Genomic Health 2019 annual meeting is June 13th. To enhance long-term value. Vote WITTHOLD all directors except Popovits & Parker; AGAINST Stock Plan, Pay, Auditor. Vote FOR Simple Majority Vote.
Genomic Health, Inc. (GHDX), a healthcare company, provides clinically actionable genomic information to personalize cancer treatment decisions in the United States and internationally. Most shareholders do not vote. Reading through 60+ pages of the proxy takes too much time. Your vote 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 in my ballot. Voting will take you only a minute or two. Every vote counts.
Genomic Health 2019: ISS Rating
From the Yahoo Finance profile:
Genomic Health, Inc.’s ISS Governance QualityScore as of April 1, 2019 is 5. The pillar scores are Audit: 2; Board: 8; Shareholder Rights: 4; Compensation: 6.
Genomic Health 2019 Proxy Voting Guide: Board Proposals
1. Genomic Health 2019: Directors
Egan-Jones Proxy Services recommends a vote FOR all directors.
I voted against Fred E. Cohen for serving on more than four public company boards. He also sits on the compensation committee, which awarded CEO compensation beyond what I consider reasonable. Other member of the committee included: Felix J. Baker, Barry P. Flannelly, and Henry J. Fuchs. I also voted against nominating/governance committee members because of lack of diversity AND for counting abstentions as votes AGAINST: Julian C. Baker, Henry J. Fuchs (again), and Ginger L. Graham.
Vote: WITHHOLD Julian C. Baker, Felix J. Baker, Fred E. Cohen, Barry P. Flannelly, Henry J. Fuchs, and Ginger L. Graham.
Vote Rigging for Remaining Items
Aside from the normal vote warnings, Genomic Health engages in additional Vote Rigging. At Genomic, “abstentions” (not just votes left blank) are treated as votes AGAINST. If you mark your ballot to ABSTAIN because you do not want your vote counted, Genomic will ignore your wish and instead count it as a vote AGAINST. If Genomic is going to count ABSTAIN as AGAINST, they should not offer ABSTAIN as a voting option. This unusual voting policy is designed to disenfranchise shareholders by over counting AGAINST votes on these critical issues.
2. Amend Omnibus Stock Plan
The plan’s dilution exceeds 10 percent. Based on evaluation of the estimated cost, plan features, and grant practices using the Equity Plan Scorecard (EPSC), a vote Against this proposal is warranted:
- The equity program is estimated to be excessively dilutive (overriding factor);
- Plan cost is excessive;
- Three-year average burn rate is excessive; and
- The plan allows broad discretion to accelerate vesting.
3. Executive Compensation
Genomic’s Summary Compensation Table (p. 23) shows the highest paid named executive officer (NEO) was President and CEO Kimberly J. Popovits at $4.8M. I’m using Yahoo! Finance to determine market cap ($1.95B) and I define large-cap as $10B, mid-cap as $2-10B, and small-cap as less than $2B. Genomic is a small-cap company.
According to the Equilar Top 25 Executive Compensation Survey 2015, the median CEO compensation at small-cap corporations was $3M in 2014. Genomic shares outperformed the NASDAQ over the most recent one, two, and five 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 26 to 1.
Given above median pay (especially for a small-cap) and my concern for growing wealth inequality, I voted against. I also voted WITHHOLD against the compensation committee for their role in award excessive pay: Julian C. Baker, Fred E. Cohen, Barry P. Flannelly, and Henry J. Fuchs.
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. Ernst & Young LLP has served more than seven years. No other issues appear significant.
Genomic Health 2019 Shareholder Proposal
5. Proposal: Adopt Simple Majority Voting
This good governance proposal comes from me, James McRitchie, so of course I voted FOR. BlackRock and many mainstream investors also typically vote FOR such proposals, recognizing that companies should not be held hostage by those holding a minority of shares.
Proxy Insight had reported the votes only Calvert as of when I wrote this on the weekend. They may have updated by the time I post this.
In looking up a few funds in our Shareowner Action Handbook, NYC Comptroller Withheld Against all directors except Barry P. Flannelly and Geoffrey M. Parker. The voted For all other items.
- Directors: WITHHOLD Julian C. Baker, Felix J. Baker, Fred E. Cohen, Barry P. Flannelly, Henry J. Fuchs, and Ginger L. Graham.
- Omnibus Stock Plan: AGAINST
- Executive Pay: AGAINST
- Auditor: AGAINST
- Adopt Simple Majority Voting: FOR
Genomic Health 2020: Issues for Future Proposals
Looking 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.
Genomic 2020: Mark Your Calendar
If a stockholder wishes to present a proposal to be considered for inclusion in our Proxy Statement for the 2020 Annual Meeting of Stockholders, the proponent and the proposal must comply with the proxy proposal submission rules of the SEC. One of the requirements is that the proposal be received by Genomic Health’s Secretary no later than December 27, 2019. Proposals we receive after that date will not be included in the Proxy Statement. We urge stockholders to submit proposals by Certified Mail—Return Receipt Requested.
Secretary, Genomic Health, Inc., 301 Penobscot Drive, Redwood City, California 94063
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.