WD-40 2020

WD-40 2020: Employee Voice

WD-40 2020, where employee voice and empowerment is on the ballot. The WD-40 2020 annual meeting is Tuesday, December 8th. To enhance long-term value, vote AGAINST the auditor and FOR all other items, including #4. $WDFC

WD-40 Company (WDFC) develops and sells maintenance products, and homecare and cleaning products in the Americas, Europe, the Middle East, Africa, and the Asia-Pacific. Most shareholders do not vote.  Reading through 50 pages of the proxy takes too much time. 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, skip reading for 7 minutes. 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 85% 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.

WD-40 2020: ISS Rating

From the Yahoo Finance profile:

WD-40 Company’s ISS Governance QualityScore as of November 1, 2019, is 3. The pillar scores are Audit: 2; Board: 8; Shareholder Rights: 1; Compensation: 3.

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.

WD-40 2020 Proxy Voting Guide Board Proposals

1. Directors

Egan-Jones Proxy Services recommends a vote FOR all directors.

Vote: FOR all directors

2. Executive Compensation

WD-40’s Summary Compensation Table shows the highest paid named executive officer (NEO) was CEO/Chair Garry O. Ridge at $2.9M. I’m using Yahoo! Finance to determine market cap ($3.4B) and I define large-cap as $10B, mid-cap as $2-10B, and small-cap as less than $2B. WD-40 is a smallish mid-cap company.

mylogiq logoAccording to MyLogIQ, the median CEO compensation at mid-cap corporations was $6.4M last year, $3.9M at small-caps. WD-40 shares outperformed the NASDAQ during the most recent 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 29 to 1. As a shareholder, it is hard to complain about WD-40’s CEO compensation.

Egan-Jones Proxy Services uses a proprietary rating compensation system to measures wealth creation in comparison to other companies. Company compensation policies 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. “Therefore, we recommend a vote FOR this Proposal.”Egan-Jones

Vote: FOR

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. PricewaterhouseCoopers, LLP has served more than seven years. No other issues appear significant.

Vote: AGAINST

WD-40 2020 Proxy Voting Guide: Shareholder Proposals

4. Increase Diversity of Director Nominees by Considering Workers

This proposal is from me, James McRitchie, so you know I voted FOR. Environmental, social, and governance (ESG) concerns have been forefront. E&G got all the attention. With covid-19 we see an acceleration of wealth inequality and appreciate “essential workers.” Social concerns should take center stage.

Decades ago, an extensive review by the National Science Foundation found workplaces were not organized for productivity.  Although the evidence supports “ownership of the workplace as well as the work itself by the workers, organizations have not adopted such models. Creating participatory structures runs contrary to the desires of most current decision-makers, whose status is derived from dominating their subordinates.” Too little progress has been made to give voice and empower workers.

I hoped WD-40, with its “tribal” culture, might embrace a more participatory workplace. Include a non-management employee in the pool of potential directors. Form an advisory council of employees.  Appoint a director to be a liaison to the workforce. Create a substantial employee stock ownership plan (ESOP). Take any such action. But no, the Board is satisfied with its current engagement efforts.

WD-40’s engagement efforts are better than average. They could be better still.

Vote: FOR

WD-40 2020 CorpGov RecommendationsProxy Insight

Proxy Insight had only reported the votes of CBIS when I last checked. CBIS voted For all items except the auditor, which they voted Against. 

In looking up a few funds in our Shareowner Action Handbook, I see Calvert voted FOR all items. Here is what they said regarding proposal #4. “A vote FOR this proposal is warranted as shareholders would benefit from more information about how a non-management employee representative director may enhance board diversity and could potentially give the company meaningful insights into its workplace.” NYC Comptroller voted FOR all items except #4, which they voted Against. Praxis voted FOR all items, except Trevor I. Mihalik, who they voted Against.


CorpGov Votes:

  1. Directors: FOR all.WD-40 2020 Employee Voice
  2. Executive Pay: FOR.
  3. Auditor: AGAINST
  4. Include Non-management Employees as Prospective Director Candidates: FOR

WD-40 2020: Issues for Future Proposals

Some anti-shareholder provisions highlighted by Activist Insight:

  • Combined chair/CEO with no lead director requirement
  • Supermajority voting standards to amend certain provisions.

WD-40 2021: Mark Your Calendar

Shareholder proposals must be received by the Company no sooner than June 1, 2021 and not later than July 1, 2021 to be included in the Proxy Statement and form of proxy for the next annual meeting.

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. The “Lake Woebegone effect,” “where all the children are above average,” works well for society. However, when all CEOs are considered above average, their collective pay spirals 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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