Clorox 2021 annual meeting is Wednesday, November 17, 2021 at 9:00 A.M. PST, virtually via https://meetnow.global/MNGZAZQ. You will also need your 15-digit control number. Of course, I recommend voting in advance. To enhance corporate governance and long-term value, vote AGAINST Auditor; FOR #5 Increase Diversity of Director Nominees – Include Non-Management Employees on Candidate List.
The Clorox Company manufactures and markets consumer and professional products worldwide. It operates through four segments: Health and Wellness, Household, Lifestyle, and International. Most shareholders do not vote. Reading through 100+ 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 76% 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.
Clorox 2021: ISS Rating
From the Yahoo Finance profile page: The Clorox Company’s ISS Governance QualityScore as of September 26, 2021, is 8. The pillar scores are Audit: 9; Board: 1; Shareholder Rights: 10; Compensation: 6.
Clorox 2021: Board Proposals
Clorox is not one of our outstanding performers but I do not have a reason to vote against any of the directors.
2. Advisory Vote on Executive Compensation
Clorox’s Summary Compensation Table shows the highest paid named executive officer (NEO) was CEO Linda Rendle at $7.9M. I’m using Yahoo! Finance to determine market cap ($20B) and I define large-cap as $10B, mid-cap as $2-10B, and small-cap as less than $2B. Clorox is a large-cap company.
According to MyLogIQ, the median CEO compensation at large-cap corporations was $14 M in 2020. Pay is substantially below that amount. Clorox shares underperformed large-caps substantially over the most recent one-year, two-year and five-year time period. The ratio of the annual total compensation of the CEO to the median of the annual total compensation of all employees was 114 to 1.
3. Ratification of Independent Auditor
Ernst & Young LLP has served for 18 years. At some point, auditing firms can feel captured by the companies they audit. There is no fine line but 18 years seems too long to me.
4. 2021 Amend Omnibus Stock Plan
I find no compelling reason to vote against.
Clorox 2021: Shareholder Proposal
5. Increase Diversity of Director Nominees: Include Non-Management Employees on Candidate List
The proposal is from me (James McRitchie) so, of course, I voted in favor. The proposal requests the initial list of candidates from which new director nominees are chosen include (but need not be limited to) current or past Clorox non-management employees to potentially add an employee perspective on the Board. Management says it has an ongoing listening strategy, which includes an annual employee engagement survey and periodic pulse surveys that gauge employee perception of the Company as a place to work, as well as their views of leadership, understanding of the Company’s IGNITE strategy, and sense of inclusion. They also list several other engagement mechanisms.
Clorox may be more engaged with its employees than many companies but it could be much stronger. We offered to withdraw the proposal if the Board agreed to any of a number of options to empower employees and report results to shareholders. Options included simply appointing a member of the Board to be a liaison with workers, as well as other options. They were unwilling to discuss any options.
This proposal was filed many months ago. In reviewing the results of my proposals at other companies in conjunction with the academic literature (such as Lifting Labor’s Voice), I see we have been trying to follow a European model without the basic infrastructure, such as supervisory boards, half elected by workers. America has a weak union movement (although that may be changing). We have no labor party. Even if companies were convinced to include workers in the initial candidate pool for directors, there is no ready mechanism for workers to choose their representatives.
Going forward, I am filing many proposals aimed at getting companies, like Clorox, to report on employee ownership data. What percent of stock plans are going to each level of employees? What programs do they have to move to an ownership culture? How do they measure progress? Is wealth inequality, based on share ownership at Clorox, growing or being reduced? See Employee Ownership 2022 Proposals.
Documented benefits of worker-ownership include the following:
- Better Corporate Performance – ESOP companies grow about 2.5 percentage points per year faster in sales, employment, and productivity
- Higher Firm Survival Rates – Privately held ESOPs are companies half as likely to go bankrupt or close
- Fewer Layoffs – Employee owners less likely to report being laid off in the previous year: 9.5% for all working adults compared to 1.3% for ESOPs in 2014
- Better Employee Compensation & Benefits – Employee owners earn 5%-12% more in median wages and have 2.5x more in retirement plans than other employees
- Strong Outcomes for Young Workers – Employee owners ages 28 to 34 enjoy 92% higher median household wealth, 33% higher income from wages, and 53% longer median job tenure
- Address Racial and Gender Wealth Gaps – Employee owners women & workers of color enjoy many multiples of retirement assets compared to their peers
Clorox 2021: CorpGov Recommendations
Proxy Insight had not reported any votes when I last checked.
In looking up a few funds in our Shareowner Action Handbook, I see the NYC Comptroller and Norges Bank voted For all items except #5, which they voted Against. Trillium voted Against directors Richard H. Carmona, Esther Lee, Matthew J. Shattock, Kathryn Tesija, Pay; For all other items including #5. Re the director votes, they wrote: The nominee is a member of the nomination committee and there are less than 40% women on the board.The nominee is a member of the nominating committee and less than 30% of the board is diverse (includes just racial/ethnic diversity).
- Directors: FOR all
- Compensation: FOR
- Auditor: AGANST
- Stock Plan: FOR
- Increase Diversity of Director Nominees – Include Non-Management Employees on Candidate List: FOR
Clorox 2021: Issues for Future Proposals
Looking at insightia for anti-shareholder provisions:
- No requirement to separate CEO and Chair
- Written consent by shareholders is prohibited
- Bylaw amendments by shareholders require a supermajority vote
Clorox 202: Mark Your Calendar
In the event that a shareholder wishes to have a proposal considered for presentation at the 2022 Annual Meeting and included in the Company’s proxy statement and form of proxy used in connection with such meeting pursuant to Exchange Act Rule 14a-8, the proposal must be received by the Company’s Corporate Secretary no later than the close of business on June 8, 2022. Any such proposal must comply with the requirements of Rule 14a-8.
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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