Caterpillar 2022 annual meeting is June 8, 2022, at 6 AM Pacific. It is a virtual-only meeting on the Compushare platform. Entry requires retail shareholders to obtain a legal proxy — a real hassle. Of course, 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 Reed-Klages, Wilkins, auditor, and pay. Vote FOR all shareholder proposals.
Caterpillar Inc. manufactures and sells construction and mining equipment, diesel and natural gas engines, and industrial gas turbines worldwide. Below, is how I voted and why in a much shorter format than I’ve used in prior years.
I voted with the Board’s recommendations 50% of the time, so a Proxy Score of 50 out of 100. View Proxy Statement via SEC’s EDGAR system (look for DEF 14A).
Read Warnings. What follows are my recommendations on how to vote the proxy in order to enhance corporate governance and long-term value.
Caterpillar 2022: ISS Rating
From the Yahoo Finance profile page: Caterpillar Inc.’s ISS Governance QualityScore as of May 1, 2022, is 6. The pillar scores are Audit: 5; Board: 7; Shareholder Rights: 5; Compensation: 6.
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.
Caterpillar 2022: CorpGov Recommendations
| # | Item | Proponent | Calvert | Corpgov.net |
| 1 | Directors | Board | For all | Against Reed-Klages, Wilkins |
| 2 | Ratify Auditor | Board | For | Against |
| 3 | Ratify Exec Pay | Board | For | Against |
| 4 | Report Greenhouse Gas | Shareholder | For | For |
| aligned with Paris | ||||
| 5 | Report on Lobbying | Shareholder | For | For |
| 6 | Report on Risks in | Shareholder | For | For |
| Conflict-Affected Areas | ||||
| 7 | Reduce Special Mtg Threshold | Shareholder | For | For |
CEO pay at $24M seems high to me. The median pay for the Equilar 100 (largest companies by revenue) was $20M. 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 not 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.
Caterpillar 2022: Shareholder Proposals
Proposal #4. Additional information on the company’s efforts to reduce its carbon footprint and align its operations with Paris Agreement goals would allow investors to better understand how the company is managing its transition to a low carbon economy and climate change-related risks.
My #5 on lobbying will help shareholders better assess the risks and benefits associated with the company’s participation in the public policy process. Caterpillar expends a significant amount of money on lobbying, over $42 million on federal lobbying alone from 2010 to 2020. For more information, see my Notice of Exempt Solicitation. (ignore the subject line)
Proposal #6. Shareholders would benefit from additional information on the assessment of adopting a policy of not doing business with governments that are complicit in genocide and/or crimes against humanity and how the company is evaluating and managing related operational risks that may negatively affect shareholder value.
Proposal #7. A lower ownership threshold would provide for a more useful special meeting right.
Caterpillar 2022: Other Recommendations
In looking up a few funds in our Shareowner Action Handbook, I see a few funds have reported their votes… maybe more by the time you read this.
Caterpillar 2022: 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
Caterpillar 2023: 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 December 29, 2022.
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