Moody's 2024 Special Meetings

Moody’s 2024 Special Meetings: My Proxy Votes

Moody’s 2024, proxy. James McRitchie’s proposal for Special Meetings is one of several items to be voted on before or during the Moody’s Corporation (MCO ) annual meeting on April 16, 2024, at 6:30 a.m. Pacific. Attend the annual meeting online. I suggest you vote in advance. However, you can also vote during the meeting with your control number IF voting isn’t cut off right after all proposals have been presented.

Vote Against compensation committee directors Howell, Forlenza, Hill, Serafin, and Van Saun. The CEO’s total pay is high at $14M, exceeds 4 times the average NEO pay, and 125 times the median employee pay. Vote AGAINST the Auditor, Pay, #4, FOR item #5 Special Meetings. See note on Automatic Voting. Note: If you vote online and leave blanks, those blanks will be filled in, not as abstentions, but as if you had voted as the Board recommends. That’s not exactly democratic corporate governance.

Moody’s Corporation operates as an integrated risk assessment firm worldwide in two segments: Moody’s Analytics and Moody’s Investors Services. I voted with 36% of the Board’s recommendations. You can view the Proxy Statement via the SEC’s EDGAR system (look for DEF 14A) or on CapEdge, which offers many free tools.

The Shareholder CommonsRead Warnings. Good corporate governance generally results in better profits and a better society. However, I don’t prioritize profits over our natural environment and human needs, especially when companies externalize costs. (see The Shareholder Commons) I also take a systems approach.

ISS Rating

Moody’s Corporation’s ISS Governance QualityScore as of March 29, 2024, is 4. The pillar scores are Audit: 7; Board: 2; Shareholder Rights: 4; 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.

Moody’s 2024: How We Voted

ItemEgan-Jones RecommendationCorpGov.net Recommendation
1A-1J – Election of DirectorsFor AllAGAINST Howell, Forlenza, Hill, Serafin, Van Saun. FOR the rest.
2 – Ratification of KPMG LLP as Independent AuditorsAgainstAGAINST
3 – Advisory Vote to Approve Executive CompensationForAGAINST
4 – Authorize Stockholders Owning 25% of the Company’s Common Stock to Call Special Meetings of StockholdersAgainstAGAINST
5 – Shareholder Proposal: Right of Shareholders to Call Special Meetings at 15%AgainstFOR

Moody’s 2024: Considerations and Recommendations

I was helped with my voting advice from Egan-Jones and my proxy voting policy through iconikapp. I also briefly looked at some funds that announced their votes in advance.

Free Proxy Advisor From As You Sow & IconikappYou can automate all your proxies to be voted according to human values by signing up for the iconik/AYS app. In about two minutes, you’ll vote all your proxies according to values that balance environment, social, governance, and profitability. More information is available at Free Proxy Advisor From As You Sow & Iconikapp. I have a more customized version, so your results with the iconikapp.com may differ. Iconikapp

Moody’s 2024: Directors

I voted Against compensation committee directors Howell, Forlenza, Hill, Serafin, and Van Saun. The CEO’s total pay is high at $14M, exceeding 4 times the average NEO pay and 125 times the median employee pay.

Moody’s 2024: Items #2-4

Vote AGAINST the Auditor. Even with auditor rotation within the contracted firm, I agree with Egan-Jones that, over time, many are essentially captured. They are troubled when a company contracts with the same firm for over 7 years. Moody’s auditor has been KPMG LLP for 16 years. That’s too long.

As stated above, vote AGAINST pay. The CEO’s total compensation is high at $14M, exceeding four times the average NEO pay and 125 times the median employee pay.

Vote against the Board’s counter-proposal to allow shareholders with 25% of the outstanding stock to call a special meeting. This is not “half a loaf.” It is nothing of real value. Please take a look at the next item for the rationale.

Item #5 Shareholder Proposal: Right of Shareholders to Call Special Meetings at 15%

My proposal offered the Board an opportunity to reflect that Moody’s does not have a provision for shareholders to call a special meeting. That prompted the Board to file its own Proposal #4, which provides a 25% threshold.

The Board recognizes that providing stockholders the ability to call special meetings “is an important corporate governance practice that promotes long-term value by reinforcing accountability.” However, they are wary of a lower threshold since “special meetings can be distracting and costly.”

In their opposition to Proposal #5, the Board claims a 15% threshold would “increase the risk that a relatively small group of stockholders with narrow interests that do not reflect the views of most other stockholders could call special meetings to advance their own particular, short-term agendas that are not aligned with the long-term interests of the Company and its other stockholders.”

Looking at our shareholders, the top 6 hold more than 40% of the stock. Soon after that, the proportion of shares each investor holds drops precipitously. Only a small group of traditionally passive investors like Berkshire Hathaway, Vanguard, BlackRock, or State Street could reach the 15% threshold. They are permanent owners, not shareholders with narrow, short-term interests. You would have to go back more than a decade to find one 13D filer. Not properly rating mortgage-backed securities that precipitated the Great Recession and led Moody’s to a $864M settlement would have been justification for at least considering some form of activism at that time, such as a special meeting.

Additionally, the Board fails to provide the text of their proposed amendment, which also includes a provision allowing allowing the Board to require “additional terms,” in the By-Laws. One restriction fad is to exclude all shares held for less than one continuous year from participating in calling for a special shareholder meeting. Therefore, 25% may translate to 40% if a one year holding requirement is added.

The Board’s fear of a 15% threshold is unfounded. Setting the threshold at 25% may look like the Board is responsive, but the passage of a 25% threshold reinforces complacency since it cannot be met without the participation of large passive permanent owners.

To ensure Board vigilance, please Vote FOR proposal #5.

A Note on Automatic Voting

Robo-voting is generally derided as the practice by an investment fund of mechanically voting according to the advice of its proxy advisor in corporate elections, fully delegating its voting decision to its advisor. However, even voting by your own proxy voting guidelines can be equally problematic if those guidelines aren’t multi-dimensional.

For example, Calvert voted for both proposals #4 and #5. Their voting guidelines and those of most funds and advisors probably favor the right of shareholders to call special meetings, so they vote in favor of such proposals, whether proposed by boards or shareholders. However, some funds and many retail shareholders always vote as the boards recommend.

Additionally, if you vote on one item on the proxy, any items you leave blank will be voted on as the Board recommends. In this case, that means in favor of #4 and against #5. Therefore, the deck is stacked against shareholders.

Funds and advisors must incorporate more “if-then” decision trees into their proxy voting policies. For example, if there are two special meeting proposals on the proxy, vote for the proposal with the lower threshold, as long as it requires 10% or more of shares outstanding, to call a special meeting.

Moody’s 2025: Mark Your Calendar

Stockholder proposals which are being submitted for inclusion in the Company’s proxy statement and form of proxy for the 2025 annual meeting of stockholders must be received by the Company at its principal executive offices no later than 5:00 p.m. EST on November 6, 2024 and a copy of the submission must be emailed to corporatesecretary@moodys.com. Such proposals when submitted must be in full compliance with applicable laws, including Rule 14a-8 of the Exchange Act. Director nominations to be included in the Company’s proxy statement pursuant to the proxy access provisions of the Company’s By-Laws must be delivered no earlier than the close of business on October 7, 2024 and no later than the close of business on November 6, 2024, and must fully comply with the By-Laws.

   

Moody’s 2024: Related Posts

Moody's Shareowners Vote to Split Chair/CEO

WDFC to Allow Special Meetings

Salesforce CRM Adopts Special Meetings

The Giant Shadow of Corporate Gadflies

, , , , , , , , , , , , , , , , , , , , , , , , , , , ,

One Response to Moody’s 2024 Special Meetings: My Proxy Votes

  1. James McRitchie 04/16/2024 at 6:49 am #

    Moody’s closed the polls immediately after the last proposal was presented. This didn’t allow shareholders to consider the arguments presented at the meeting or time to change their vote, which was very disrespectful to investors. The official meeting lasted less than 10 minutes. The whole meeting lasted 17 minutes. It felt like they did the minimum to meet their legal requirements.

Leave a Reply

Powered by WordPress. Designed by WooThemes