Broadridge 2020 Dark Money

Broadridge 2020: Dark Money

Broadridge 2020 Annual Meeting of Stockholders will be held on Thursday, November 19, 2020, at 9:00 AM Eastern. Attend meeting online, vote your shares, and submit questions during the meeting by visiting www.virtualshareholdermeeting.com/BR20. You need the Control Number provided to you (usually by your broker or bank) to join the meeting. To enhance long-term value: Vote AGAINST Duelks, Perna, Weber, and Auditor. Vote FOR Pay and Political Contributions Disclosure.

Broadridge Financial Solutions, Inc. provides investor communications and technology-driven solutions for the financial services industry worldwide. Reading through the proxy takes time. Yet, 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 25 years and trust my judgment,  save the 9-minute read. See how I voted in my ballot. Voting takes only a minute or two. Every vote counts.

I voted with the Board’s recommendations 69% of the time. Read Warnings below. What follows are my recommendations to enhance corporate governance, ESG, and long-term value.

Broadridge 2020: ISS Ratings

From the Yahoo Finance profile:

Broadridge Financial Solutions, Inc.’s ISS Governance QualityScore as of November 1, 2019, is 5. The pillar scores are Audit: 2; Board: 5; Shareholder Rights: 6; Compensation: 2. 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. Their highest ESG risk is on the social dimension. We need to pay close attention to the board, shareholder rights, and social issues, like dark money contributions in politics.

Broadridge 2020 Proxy Voting Guide: Board Proposals

1. Broadridge 2020 DirectorsEgan-Jones

Egan-Jones Proxy Services recommends Against 1D) Robert N. Duelks, 1G) Maura A. Markus, 1H) Thomas J. Perna, 1I) Alan J. Weber, 1F) Brett A. Keller. Duelks, Perna, and Weber served for more than 10 years. They are less than fully independent. Markus, Weber, and Keller serve on the compensation committee, which recommended executive pay EJ believes is unaligned with long-term interests. When executive pay is too high, vote against those who enabled that pay, the compensation committee members. However, since I disagreed with E-J on pay (see below), I only voted against the directors who are not fully independent.

Vote: Against 1D) Robert N. Duelks, 1H) Thomas J. Perna, and 1I) Alan J. Weber.

2. Executive Compensation

mylogiq_logoBroadridge 2020 Summary Compensation Table shows the highest paid named executive officer (NEO) was CEO Timothy C. Gokey at $9M. I’m using Yahoo! Finance to determine market cap ($17B). I define large-cap as $10B, mid-cap as $2-10B, and small-cap as less than $2B. Broadridge is a large-cap company.

According to MyLogIQ, which has the best compensation data, the median CEO compensation at large-cap corporations was $12.7M in 2019. Broadridge 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 127:1.

Egan-Jones Proxy Services writes:

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.

Despite the Egan-Jones analysis, I found good long-term performance and lower than median pay compelling. I voted FOR.

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. Deloitte & Touche served more than seven years. No other issues appear significant.

Vote: AGAINST

Broadridge 2020 Shareholder Proposals

5. Political Contributions Disclosure

This good governance proposal is from me (James McRitchie) based on an analysis of the Center for Political Accountability. Yes, Broadridge improved over last year. However, they still fall short on several measures. For example, they should disclose all political payments made by trade associations or other tax-exempt organizations where they are either a member or donor. As a former legislative chief in California, I know that companies often hide behind their trade association when taking issues their shareholders would oppose. Egan-Jones recommends against, as an unnecessary expense. However, I view such proposals as plain and simple good governance. We cannot hold directors accountable unless we know where the money goes. In this election year, everyone should want dark money disclosed.

Vote: FOR

Broadridge 2020 CorpGov Recommendations

Proxy InsightProxy Insight reported the CBIS voted against the auditor and for all other items. Maybe they will report more votes by the time I post this. Looking up a few funds announcing votes in advance:

CorpGov Votes:

  1. Directors: Against 1D) Robert N. Duelks, 1H) Thomas J. Perna, and 1I) Alan J. Weber.
  2. Executive Pay: FOR
  3. Auditor: AGAINST
  4. Political Contributions Reporting: FOR

Broadridge 2021: Mark Your Calendar

Any stockholder who desires to have a proposal considered for presentation at the 2021 annual meeting of stockholders (the “2021 Annual Meeting”) and included in the proxy statement … must submit the proposal in writing via mail or email to our Secretary so that it is received no later than May 28, 2021. The proposal must also comply with the requirements of Rule 14a-8 under the Exchange Act.

Warnings

Be sure to vote for each item on the proxy. Any items left blank get 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 the 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. The “Lake Woebegone effect” may be nice in fictional towns, “where all the children are above average.” However, 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% of 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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One Response to Broadridge 2020: Dark Money

  1. James McRitchie November 19, 2020 at 6:34 am #

    At the virtual shareholders meeting, I was glad to hear Broadridge acknowledge because of my proposal, they updated their political contribution policy. However, I was not pleased that voting was cut off the second I concluded my presentation. I submitted a question asking: “Why was voting concluded the second I finished presenting proposal #4, leaving no time for shareholders to vote?” Their response was that it was a “good question” but it “goes to the mechanisms of what we’re trying to do here.”

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