Assembly Bio 2020 annual meeting is 6/11/2020 at 8AM Pacific (update) virtually by entering the eligible shareholder’s 16-digit control number found on the proxy card. To enhance long-term value: Vote AGAINST Holubiak, Mahony and Ringo, Pay, Stock Plan, token Special Meeting 25%. Vote FOR real Special Meeting Right of 15%. See list of all virtual-only meetings maintained by ISS.
Assembly Biosciences, Inc. operates as a clinical-stage biotechnology company in the United States. 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.
I voted with the Board’s recommendations 46% 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.
Assembly Bio 2020: ISS Ratings
From the Yahoo Finance profile: Assembly Biosciences, Inc.’s ISS Governance QualityScore as of December 6, 2019 is 3. The pillar scores are Audit: 2; Board: 3; Shareholder Rights: 3; Compensation: 7. 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 compensation.
Assembly Bio 2020 Proxy Voting Guide: Board Proposals
1. Assembly Bio 2020 Directors
Egan-Jones Proxy Services had not updated their recommendations when I last looked but may have now. Since I voted against Pay, I also voted against the members of the Compensation Committee: Holubiak, Mahony and Ringo.
Vote AGAINST: Holubiak, Mahony and Ringo.
2. Executive Compensation
Assembly Bio 2020 Summary Compensation Table shows the highest paid named executive officer (NEO) was CEO John G. McHutchison, at $7M. I’m using Yahoo! Finance to determine market cap ($720M) and I define large-cap as $10B, mid-cap as $2-10B, and small-cap as less than $2B. Assembly Bio is a small-cap company.
According to MyLogIQ, the median CEO compensation at small-cap corporations was $6.45 M in 2019. Assembly Bio shares outperformed during the last one year time period but underperformed during the last two and five year time periods.
Given above median pay, mixed performance, and my general concerns about inequality, I voted AGAINST.
Vote: AGAINST
3. 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 less than seven years. No other issues appear significant.
Vote: FOR
4. Stock Incentive Plan
The New York City Comptroller voted Against. That’s good enough for me. I assume it is too dilutive.
5. Special Meeting Right – 25%
To counter my proposal to allow shareholders with 25% of shares to call for a special meeting, the Board seeks to substitute their own watered down version. I recommend voting this version down and supporting my proposal #6, which would set the threshold at a more reasonable 15%.
Assembly Bio 2020 Shareholder Proposals
6. Shareholder Right to Call Special Meeting – 15%
James McRitchie requests the Board give holders with an aggregate of 15% net long of our outstanding common stock the power to call a special shareowner meeting
In response to my proposal, the Board seeks to create such a right but with a threshold of 25% in proposal #5. That threshold would still among the highest levels required.
Many companies have a threshold as low as 10%. Getting 25% of shareholders to agree to a meeting under urgent circumstances would be too difficult. The requested 15% is a reasonable compromise.
Recently, similar proposals to reduce special meeting thresholds have won majority votes at Laboratory Corporation of America Holdings, Cadence Design, Rite Aid, Discover Financial Services, Occidental Petroleum, O’Reilly Automotive, and Citigroup.
I ask that you vote Against proposal #5 and FOR proposal #6. Establish the special meeting threshold at 15%.
Vote: FOR
Assembly Bio 2020 CorpGov Recommendations
Proxy Insight reported the following as of when I last checked.
Pensionskassen Magistre & Psykologer (Danish) voted Against Holubiak, Kim, Lewis, Exec Pay and Stock Plan.
Looking up a few funds announcing votes in advance, NYC Pensions voted FOR all items except Kim, Stock Plan, Board’s Token Special Meeting #5. Trillium voted the same as the Danish firm above.
- Directors: AGAINST Holubiak, Mahony and Ringo.
- Executive Pay: AGAINST
- Auditor: FOR
- Stock Plan: AGAINST
- token Special Meeting Right 25%: AGAINST
- real Special Meeting Right 15%: FOR
Assembly Bio 2020: Mark Your Calendar
Any stockholder who meets the requirements of the proxy rules under the Exchange Act may submit proposals to the Board to be included in next year’s proxy statement and on our proxy card for the 2021 Annual Meeting of Stockholders. Such proposals must comply with the requirements of Rule 14a‑8 under the Exchange Act. To be considered for inclusion in next year’s proxy materials, any proposals must be submitted in writing by December 28, 2020, to our Corporate Secretary at 331 Oyster Point Blvd., Fourth Floor, South San Francisco, California 94080; provided, however, that if our 2021 Annual Meeting of Stockholders is held before May 12, 2021 or after July 11, 2021, then the deadline is a reasonable amount of time prior to the date we begin to print and send our proxy statement for the 2021 Annual Meeting of Stockholders.
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.
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