensation Table shows the highest paid named executive officer (NEO) was “Engineering Lead” Michael Montano at $18.0M. I’m using Yahoo! Finance to determine market cap ($26.5B). I define large-cap as $10B, mid-cap as $2-10B, and small-cap as less than $2B. Twitter 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. Twitter shares underperformed the NASDAQ over the most recent five year time period but outperformed in the most recent one and two year periods. The ratio of the annual total compensation of the CEO to the median of the annual total compensation of all employees was less than 0.0001, since Jack Dorsey is largely being paid through the shares he already owns.
Egan-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.
Given far above median pay to Michael Montano am tempted to vote against pay but did not.
3. Twitter 2019: Ratification of Independent Auditor
Egan-Jones recommends voting against the auditor if they served for seven years. That is not the case here but they do recommend Against. I see Calvert recommends Against: “Given the excessive non-audit fees to the auditor, a vote AGAINST is warranted. Given that other funds recommend the same, I agreed.
Twitter 2019: Shareholder Proposals
4. Shareholder Proposal: Simple Majority Vote
This good governance proposal comes from me (James McRitchie), so of course I voted FOR. At Salesforce.com Fidelity, BlackRock, T. Rowe Price, SSgA, Morgan Stanley, First Trust Advisors, Northern Trust, Geode Capital, and TIAA-CREF supported a similar proposal from me. In fact, 285 funds voted in favor while only 32 voted against and 3 abstained. Egan-Jones believes “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.”
5. Shareholder Proposal: Content Enforcement Policies
This good governance proposal is from the New York State Common Retirement Fund and Arjuna Capital. Proposal requests review of the efficacy of Twitter’s “enforcement of its terms of service related to content policies and assessing the risks posed by content governance controversies (including election interference, fake news, hate speech and sexual harassment) to the company’s finances, operations and reputation.” That is long overdue. Egan-Jones notes, “We believe that the report will provide useful information to shareholders regarding which will help the Company address related ethical concerns.”
5. Shareholder Proposal: Board Qualifications
The National Center for Public Policy Research filed this misleading proposal. Although I support the notion that “True diversity comes from diversity of thought,” I believe categorizing nominees by ideology will bring confusion and divisiveness. Think about it. Can you readily pigeonhole yourself into a specific ideology?
Proxy Insight reported the votes of four funds as I wrote up my recommendations. See their votes in the top graphic. By now, you may be able find a few more fund votes by looking them up from the links in our Shareowner Action Handbook.
- Directors: AGAINST Robert Zoellick
- Executive Pay: FOR
- Auditor: AGAINST
- Simple Majority Vote: FOR
- Content Enforcement Policies: FOR
- ID Ideology of Board Nominees: AGAINST
Twitter 2019: Issues for Future Proposals
Looking at SharkRepellent.net for anti-shareholder provisions:
- Classified board with staggered terms.
- No action can be taken without a meeting by written consent.
- Shareholders cannot call special meetings.
- Supermajority vote requirement (80%) to amend certain charter and all bylaw provisions.
Twitter 2019: Mark Your Calendar
Stockholders may present proper proposals for inclusion in our proxy statement and for consideration at next year’s annual meeting of stockholders by submitting their proposals in writing to our Secretary in a timely manner. For a stockholder proposal to be considered for inclusion in our proxy statement for our 2020 annual meeting of stockholders, our Secretary must receive the written proposal at our principal executive offices not later than December 10, 2019. In addition, stockholder proposals must comply with the requirements of Rule 14a-8 regarding the inclusion of stockholder proposals in company-sponsored proxy materials. Stockholder proposals should be addressed to: Twitter, Inc., Attention: Secretary, 1355 Market Street, Suite 900, San Francisco, California 94103
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.