Tractor Supply 2021 annual meeting is May 6, 8AM Pacific Time. To attend, visit http://www.meetingcenter.io/215031089. The password for the meeting is TSCO2021. You must submit a legal proxy reflecting your Tractor Supply Company holdings along with your name and email address to Computershare. Requests for registration must be labeled as “Legal Proxy” and be received no later than 4:00 p.m., Central Time, on May 3, 2021. Good luck with that. Vote in advance. To enhance long-term value. Vote AGAINST Jamison, Kingsbury, Krishnan, Morris, and Weikel, the Auditor, and Pay. Vote FOR Transition to Public Benefit Company.
Tractor Supply Company operates as a rural lifestyle retailer in the United States. Most shareholders do not vote. Reading through 75+ 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.
Tractor Supply 2021: ISS & Sustainalytics Ratings
From the Yahoo Finance: Tractor Supply Company’s ISS Governance QualityScore as of April 1, 2021 is 1. The pillar scores are Audit: 3; Board: 1; Shareholder Rights: 1; Compensation: 3.
Tractor Supply 2021: Board Proposals
Egan-Jones Proxy Services recommends against Jamison. Chairmen should hold no more than one other public directorship to ensure the valuable and prudent exercise of fiduciary duties. Since I voted against Pay, I also voted against the members of the compensation committee.
Vote: AGAINST Jamison, Kingsbury, Krishnan, Morris, and Weikel. I would have voted against Morris anyway because she should no longer be considered, having served since 2004.
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.
3. Executive Compensation
Tractor Supply‘s Summary Compensation Table shows the highest paid named executive officer (NEO) was CEO Harry A. Lawton III at $15.8M. I’m using Yahoo! Finance to determine market cap ($22B) and I define large-cap as $10B, mid-cap as $2-10B, and small-cap as less than $2B. Tractor Supply is a large-cap company.
According to MyLogIQ, the median CEO compensation at large-cap corporations was $13M in 2020. CEO Lawton at $15.8M is above that amount. Tractor Supply‘s shares outperformed over the most recent one-, and two-year time periods but lagged over 5 years. The ratio of the annual total compensation of the CEO to the median of the annual total compensation of all employees was 654:1.
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, pay above peers and a large pay ratio, I could not in good conscience vote that way.
Tractor Supply 2021: Shareholder Proposals
4. Transition to Public Benefit Corporation (PBC)
This proposal comes from me, James McRitchie, written by experts at The Shareholder Commons, so of course, I voted FOR. Egan-Jones recommends Against, parroting Board arguments.
The purpose of the Proposal is to better address the inevitable tension between shareholder interests and stakeholder concerns. The Proposal’s suggested resolution—conversion to a benefit corporation—is celebrated by Leo Strine, the former Chief Justice of Delaware. Chief Justice Strine argues conversion to benefit corporation status resolves the contradiction between company-first shareholder primacy and the need to account for the full impact of business operations:
So how to resolve this legal impasse? A recent innovation offers a sensible answer. … [The benefit corporation] puts legal force behind the idea that a business should have a positive purpose, commit to do no harm, seek sustainable wealth creation, and treat all its stakeholders with equal respect.
In its opposition statement, Tractor Supply demonstrates it has not considered the gap between what it is doing to address stakeholder interests and what it could do as a PBC.
Most Tractor Supply shareholders are diversified investors who depend on an economy that succeeds for everyone over the long term. As a PBC, Tractor Supply could better consider the long-term risks to multiple stakeholders and the overall economy, as well as to our Company. Tractor Supply would be incentivized to protect you as a diversified shareholder by limiting activities that undermine healthy systems necessary for a successful economy. These social and environmental costs on the economy are not insignificant. At $2.2 trillion annually, they equal more than 2.5% of global GDP. While Tractor Supply may increase its isolated return to shareholders slightly by applying a company-first shareholder primacy model, its diversified shareholders will ultimately pay for the costs it externalizes.
As a PBC, Tractor Supply would have a clear advantage with regard to its customers. Shopping with Tractor Supply would be like hiring a financial advisor who owes you a fiduciary duty, instead of one more concerned with how much they profit from you. (See also exempt solicitation.)
Proxy Insight reported no votes when I last checked.
In looking up a few funds in our Shareowner Action Handbook, Calvert vote For all items except Against Pay and conversion to PBC. CBIS voted Against the auditor and pay; For all other items. Norges voted For all items except conversion to PBC. Trillium voted Against Cardenas, Jackson, Kingsbury, and pay; For all other items.
- Directors: AGAINST: Jamison, Kingsbury, Krishnan, Morris, and Weikel.
- Auditor: AGAINST
- Executive Pay: AGAINST
- Transition to Public Benefit Company: FOR
Tractor Supply 2021: Issues for Future Proposals
Looking at insightia for anti-shareholder provisions:
- No requirement to separate CEO and Chair
- Supermajority requirements to amend Certificate of Incorporation
Tractor Supply 2022: Mark Your Calendar
Stockholders who desire to submit to the Company proposals for possible inclusion in the Company’s proxy materials for the 2022 Annual Meeting of Stockholders must submit such proposals in writing by November 25, 2021 to the Corporate Secretary of the Company at 5401 Virginia Way, Brentwood, Tennessee 37027.
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.