Kimberly-Clark 2021 annual meeting is April 29, 7AM Pacific Time. To attend, vote, and submit questions visit www.meetingcenter.io/277152589 (password: KMB2021). Vote in advance, especially since the meeting is hosted by a company other than Broadridge. You may not be able to vote at the meeting, as even the proxy acknowledges. To enhance long-term value. Vote AGAINST Decherd, Jemison, McCoy, Quarles, Read, the Auditor, Pay Equity Participation, and Directors’ Compensation Plan. Vote FOR Reduce Special Meeting Threshold and Shareholder Right to Act by Written Consent.
Kimberly-Clark Corporation, together with its subsidiaries, manufactures and markets personal care and consumer tissue products worldwide. Most retail shareholders do not vote. Reading through 150 pages of the proxy takes too much time. But 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 7 minutes of reading. See how I voted my ballot. Voting will take you only a minute or two. Every vote counts.
Kimberly-Clark 2021: ISS & Sustainalytics Ratings
From the Yahoo Finance profile page:
Kimberly-Clark Corporation’s ISS Governance QualityScore as of April 1, 2021 is 5. The pillar scores are Audit: 5; Board: 5; Shareholder Rights: 5; 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 Compensation.
Kimberly-Clark 2021: Board Proposals
Egan-Jones Proxy Services recommends against 1B) Robert W. Decherd, 1D) Mae C. Jemison, 1F) Sherilyn S. McCoy, 1G) Christa S. Quarles, and 1H) Ian C. Read. Each of those directors served on the Compensation Committee. Since E-J recommends against the pay package, they also recommend against the committee members who recommended it. Additionally, Decherd and Read are directors who served for longer than 10 years, so should not be considered independent. Additionally, McCoy is overboarded.
Vote: AGAINST 1B) Robert W. Decherd, 1D) Mae C. Jemison, 1F) Sherilyn S. McCoy, 1G) Christa S. Quarles, and 1H) Ian C. Read.
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 served more than seven years. No other issues appear significant
3. Executive Compensation
Kimberly-Clark‘s Summary Compensation Table shows the highest paid named executive officer (NEO) was CEO Michael Hsu at $13.5M. I’m using Yahoo! Finance to determine market cap ($45B) and I define large-cap as $10B, mid-cap as $2-10B, and small-cap as less than $2B. Kimberly-Clark is certainly a large-cap company.
According to MyLogIQ, the median CEO compensation at large-cap corporations was $13M in 2020. CEO Michael Hsu at $13.5M is slightly above that amount. Kimberly-Clark’s shares vastly underperformed the Nasdaq over 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 283 to 1.
Egan-Jones Proxy Services: The board better align CEO pay with the performance of the company. It should “work to reduce the cost of any similar plan that may be proposed in the future.” They recommend voting Against it. Given such poor performance and my concern for the growing wealth disparity.
4. Equity Participation Plan
The Plan allows the company to grant stock options, SARs, restricted shares, restricted share units, performance awards, dividend equivalents, and other stock-based awards. The purpose is to retain managers and other key employees.Egan-Jones Proxy Services is concerned about shareholder equity dilution, as well as poor quantitative and qualitative measures. “Shareholders should not support the passage of this plan as proposed by the board of directors.
5. Outside Directors’ Compensation Plan
Egan-Jones believes the continued success of the Company depends on its ability to attract, retain, and motivate its directors. They recommend a vote FOR. In checking MyLogIQ, I see the average compensation for directors at S&P 500 companies was $297,000. At Kimberly-Clark, it was $262,000, so slightly less. But consider compensation for the entire board was $3.9M at Kimberly-Clark, compared to $3M at the average S&P 500 company. The average S&P 500 company stock was up 48% last year and 98% over the last 5. Kimberly-Clark was down 7% and up 4% during the same period. Why should we be paying our board more than average?
6. Reduce Ownership Threshold Required to Call a Special Meeting of Stockholders
This proposal would reduce the threshold to call a special meeting from 25% to 15%. I view it as a very positive response to my proposal asking for the right of shareholders to act by written consent. Egan-Jones recommends against it, thinking 25% is the right level. ISS policy is to recommend in favor of special meeting proposals with 10% the preferred threshold and important “unfettered” requirements. I see this as a fundamental shareholder right. Management’s proposal of a 15% threshold is low enough that most shareholders will refrain from asking for 10%.
Kimberly-Clark 2021: Shareholder Proposals
7. Shareholder Right to Act by Written Consent
This good corporate governance proposal comes from my wife (Myra Young), written by me, James McRitchie, so of course, we voted FOR. Egan-Jones also recommends For. As indicated in the proposal, many boards and investors assume a false equivalency between rights of written consent and special meetings.
However, any shareholder, regardless of shares owned, 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. That can take more time and expense. Additionally, management generally places more restrictions on special meetings. See Special Meetings and Consent Solicitations: How the Written-Consent Right Uniquely Empowers Shareholders.
Written consent rights create a more competitive environment. That increases the value of your shares.
Proxy Insight reported no votes when I last checked.
In looking up a few funds in our Shareowner Action Handbook, I see Trillium voted For Auditor, Special Meetings, and Written Consent; Against all other items. Two major concerns of theirs: A shareholder proposal received at least 20% shareholder support in the last year. There are less than 40% women on the board. Calvert voted For all items, except McCoy, who sits on too many boards. CBIS voted For all items, except Against the auditor for too many years of service. Australia’s Local Super voted Against the auditor and written consent.
- Directors: AGAINST Decherd, Jemison, McCoy, Quarles, and Read.
- Auditor: AGAINST
- Executive Pay: AGAINST
- Equity Participation Plan: AGAINST
- Outside Directors’ Compensation Plan: AGAINST
- Reduce Ownership Threshold Required to Call a Special Meeting of Stockholder: FOR
- Shareholder Right to Act by Written Consent: FOR
Kimberly-Clark 2021: Issues for Future Proposals
- No requirement to separate CEO and Chair
- No written consent
- Exclusive forum provisions
Kimberly-Clark 2021: Mark Your Calendar
Proposals for the 2022 Annual Meeting of Stockholders must be received by the Corporate Secretary, Kimberly-Clark Corporation, P.O. Box 619100, Dallas, Texas 75261-9100 no later than November 8, 2021. Upon receipt of a proposal, we will determine whether or not to include the proposal in the proxy statement and form of proxy in accordance with applicable law. We suggest that proposals be forwarded by certified mail, return receipt requested.
Be sure to vote for each item on the proxy. Any items left blank get automatically 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.” Peer groups are often chosen by aspiration. The “Lake Woebegone effect” may be nice in fictional towns, “where all the children are above average.” However, corporations live in the real world. All CEOs are above average. Ignoring that fact partly explains why their collective pay spiraling out of control. We need to slow the pace of money going to the 1% or our economy will fail to serve the majority. The rationale for peer group benchmarking is a mythological market for CEOs. For more on the subject, see CEO Pay Machine Destroying America.