Alphabet 2021 annual meeting is June 2, 9 AM Pacific Time. To attend, vote, and submit questions during the Annual Meeting visit here. You must have your 16 digit control number. I recommend voting in advance. To enhance long-term value. Vote AGAINST Doerr, Ferguson, Hennessy, Mather, Shriram, Washington, Auditor, Stock Plan, #9. Vote FOR all other items. Thankfully, the SEC disagreed with Alphabet’s attempt to exclude our proposal to transition to a Public Benefit Corporation.
Alphabet Inc. provides online advertising services in the United States, Europe, the Middle East, Africa, Asia-Pacific, Canada, and Latin America. The company offers performance and brand advertising services. It operates through Google Services, Google Cloud, and Other Bets segments. Most shareholders do not vote. Reading through 83 pages of the proxy takes 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 9 minutes of reading. See CorpGov votes below. Voting will take you only a minute or two. Every vote counts.
I voted with the Board’s recommendations 29% 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.
Alphabet 2021: ISS & Sustainalytics Ratings
From the Yahoo Finance profile page: Alphabet Inc.’s ISS Governance QualityScore as of April 30, 2021, is 10. The pillar scores are Audit: 2; Board: 5; Shareholder Rights: 10; Compensation: 10.
Alphabet 2021: Board Proposals
Egan-Jones recommends Against Hennessy (over tenured, cyber risk), L. John Doerr (over tenured, comp com), K. Ram Shriram (comp com), Robin L. Washington (comp com).
Vote: AGAINST Doerr, Ferguson, Hennessy, Mather, Shriram, Washington.
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. Ernst and Young served for 22 years. No other issues appear significant
3. Stock Plan
Egan-Jones: After taking into account the maximum amount of shareholder equity dilution this proposal could cause, as well as both the quantitative and qualitative measures, shareholders should not support. Trillium: Based on evaluation of the estimated cost, plan features, and grant practices using the Equity Plan Scorecard (EPSC), a vote AGAINST this proposal is warranted due to the following:
- Plan cost is excessive
- The three-year average burn rate is excessive
- Disclosure of change-in-control (“CIC”) vesting treatment is incomplete (or is otherwise considered discretionary)
- Permits liberal recycling of shares
- Allows broad discretion to accelerate vesting
Alphabet 2021: Shareholder Proposals
4. Equal Shareholder Voting
E-J recommends For. Differential voting power has the effect of denying shareholders the opportunity to vote on matters of critical economic importance to them. Companies should not utilize multiple class capital structures. If they do, there should be time limits.
If you only vote for one item, this should be it. Our capital structure and voting power must be aligned or we will continue to hold shares in a dictatorship where we have no real voice.
5. Nomination of Human Rights and/or Civil Rights Expert to Board
E-J: Human rights issues are needed to be escalated at the board level to ensure proper accountability and oversight.
6. Report on Sustainability Metrics
E-J: Investors seek clarity regarding how companies drive improvement and how that strategy is supported by executive accountability. Comprehensive links among sustainability, diversity and executive compensation would help protect long-term shareholder value. We believe that approval of this proposal is in the best interests of the Company and its shareholders.
7. Report on Takedown Requests
E-J: Free speech and political censorship are some of the most significant issues that face Big Tech companies today. More than any company in the industry, we believe that Alphabet must be a key player in exercising accountability, integrity, and oversight over these issues. Current law gives immunity to web content hosts who take down content in dispute, for example, due to copyright issues. However, Alphabet may promote the violation of freedom of expression by making such content too easy to take down and too hard to re-post.
Additionally, evidence suggests that Google may manipulate some search results, potentially impacting everything from competitor success to national elections.
Given the reputational and regulatory risks Alphabet faces, including the risk of antitrust action, improved transparency and accountability are needed to meet the company’s long-term responsibility to its many investors. The report will facilitate the evaluation of political advertising and potential censorship issues, and at the same time assess the operational, reputational, and social implications to the Company.
8. Report on Whistleblower Policies and Practices
E-J: the proposed resolution contemplated is advisable, substantively, and procedurally fair to, and in the best interests of the Company and its shareholders.
9. Report on Charitable Contributions
EJ: The benefits of implementing the proposal would not justify the administrative costs and efforts, nor would it provide a corresponding meaningful benefit to shareholders.
10. Report on Risks Related to Anti-competitive Practices
EJ: Robust board oversight would improve its management of risks related to anticompetitive practices.
11. Transition to a Public Benefit Corp
EJ: Not in the best interests of the Company and its shareholders. I disagree.
Despite the risk Alphabet poses to social stability around the world, the Company is governed at the highest levels with a primary goal of creating value for shareholders. While Alphabet considers the effects it has on other stakeholders, those considerations are measured against the corporate governance goal of delivering value to its own shareholders. When the interests of shareholders diverge from the public interest, creating chaos and human loss, it is the public interest that must yield.
By becoming a PBC, Alphabet could reject shareholder primacy and protect its diversified shareholders from this threat, as long as the founders’ voting power is reduced, as specified.
Please read this Notice of Exempt Solicitation. The proposal comes from me (James McRitchie), written by The Shareholder Commons.
Alphabet 2021 CorpGov Recommendations
Proxy Insight reported no votes when I last checked.
Here is how a few funds in our Shareowner Action Handbook voted:
Australia’s Local Government Super: AGAINST John Doerr (Affiliate/Insider on compensation committee), Ferguson (overboarded), Auditor (tenure), Stock Plan (excessive cost), #9 (anti-social), #11 (no reason). FOR all other items.
Calvert: AGAINST Hennessy, Doerr, Mather, Shriram, Washington, Stock Plan, #9, #11. FOR all other items. Re directors: lack diversity, overboarded, poor stewardship of compensation committee.
CBIS: AGAINST Doerr, Mather, Shriram, Washington, Auditor, Stock Plan, #9. FOR all other items.
Trillium voted AGAINST Hennessy, Arnold, Doerr, Mather, Shriram, Washington, Stock Plan. For all other items.
- Directors: AGAINST Doerr, Ferguson, Hennessy, Mather, Shriram, Washington.
- Auditor: AGAINST
- Alphabet Stock Plan: AGAINST
- Equal Shareholder Voting: FOR
- Nominate Human Rights and/or Civil Rights Expert to Board: FOR
- Report on Sustainability Metrics for Exec Comp: FOR
- Report on Takedown Requests: FOR
- Report on Whistleblower Policies and Practices: FOR
- Report on Charitable Contributions: AGAINST
- Report on Risks Related to Anti-competitive Practices: FOR
- Transition to a Public Benefit Corp: FOR
Alphabet 2021: Issues for Future Proposals
Looking at insightia for anti-shareholder provisions:
- Dual-Class Shares
- Shareholders lack the right to act by written consent
- No proxy access rights
- Supermajority provision
Alphabet 202: Mark Your Calendar
For inclusion in our 2022 proxy statement, our Corporate Secretary must receive a written proposal at firstname.lastname@example.org no later than Friday, December 24, 2021.
Alphabet and Facebook Shareholders Seek Better Oversight: Scandals Loom
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.
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