NextEra Energy 2020 annual meeting is 5/21/2020 at 6AM Pacific, the in-person meeting will be webcast. I am not sure if shareholders will be able to vote online during the meeting. To enhance long-term value: Vote AGAINST Camaren, Dunn, Robo, Schupp, Swanson, Executive Pay. Vote FOR Political Contributions Report, Written Consent. See list of all virtual-only meetings maintained by ISS.
NextEra Energy, Inc., through its subsidiaries, generates, transmits, distributes, and sells electric power to retail and wholesale customers in North America. Reading through 100 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 9 minute read. See how I voted in my ballot. Voting will take you only a minute or two. Every vote counts.
NextEra Energy 2020: ISS Ratings
From the Yahoo Finance profile: NextEra Energy, Inc.’s ISS Governance QualityScore as of December 5, 2019 is 3. The pillar scores are Audit: 1; Board: 8; Shareholder Rights: 2; 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 the board and compensation.
NextEra Energy 2020 Proxy Voting Guide: Board Proposals
Egan-Jones Proxy Services recommends Against 1B) James L. Camaren, 1C) Kenneth B. Dunn, 1I) James L. Robo, 1J) Rudy E. Schupp, and 1L) William H. Swanson. Mr. Robo, as CEO, should be held accounable for cybersecurity issues, according to E-J. The other four named directors have served for 10 years or more, so should no longer be considered independent nor should they serve on compensation, audit or nominating committees.
Vote: AGAINST: 1B) James L. Camaren, 1C) Kenneth B. Dunn, 1I) James L. Robo, 1J) Rudy E. Schupp, and 1L) William H. Swanson.
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 less than seven years. No other issues appear significant. Yet, E-J recommends Against. Trillium is a very strident voter, with no hesitation to go against board recommendations. They voted For the auditor. I will follow their lead.
3. Executive Compensation
NextEra Energy 2020 Summary Compensation Table shows the highest paid named executive officer (NEO) was CEO/Chair James L. Robo at $21.9M. I’m using Yahoo! Finance to determine market cap ($111.6B) and I define large-cap as $10B, mid-cap as $2-10B, and small-cap as less than $2B. NextEra is a large-cap company.
According to MyLogIQ, the median CEO compensation at large-cap corporations was $12.2M in 2019. NextEra shares outperformed 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 168:1.
Egan-Jones Proxy Services recommends For:
We believe that the Company’s compensation policies and procedures are centered on a competitive pay-for-performance culture, strongly aligned with the long-term interest of its shareholders and necessary to attract and retain experienced, highly qualified executives critical to the Company’s long-term success and the enhancement of shareholder value.
Given much higher than median pay and my general concerns about inequality, I voted AGAINST.
NextEra Energy 2020 Shareholder Proposals
4. Shareholder Proposal: Political Contributions Disclosure
This is a standard shareholder proposal seeking NextEra disclose its political contributions. The proposal from Newground Investments looks like many that I have submitted with guidance from the Center for Political Accountability.
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. For example, NextEra’s payments to trade associations that may be used for election-related activities are undisclosed and unknown. This proposal asks NextEra to disclose all of its electoral spending, including payments to trade associations and other tax-exempt organizations, which may be used for electoral purposes. This would bring it in line with a growing number of leading companies, including MasterCard Inc., Intuit Inc., and Salesforce.com, 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. E-J recommends Against, since it is “unnecessary and will not result in any additional benefit to the shareholders.” I disagree.
5. Shareholder Proposal: Written Consent
This proposal from me (James McRitchie & Myra Young), since having the right to act by written consent would allow shareholders to take emergency action before an annual meeting.
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 NextEra Energy, which allows only investors with 20% of outstanding shares to call a special meeting, instead of 10%, as allowed by many companies. Egan-Jones recommends For.
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 recommends For.
Looking up a few funds announcing votes in advance, Calvert and Praxis voted FOR all items. Trillium voted voted AGAINST all directors (except David L. Porges) and Executive Pay; FOR all other items.
- Directors: AGAINST: 1B) James L. Camaren, 1C) Kenneth B. Dunn, 1I) James L. Robo, 1J) Rudy E. Schupp, and 1L) William H. Swanson.
- Auditor: FOR
- Executive Pay: AGAINST
- Political Contributions Report: FOR
- Written Consent: FOR
NextEra Energy 2020: Mark Your Calendar
Proposals on matters appropriate for shareholder consideration consistent with Rule 14a-8 under the Exchange Act submitted by shareholders for inclusion in the proxy statement and form of proxy for the 2021 annual meeting of shareholders must be received by the Corporate Secretary at the Company’s principal executive offices not later than December 4, 2020. The submission of such proposals by shareholders is subject to regulation by the SEC pursuant to 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.