Zillow Group 2020

Zillow Group 2020: Proxy Scorecard

Zillow Group 2020 annual meeting is 6/9/2020 at 2PM Pacific virtually by entering the eligible shareholder’s control number found on the proxy card. Meeting password: ZG2020. To enhance long-term value: Vote AGAINST Maffei, Hoag, and Incentive Plan. Vote FOR Elect Directors by Majority Vote.

I would advise voting online by 6/8, since I have often encountered problems trying to vote at the meeting, especially when not hosted by Broadridge. See list of all virtual-only meetings maintained by ISS.

Zillow Group, Inc. (ZG) operates real estate brands on mobile and the web in the United States. It operates through three segments: Homes; Internet, Media & Technology; and Mortgages.  Reading through about 70 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 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 33% 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.

Zillow Group 2020: ISS Ratings

From the Yahoo Finance profile: Zillow Group, Inc.’s ISS Governance QualityScore as of December 5, 2019 is 10. The pillar scores are Audit: 1; Board: 10; Shareholder Rights: 10; 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 everything at this company under the full control of its founders.

Zillow Group 2020 Proxy Voting Guide: Board Proposals

1. Zillow Group 2020 DirectorsEgan-Jones

Egan-Jones Proxy Services recommends Against Gregory B. Maffei and Jay C. Hoag. Both should no longer be considered independent nor should they serve on compensation, audit or nominating committees, since they have served for more than 10 years. Additionally, Hoag serves on the compensation committee and I voted against the incentive plan that came from that committee.

Vote: AGAINST Maffei and Hoag.

2. Ratification of Independent Auditor

I have no reason to believe the auditor engaged in poor accounting practices or has a conflict of interest.

Vote: FOR

3. Incentive Plan

mylogiq_logoZillow Group’s 2020 Summary Compensation Table shows the highest paid named executive officer (NEO) was Former CEO Spencer M. Rascoff  at $27.6M.  I’m using Yahoo! Finance to determine market cap ($13.7B) and I define large-cap as $10B, mid-cap as $2-10B, and small-cap as less than $2B. Zillow Group is a large-cap company.

According to MyLogIQ, the median CEO compensation at large-cap corporations was $12.2M in 2019. Zillow Group’s shares outperformed during the last one and five year time periods but underperformed during the last two year time period. The ratio of the annual total compensation of the CEO to the median of the annual total compensation of all employees was 37:1. Of course, that ratio would be substantially different if reported for the former CEO.

Egan-Jones Proxy Services recommends Against:

After taking into account the maximum amount of shareholder equity dilution this proposal could cause, as well as both the quantitative and qualitative measures outlined below, we believe that shareholders should not support the passage of this plan as proposed by the board of directors. We recommend the board seek to align CEO pay more closely with the performance of the company and work to reduce the cost of any similar plan that may be proposed in the future.

Given far above median pay, mixed performance, the recommendation of Egan-Jones and my general concerns about inequality, I voted AGAINST.

Vote: AGAINST

Zillow Group 2020 Shareholder Proposals

4. Elect Directors by Majority Vote

This proposal comes from me (James McRitchie). It is something of a test of the Board’s willingness to even hear the voice of shareholders. It simply requests that directors be elected by a majority of votes. That should be an easy proposal to implement. Why allow a director to get elected with only one vote, if 99.99% of shares are voted against or withheld?

Egan-Jones recommends For, writing:

Generally, we support proposals calling for majority vote requirements. We believe that majority vote requirements in boardroom elections enhance director accountability to shareholders and director accountability is the hallmark of good governance. The board election process should ensure that shareholder expressions of dissatisfaction with the performance of directors have real consequences.  A majority-vote standard will transform the director election process from a symbolic gesture to a process that gives meaningful voice to shareholders.

Proxy Insight reported similar proposals have passed recently at the following companies:

Abeona Therapeutics, Alico, Guideware Software, Stemline Therapeutics, Eldorado Resorts, RadNet, Gannett, New Residential Investment, Safety Insurance Group, First Community Bankshares, Advaxis, 2U Inc, Service Properties Trust, New Senior Investment Group, Netflix and Utah Medical Products.

Vote: FOR

Zillow Group 2020 CorpGov Recommendations

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 the reasons. 

CorpGov Votes:

  1. Directors: Maffei and Hoag.
  2. Auditor: FOR
  3. Incentive Plan: AGAINST
  4. Elect Directors by Majority Vote: FOR

Zillow Group 2020: Mark Your Calendar

To be considered for inclusion in next year’s proxy statement and form of proxy, shareholder proposals for the 2021 Annual Meeting of Shareholders must be received at our principal executive offices no later than the close of business on December 23, 2020. As prescribed by current Rule 14a-8(b) under the Exchange Act, a shareholder must have continuously held at least $2,000 in market value, or 1%, of our outstanding shares for at least one year by the date of submitting the proposal, and the shareholder must continue to own such stock through the date of the annual meeting.

Shareholders may contact our Board of Directors as a group or any individual director about the Board of Directors or corporate governance by sending written correspondence to the following address: Board of Directors – Zillow Group, Inc., Attn: General Counsel, 1301 Second Avenue, Floor 31, Seattle, Washington 98101 or by email at [email protected] Shareholders should clearly specify in each communication the name(s) of the group of directors or the individual director to whom the communication is addressed. Inquiries meeting these criteria will be received and processed by management before being forwarded to the group of directors or the individual director, as designated in the communication. Communications that are unrelated to the duties and responsibilities of the Board or are unduly hostile, threatening, potentially illegal or similarly unsuitable will not be forwarded.

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.

   

, , , , , , , , , ,

No comments yet.

Leave a Reply

Powered by WordPress. Designed by WooThemes