Stryker Corporation 2021 annual meeting is May 5, 2021, at 11AM Pacific Time. To attend, vote, and submit questions during the Annual Meeting visit www.virtualshareholdermeeting.com/SYK2021 and enter the 16-digit control number. With my broker (TD Ameritrade), the only place I can find that control number is in a “vote now!” email I received long ago. If you deleted a similar email, you can still attend as a guest but you will not be able to vote or ask questions. Save those emails! I recommend voting in advance. To enhance long-term value. Vote AGAINST Datar, Golston, McCoy, Stryker, the Auditor, and Pay. Vote FOR Study Workforce Involvement in Corporate Governance and Special Meetings.
Stryker Corporation operates as a medical technology company. The company operates through three segments: Orthopaedics, MedSurg, and Neurotechnology, and Spine. Most shareholders do not vote. Reading through 50 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 8 minutes of reading. See how I voted my ballot. Voting will take you only a minute or two. Every vote counts.
I voted with the Board’s recommendations 36% 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.
Stryker Corporation 2021: ISS & Sustainalytics Ratings
Stryker Corporation’s ISS Governance QualityScore as of April 1, 2021, is 5. The pillar scores are Audit: 8; Board: 7; Shareholder Rights: 4; Compensation: 5.
Stryker Corporation 2021: Board Proposals
1. Directors
Egan-Jones Proxy Services recommends For all directors. However, directors who served for much longer than 10 years should not be considered independent. Both Srikant M. Datar, Ph.D. and Ronda E. Stryker fall into that category. Sherilyn S. McCoy sits on more than four corporate boards, so may not have adequate time to devote to her duties. Srikant M. Datar, Ph.D., Allan C. Golston, and Sherilyn S. McCoy sit on the compensation committee. Since I voted against pay, I also voted against the directors who recommended that pay.
Vote: AGAINST Srikant M. Datar, Ph.D., Allan C. Golston, Sherilyn S. McCoy, and Ronda E. Stryker.
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 & Young, LLP served more than seven years. No other issues appear significant.
Vote: AGAINST
3. Executive Compensation
Stryker’s Summary Compensation Table (p. 35) shows the highest paid named executive officer (NEO) was CEO/Chair Kevin A. Lobo at $13.3M. I’m using Yahoo! Finance to determine market cap ($99B) and I define large-cap as $10B, mid-cap as $2-10B, and small-cap as less than $2B. Stryker is a large-cap company.
According to MyLogIQ, the median CEO compensation at large-cap corporations was $13M in 2020. CEO Kevin Lobo’s pay at $13.3M is slightly above that amount. Stryker’s shares underperformed large-caps 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 181 to 11.
Egan-Jones Proxy Services found pay aligned with the long-term interest of its shareholders. They recommend voting For. Given my concern for the growing wealth disparity and Stryker’s underperformance, I voted Against.
Vote: AGAINST.
Stryker Corporation 2021: Shareholder Proposals
4. Study Workforce Involvement in Corporate Governance
This proposal comes from NorthStar Asset Management. Egan-Jones recommends Against, since “changing the director nomination policy with respect to Company employees as requested in the proposal is unnecessary and will not enhance shareholder value.” However, the proposal does not ask Stryker to change the nomination process. It asks the Board to study “benefits to the company related to employee participation in company governance.”
Yes, one possibility mentioned in the proposal is possible employee representation on the board. Others include employee participation in governance such as employee councils, joint labor-management committees, or labor unions.
The average tenure of employees at Stryker is less than 3 years. Costco employees stay an average of 9 years. Stryker will continue to lag if it fails to fully engage employees. This is a worthy proposal.
Vote: FOR
5. Special Meetings
This proposal from my wife, Myra Young, and I wrote it. Egan-Jones believes appropriate to enable holders of below 25% of the common stock to have an unlimited ability to call special meetings. Large funds such as Vanguard, TIAA-CREF, BlackRock and support the right of shareholders to call special meetings.
The beauty of a good governance proposal, like this one, is that it is highly unlikely to result in more cost or a special meeting. The mere presence of the good governance right empowering shareholders serves as a guardrail. It helps ensure the board nominates the best directors. They will know that if they don’t, shareholders will have a practical remedy… with teeth.
I presented a similar proposal at Kellogg’s on April 30th. It won 61% of the vote. We urge the Board to join the mainstream of major U.S. companies and establish a right for shareholders owning 15% of our outstanding common stock to call a special meeting.
Vote FOR.
Stryker Corporation 2021 CorpGov Recommendations
Proxy Insight reported no votes when I last checked.
In looking up a few funds in our Shareowner Action Handbook, I see Calvert voted Against McCoy and the auditor; For all other items. Norges voted Against McCoy, and both shareholder proposals; For all other items. Trillium voted Against McCoy, the auditor, and pay; For all other items.
- Directors: AGAINST Datar, Golston, McCoy, and Stryker.
- Auditor: AGAINST
- Executive Pay: AGAINST
- Study Workforce Involvement in Corporate Governance: FOR
- Special Meetings: FOR
Stryker Corporation 2021: Issues for Future Proposals
Looking at insightia for anti-shareholder provisions:
- No requirement to separate CEO and Chair
- No right to hold special meetings
- No right to written consent
- No right to proxy access
Stryker Corporation 2021: Mark Your Calendar
To submit a proposal for inclusion in the proxy materials for our 2022 annual meeting, the proposal must be received by our Vice President, Corporate Secretary at 2825 Airview Boulevard, Kalamazoo, Michigan 49002 on or prior to November 24, 2021. The inclusion of any proposal in the proxy statement and form of proxy for such meeting will be subject to applicable SEC rules.
Warnings
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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