Illumina 2020 annual meeting is 5/27/2020 at 10AM Pacific, a virtual-only meeting. To enhance long-term value: Vote AGAINST Dorsa and Epstin, Auditor and Executive Pay. Vote FOR Political Disclosures. See list of all virtual-only meetings maintained by ISS. To have your vote count, vote by 5/26 or at the meeting on 5/27.
Illumina, Inc. provides sequencing and array-based solutions for genetic and genomic analysis. Its products and services serve customers in a range of markets enabling the adoption of genomic solutions in research and clinical settings for applications in the life sciences, oncology, reproductive health, agriculture and other emerging segments. Reading through 80 pages of the proxy takes too much time for most. 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 7 minute read. See how I voted in my ballot. Voting will take you only a minute or two. Every vote counts.
Illumina 2020: ISS Ratings
From the Yahoo Finance profile: Illumina, Inc.’s ISS Governance QualityScore as of December 5, 2019 is 5. The pillar scores are Audit: 1; Board: 4; Shareholder Rights: 5; Compensation: 8.
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.
Illumina 2020 Proxy Voting Guide: Board Proposals
Egan-Jones Proxy Services recommends Against (1A) CAROLINE D. DORSA AND (1B) ROBERT S EPSTEIN. Dorsa and Epstin are on the compensation committee. E-J recommds Against Executive Pay and Against members of the compensation committee.
Vote: AGAINST (1A) CAROLINE D. DORSA AND (1B) ROBERT S EPSTEIN.
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. Ernst & Young, LLP has served more than seven years. No other issues appear significant.
3. Executive Compensation
Illumina 2020 Summary Compensation Table shows the highest paid named executive officer (NEO) was CEO Francis A. deSouza at $1.5M (although it was $11.1M the year before). I’m using Yahoo! Finance to determine market cap ($47.5B) and I define large-cap as $10B, mid-cap as $2-10B, and small-cap as less than $2B. Illumina is a large-cap company.
According to MyLogIQ , the median CEO compensation at large-cap corporations was $12.2M in 2019. Illumina shares underperformed during the last 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 15:1.
Egan-Jones Proxy Services recommends Against:
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.
Given the recent above median pay, consistent performance and the recommendation of Egan-Jones, I voted AGAINST.
Illumina 2020 Shareholder Proposals
4. Shareholder Proposal: Political Contributions Disclosure
This proposal from me (James McRitchie). It requests Illumina provide a semiannual report disclosing policies and procedures, as well as expenditures, both direct and indirect. E-J recommends Against.
Disclosure is in the best interest of the Company and its shareholders. The Supreme Court recognized this in its 2010 Citizens United decision, which said,
[D]isclosure permits citizens and shareholders to react to the speech of corporate entities in a proper way. This transparency enables the electorate to make informed decisions and give proper weight to different speakers and messages.
Relying on publicly available data does not provide a complete picture of the Company’s electoral spending. This proposal asks the Company to disclose all of its electoral spending, including payments to trade associations and other tax-exempt organizations, currently hidden, which may be used for electoral purposes. This would bring our Company in line with a growing number of leading companies, including Alexion Pharmaceuticals Inc., Celgene Corporation, and Biogen Inc., which present this information on their websites.
Proposals on this topic at Alliant Energy and Cognizant Technology Solutions passed last year, despite board opposition. This year, shareholders of Centene Corporation, J.B. Hunt Transport Services, and Western Union have also passed similar proposals.
Proxy Insight had no reported advanced notifications when I last checked.
Looking up a few funds announcing votes in advance, Trillium voted Against Dorsa, Epstin, Schiller and Executive Pay; For Disclose Political Contributions. NYC Pensions and Calverrt voted For all items.
- Directors: AGAINST Dorsa and Epstin.
- Auditor: AGAINST.
- Executive Pay: AGAINST.
- Disclose Political Contributions: FOR
Illumina 2020: Mark Your Calendar
Under SEC Rule 14a-8, a stockholder who intends to present a proposal at our 2021 annual meeting of stockholders (other than a director nomination) and who wishes the proposal to be included in the proxy statement for that meeting must submit the proposal in writing to our principal executive offices. The proposal must be received no later than December 17, 2020. The proposal and its proponent must satisfy all applicable requirements of Rule 14a-8.
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.