Alarm.com Holdings 2022 annual meeting will be in-person only on June 2, 2022, at 9:00 am Eastern, 8281 Greensboro Drive, Suite 100, Tysons, Virginia. I recommend voting in advance, especially since many companies cut off voting as soon as proposals have been presented. To enhance corporate governance and long-term value, vote Against Clarke, Whall, auditor, pay; FOR #4 Proxy Access.
Alarm.com Holdings, Inc. provides cloud-based solutions for smart residential and commercial properties in the United States and internationally. Below, is how I voted and why in a much shorter format than I’ve used in prior years.
Alarm.com Holdings 2022: ISS Rating
From the Yahoo Finance profile page: Alarm.com Holdings, Inc.’s ISS Governance QualityScore as of May 1, 2022, is 6. The pillar scores are Audit: 4; Board: 6; Shareholder Rights: 5; Compensation: 7.
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.
Alarm.com Holdings 2022: CorpGov Recommendations
|1. Election of Directors
|AGAINST Clarke & Whall
|2 – Ratification of the Appointment of Independent Auditors
|3 – Advisory Vote to Approve Executive Compensation
|4 – Adopt Proxy Access Right
Alarm.com Holdings 2022: Board Proposals
Alarm.com Holdings 2022: Shareholder Proposal – Adopt Proxy Access Right
As cited in the proposal Proxy Access in the United States: Revisiting the Proposed SEC Rule, a cost-benefit analysis by CFA Institute, found proxy access would “benefit both the markets and corporate boardrooms, with little cost or disruption,” rising US market capitalization by up to $140.3 billion.
That estimate was based on proxy access having no limit with regard to the number in a participating group. The vast majority of companies have limited groups to a maximum of 20 members. As a result, proxy access has only been used once, to return a founder to the board. The anticipated economic benefits of proxy access have failed to materialize.
Shareholder proposals are advisory and are limited to 500 words. If my shareholder proposal passes, the Board is free to adopt the proposal, adopt it with amendments, or even reject it. However, it would be difficult for the Board to simply reject a proposal that shareholders favor.
In 2019 and again in 2021 our proposal seeking a majority vote in an uncontested board election passed with 65% and then 89% of the vote. The Board finally made that change early this year. In 2020 62% of shares voted for our proposal to declassify the Board. In 2021 the Board then put declassification to a vote and 94% voted For.
Proxy access will probably follow the same path. I am only surprised the Board has been unwilling to negotiate these changes, instead of opposing good governance reforms at every turn. Changes need to be made if Alarm.com is to evolve and develop. Maybe it is time for drastic measures, like more than one woman on the Board. Five years ago the Company’s return on capital was about 17%. That measure has fallen below 7%.
Proxy access will help the Board be more responsive to shareholders by putting directors on notice that if they fail to represent our interests, they may just have a little competition from nominations made by shareholders.
In looking up a few funds in our Shareowner Action Handbook, I see most, such as Calvert and NYC pensions voted in favor of proposal #4. I expect that trend will continue.
Alarm.com Holdings: Issues for Future Proposals
Looking at insightia for anti-shareholder provisions:
- No requirement to separate CEO and Chair
- Shareholders cannot take action by written consent or call special meetings
- Lack of diversity among directors
Alarm.com Holdings 2023: Mark Your Calendar
To be considered for inclusion in next year’s proxy materials, you must submit your proposal, in writing, by December 22, 2022, to our Corporate Secretary c/o Alarm.com Holdings, Inc., 8281 Greensboro Drive, Suite 100, Tysons, Virginia 22102, and you must comply with all applicable requirements of Rule 14a-8 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
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.