Caterpillar 2021 Faces Proxy Issues

Caterpillar 2021 Faces Proxy Issues

Caterpillar 2021 annual meeting is June 9, 6 AM Pacific Time. To attend, vote, and submit questions during the Annual Meeting visit here (Password: CAT2021). To participate, use the 16-digit control number provided on your proxy card or voting instruction form. I recommend voting in advance. To enhance long-term value. Vote AGAINST Dickinson, Reed-Klages, Rust, Schwab, White, Wilkins, the Auditor, and Pay. Vote FOR all the shareholder proposals. 

Caterpillar Inc. manufactures and sells construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives worldwide. Most shareholders do not vote.  Reading through 62+ 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 7 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 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.

Caterpillar 2021: ISS Ratings

Caterpillar Inc.’s ISS Governance QualityScore as of April 30, 2021, is 5. The pillar scores are Audit: 1; Board: 7; Shareholder Rights: 4; 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 Board and Compensation.
ESG Risk Ratings -High Controversy Level

Caterpillar 2021: Board Proposals

1. Directors

Egan-Jones Proxy Services recommends voting against directors who served for much longer than 10 years since they should not be considered independent. That is my rationale for voting Against Dickinson, Rust, and Schwab. Since I voted against Pay, I also voted against the members of the compensation committee: Reed-Klages, White, and Wilkins.

Vote: AGAINST Dickinson, Reed-Klages, Rust, Schwab, White, and Wilkins.

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. PricewaterhouseCoopers LLP has served for 96 years. No other issues appear significant.


3. Executive Compensation

Caterpillar’s Summary Compensation Table shows the highest paid named executive officer (NEO) was CEO D. James Umpleby III at $13.7 M. I’m using Yahoo! Finance to determine market cap ($130B) and I define large-cap as $10B, mid-cap as $2-10B, and small-cap as less than $2B. Caterpillar is a large-cap company.mylogiq_logo

According to MyLogIQ, the median CEO compensation at large-cap corporations was $12.9 M in 2020. CEO D. James Umpleby III at $13.7M was paid over that amount.  Caterpillar shares outperformed the S&P 500 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 274 to 1. Egan-Jones Ratings

Although I am a bit torn on this, excess pay outweighed the increase in share value, which may have had little to do with executive performance.


Shareholder Proposals

4.Report on Climate Policy

This proposal from As You Sow on behalf of The Thornhill Company requests a report disclosing climate policies, performance, and improvement targets, if any, responsive to each of the indicators set forth in the Net Zero Benchmark, or any rationale for failure to adopt such metrics. Climate change is an existential threat to all of us. The proposal is very reasonable. See As You Sow’s Exempt Solicitation.

Vote: FOR

5. Report on Diversity and Inclusion

This proposal from As You Sow on behalf of PCR Children’s TR FBO Ellen asks for a report on diversity and inclusion efforts. It would allow shareholders to better assess the effectiveness of the company’s diversity and inclusion efforts and management of related risks. The report requires minimal cost, with the potential for much greater returns.

Vote: FOR

6. Transition to Public Benefit Corp

The proposal comes from my wife and me, Myra Young and James McRitchie, with help from The Shareholder Commons. Just take a look at the other shareholder proposals. If the search for higher returns prevents Caterpillar from reducing its carbon footprint and advancing diversity and inclusion, that is bad for the planet, bad for people, and bad for the Company’s own diversified shareholders, who rely on a stable climate and healthy economy to support their many investments and overall prosperity.

As a PBC, Caterpillar would be able to reprioritize its goals and pursue profits solely within the planetary and societal boundaries necessary to preserve the critical systems that undergird the global economy.

See the Exempt Solicitation from The Shareholder Commons.

Vote: FOR

7. Shareholder Action by Written Consent

This proposal from John Chevedden asks for what should be a fundamental right at all companies — allow a majority of shareholders to act by written consent. I file these frequently. This is especially important at Caterpillar where it takes 25% of shareholders, not 10%, to call a special meeting.

Vote: FOR

Caterpillar 2021 CorpGov RecommendationsProxy Insight

Proxy Insight reported no votes when I last checked. 

In looking up a few funds in our Shareowner Action Handbook, I see Calvert vote For all items, except my proposal to convert to a PBC, which they argue is untested. CBIS voted Against the auditor, For all other items. Norges voted against Umpleby because the CEO/Chair should be split, #4, and #6. Trillium voted Against all directors except MacLennan, and Pay; For all other items.

CorpGov Votes:

  1. Directors: Dickinson, Reed-Klages, Rust, Schwab, White, and Wilkins.
  2. Auditor: AGAINST
  3.  Executive Pay: AGAINST
  4. Report on Climate Policy: FOR
  5. Report on Diversity and Inclusion: FOR
  6. Transition to a Public Benefit Corp: FOR
  7. Shareholder Action by Written Consent: FOR

Caterpillar 2021: Issues for Future Proposalsinsightia

Looking at insightia for anti-shareholder provisions:

  • No requirement to separate CEO and Chair
  • Written Consent not provided to shareholders.

Caterpillar 2022: Mark Your Calendar

Rule 14a-8 proposals: If the proposal is to be included in our proxy statement pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, the proposal must be received at the office of the Corporate Secretary on or before January 1, 2022

Related Posts

Caterpillar 2020: Written Consent


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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