Bristol-Myers Squibb 2020

Bristol-Myers Squibb 2020 annual virtual meeting portal opens at 6:50AM Pacific time on May 5, 2020. To vote or ask questions, you will need your 16-digit control number. To enhance long-term value at BMY: Vote AGAINST Arduini, Emmens, Paliwal, Storch, Vousden, Pay, Auditor. Vote FOR Independent Chair, Shareholder Right to Act by Written Consent. VOTE! List of all virtual meetings kept by ISS.

Bristol-Myers Squibb, discovers, develops, licenses, manufactures, markets, distributes, and sells biopharmaceutical products worldwide. It offers products in the following therapeutic classes: hematology, oncology, cardiovascular, and immunology. Reading through 100 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.

I voted with the Board’s recommendations 44% 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.

Bristol-Myers Squibb 2020: ISS Ratings

From the Yahoo Finance profile: Bristol-Myers Squibb Company’s ISS Governance QualityScore as of December 4, 2019 is 4. The pillar scores are Audit: 1; Board: 4; Shareholder Rights: 5; 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 shareholder rights and compensation.

Bristol-Myers Squibb 2020 Proxy Voting Guide: Board Proposals

1. Bristol-Myers Squibb 2020 Directors

Egan-Jones Proxy Services recommends Against 1A) Peter J. Arduini, 1E) Matthew W. Emmens, 1G) Dinesh C. Paliwal, 1J) Gerald L. Storch, and 1K) Karen H. Vousden, Ph.D. These directors served on the compensation committee. Since E-J finds compensation not sufficiently related to performance, they recommend voting against all members.

Vote: AGAINST 1A) Peter J. Arduini, 1E) Matthew W. Emmens, 1G) Dinesh C. Paliwal, 1J) Gerald L. Storch, and 1K) Karen H. Vousden, Ph.D.

2. Executive Compensation

Bristol-Myers Squibb 2020 Summary Compensation Table shows the highest paid named executive officer (NEO) was CEO/Chair Giovanni Caforio, M.D. at $18M. I’m using Yahoo! Finance to determine market cap ($141B) and I define large-cap as $10B, mid-cap as $2-10B, and small-cap as less than $2B. Bristol-Myers Squibb is a large-cap company.

According to MyLogIQ , the median CEO compensation at large-cap corporations was $12.5M in 2019. Bristol-Myers Squibb paid considerably higher. Shares underperformed during the last five year and two yeaar time period but outperformed during the last one  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 152:1 times.

Egan-Jones Proxy Services writes:

After taking into account both the quantitative and qualitative measures outlined below, we believe that shareholders cannot support the current compensation policies put in place by the Company’s directors. Furthermore, we believe that the Company’s compensation policies and procedures are not effective or strongly aligned with the long-term interest of its shareholders. Therefore, we recommend a vote AGAINST this Proposal.

Given far above median pay, underperformance and E-J recommendation, I voted against.

Vote: AGAINST

2. 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. Deloitte & Touche, LLP has served more than seven years. No other issues appear significant.

Vote: AGAINST

Bristol-Myers Squibb 2020 Shareholder Proposals

This good governance proposal comes from me (James McRitchie), so of course I voted FOR. Many boards and investors assume a false equivalency between rights of written consent and special meetings. However, any shareholder, regardless how many (or few) shares she owns, can seek to solicit written consents on a proposal.

By contrast, calling a special meeting may require a two-step process. A shareholder who does not own the minimum shares required must first obtain the support of other shareholders. Once that meeting is called, the shareholder must distribute proxies asking shareholders to vote on the proposal to be presented at the special meeting. This two-step process can take more time and expense than the one-step process of soliciting written consents, especially at BMY, which allows only investors with 25% of outstanding shares to call a special meeting, instead of 10%, as allowed by many companies.

Similar proposals won more than 50% of the vote recently at Stanley Black & Decker, Berry Global Group, Flowserve, JetBlue, United Rentals, Capital One, Cigna, Applied Materials and Nuance.

E-J recomments FOR.

Vote: FOR

Bristol-Myers Squibb 2020 CorpGov Recommendations

Proxy Insight reported the following as of when I last checked. 

Proxy Insight may have updated by the time I post this. Looking up a few funds announcing votes in advance, NYC Pensions voted FOR all items except Mae C. Jemison and Sherilyn S. McCoy. I wish they posted their reasons. Maybe I would have joined them on those two. Calvert voted FOR all items.  

CorpGov Votes:

1. Directors: AGAINST (withhold) 1A) Peter J. Arduini, 1E) Matthew W. Emmens, 1G) Dinesh C. Paliwal, 1J) Gerald L. Storch, and 1K) Karen H. Vousden, Ph.D..
2. Executive Pay: AGAINST
3. Auditor: AGAINST
4. Separate Chair and CEO: FOR
5. Right to Act by Written Consent: FOR

Bristol-Myers Squibb 2020: Issues for Future Proposals

• No ability for shareholders to at by Written Consent
• 25% to call for a Special Meeting
• It appears they may not prohibit hedging of stock or overboarding by directors. I would need to confirm.
• Women are underrepresented on the BMY Board. (4 out of 12)

Bristol-Myers Squibb 2021: Mark Your Calendar

Shareholder proposals relating to our 2021 Annual Meeting of Shareholders must be received by us at our principal executive offices, Bristol-Myers Squibb Company, 430 East 29th Street—14th Floor, New York, New York 10016, Attention: Corporate Secretary, no later than November 25, 2020.

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.