General Electric Company (GE), operates as a digital industrial company worldwide. It operates through Power, Renewable Energy, Oil & Gas, Aviation, Healthcare, Transportation, Lighting, and Capital segments. Most shareholders do not vote because reading through 70 pages of the proxy is not worth the time for the small difference your vote will make. Below, I tell you how I am voting and why. If you have read these posts related to my portfolio for the last 22 years and trust my judgment (or you don’t want to take the time to read it), go immediately to see how I voted my ballot. Voting will take you only a minute or two and every vote counts.
Author Archive | James McRitchie
NCR Recent Governance Developments: Typical Statement
In a section of NCR Recent Governance Developments, the first paragraph was not unusual. They touted their shareholder engagement and the fact that the Board adopted a proxy access bylaw. As is typical, they fail to mention they did so because we filed a shareholder proposal on that topic. Continue Reading →
GE PX14A6G: Notice of Exempt Solicitation pursuant to Rule 14a-103 reproduced below with minor modifications. Please sign on to our Change.org campaign. Use Real Impact Tracker to ask your fund to vote for Shareholder Proposal 3, “Deduct Impact of Stock Buybacks from Executive Pay” at or before the GE annual meeting. See also SEC ADMITS IT’S NOT MONITORING STOCK BUYBACKS TO PREVENT MARKET MANIPULATION.
GE PX14A6G: Shareholder Proxy Memo
GE PX14A6G: Notice of Exempt Solicitation Pursuant to Rule 14a-103
Name of Registrant: General Electric Company (GE)
Names of persons relying on Exemption: James McRitchie on behalf of Myra K. Young
We call on GE shareholders to vote FOR shareholder proposal 3, “Deduct Impact of Stock Buybacks from Executive Pay” at or before the GE Annual Meeting on April 25, 2018.
Facets of Risk – my abbreviation for The Many Facets of Risk: Threats Posed by Internal Cultural Issues – the topic of a panel at the Corporate Directors Forum I attended in San Diego in January. This will be the last of my reports from that Forum. Like all Corporate Directors Forums, Facets of Risk operated under the Chatham House Rule, so you will not find any direct quotes below. My notes include my opinions as well observations made by speakers, panelists and others in attendance at the Forum. While it is certainly not a transcript, I hope even those who attended the Forum will find the post useful, especially my attempt to provide additional context through links and commentary. Continue Reading →
AST claims to have created the first industry platform with registered and street securities ownership information available together, providing a more comprehensive view of ownership.
AST, a leading tech-enabled professional services firm with transfer agent roots, gave me a peek under the hood of their database. Issuer Central™ brings together many of the core services corporate securities issuers require in one secure, centralized platform. AST believes Issuer Central will transform the way corporate issuers understand their ownership by providing unprecedented insights and fostering greater collaboration among C-suite teams. Continue Reading →
A new measuring effectiveness roadmap helps investors ensure they are moving beyond generating environmental or social impact through individual market transactions and are better aligning with broader system-level goals (e.g., the United Nations Sustainable Development Goals, SDGs). Group action along the same trajectory can better influence system-level change. The measuring effectiveness roadmap helps investors answer the following question: How can I measure whether I, as a long-term institutional investor, have contributed to promoting the long-term wealth-creating potential of the environment, society, or the financial system? Continue Reading →
Transforming Capital Markets; that will be my abbreviation for Transformation of Our Capital Markets. the topic of a panel at the Corporate Directors Forum I attended in San Diego in January. Yes, I’m still digesting all the great conversations. Like all Corporate Directors Forums, this one operated under the Chatham House Rule, so you will not find any direct quotes below. These are my notes. As such, they include my opinions as well observations made by speakers, panelists and others in attendance at the Forum. This is certainly not a transcript. However, I hope even those who attended the Forum will find the post useful, especially my attempt to provide additional context through links and commentary. Continue Reading →
Culture: A Driving Force in Talent Management was the topic of a panel at the Corporate Directors Forums I attended in San Diego in January. Yes, I’m still digesting all the great conversations. Like all Corporate Directors Forums, this one operated under the Chatham House Rule, so you will not find any direct quotes below. These are my notes. As such, they include my opinions as well observations made by speakers, panelists and others in attendance at the Forum. This is certainly not a transcript. However, I hope even those who attended the Forum will find the post useful, especially my attempt to provide additional context through links and commentary. Continue Reading →
Cultural Risks: As Advertised
The spotlight often shines on cultural risks only after an organizational crisis or incident. But forward-looking leaders are shifting to a proactive approach to cultural risk management. Macro business issues—cost and regulatory pressures, digital disruption, cyber threats, talent shortages, and others—have clear cultural implications. Corrosive cultures can pose significant challenges, making the organization more vulnerable to a wide range of potential risks. So is assessing an organization’s culture the responsibility of the board? If so, how can they be a change agent? Where does the board’s role end and management’s begin? And finally, how can a board objectively examine its own culture?
Lobbying disclosure remains a top shareholder concern for the 2018 season, as evidenced by proposals filed at 50 companies by 74 institutional and individual investors. A coalition is asking for lobbying reports that include federal and state lobbying payments, payments to trade associations used for lobbying, and payments to any tax-exempt organization that writes and endorses model legislation. (Above graphic from The Nation’s Where Have All the Lobbyists Gone?)
I urge readers to vote in favor of all these resolutions. In Citizens United v. Federal Election Commission, dealing with the related issue of political contributions, Justice Kennedy’s majority opinion justified the Supreme Court’s decision by pointing to the Internet.
With the advent of the Internet… Shareholders can determine whether their corporation’s political speech advances the corporation’s interest in making profits, and citizens can see whether elected officials are ‘in the pocket’ of so-called moneyed interests.
Starbucks Corp (SBUX), operates as a roaster, marketer, and retailer of specialty coffee worldwide. Most shareholders do not vote because reading through 70 pages of the proxy is not worth the time for the small difference your vote will make. Below, I tell you how I am voting and why. If you have read these posts related to my portfolio for the last 22 years and trust my judgment (or you don’t want to take the time to read it), go immediately to see how I voted my ballot. Voting will take you only a minute or two and every vote counts.
Compensation: The Difference it Makes
Compensation. Most Americans think CEOs of the 500 largest publicly traded corporations are overpaid, even though they think CEOs made less than a tenth of what they actually earn. The Rock Center for Corporate Governance at Stanford University conducted a nationwide survey of 1,202 individuals — representative by gender, race, age, political affiliation, household income, and state residence — to understand public perception of CEO pay levels among the Key takeaways are:
- CEOs are vastly overpaid, according to most Americans
- Most support drastic reductions
- The public is divided on government intervention
Americans and CEO Pay: 2016 Public Perception Survey on CEO Compensation found 74% believe that CEOs are not paid the correct amount relative to the average worker. Only 16% believe that they are.
A brave panel tackled the topic, Compensation: The Difference it Makes, at the Corporate Directors Forums I attended in San Diego last month. Like all Corporate Directors Forums, this one operated under the Chatham House Rule, so you will not find any direct quotes below. These are my notes on Compensation: The Difference it Makes. As such, they include my opinions as well observations made by speakers panelists and others in attendance at the Forum. This is certainly not a transcript. However, I hope even those who attended the Forum will find the post useful, especially my attempt to provide additional context through links and commentary. Continue Reading →
Universal background checks; that would be a good first step. Gun violence may seem to some of my readers too far afield from corporate governance. However, I believe our investment decisions, including communications with companies and proxy votes made after AFTER buying stock should reflect all our values, not just greed.
I am all for banning assault weapons, ending the federal funding freeze on gun violence research, raising the minimum age to buy firearms, outlawing bump stocks, no-fly no-buy laws, etc. However, here I simply request that readers take a few minutes to help pass federal legislation requiring universal background checks by putting pressure on corporations to lobby in favor of it. Continue Reading →
The Culture Impact: Values, Attitudes & Strategic Directions
Culture impact in corporate governance got a big boost with NACD Blue Ribbon Commission report Culture as a Corporate Asset. A brave panel tackled the topic, The Culture Impact: Values, Attitudes & Strategic Directions, at the Corporate Directors Forums I attended in San Diego. Like all Corporate Directors Forums, this one operated under the Chatham House Rule, so you will not find any direct quotes below. These are my notes on The Culture Impact. As such, they include my opinions as well observations made by speakers, panelists and others in attendance at the Forum. This is certainly not a transcript. However, I hope even those who attended the Forum will find the post useful, especially my attempt to provide additional context through links and commentary.
To learn more about the 13th annual Directors Forum: Directors, Management & Shareholders in Dialogue conference, click on the following: @corpdirforum on Twitter, tweets from
#CorpDirForum2018 that often link to other posts, #corpgov #boards website, and Linkedin.
The Culture Impact: Panelists
- Moderator: Michael Berthelot, Director, Fresh Del Monte Produce Company, CEO, Cito Capital Corp; and Managing Principal, Corporate Governance Advisors, Inc.
- Stephen L. Brown, Senior Advisor, KPMG Board Leadership Center
- Joann Lublin, Pulitzer-Prize Winning Journalist & Management News Editor, The Wall Street Journal; Author, Earning It
- Bryan Cornwall, Founder & Principal, Cornwall Bioengineering & Communications
- Hanna Grene, Policy Director, Center for Sustainable Energy
The Culture Impact: My Notes
Paper forthcoming on Wells Fargo and Uber by Hanna Grene and Bryan Cornwall to be published on Equilar website. I will be waiting with anticipation. How would we react? What tools do we have available? It seems to me, the problems were an open “secret,” not unlike Harvey Weinstein. The basics of the Wells Fargo scandal were reported in the LA Times in 2013. Los Angeles sued in 2015. The Board didn’t issue their own internal study until April 2017. Too little, too late with Federal Reserve placing the first firmwide limit on a bank as Chair Janet Yellen stepped down. Wells Fargo announced concurrently that it would replace 4 board members, three by April. Wells Fargo will be included in case studies on culture impact for years to come.
Similarly, Uber’s “hard charging” workplace environment was hardly a secret and had adverse corporate culture. Culture was key. Uber was (is?) aggressive and overbearing. Whereas founder Travis Kalanick’s motto might have been something like, “get it done,” the new CEO Dara Khosrowshahi has adopted ‘We do the right thing. Period.’ Media impact was huge reason for change. We see the influence of media, especially social media, even more after the latest mass shooting. (Mass shootings have made gun stocks toxic assets on Wall Street)
The Culture Impact: Public Opinion Sidebar
Renee Aggarwal, Isil Erel and Laura T. Starks, Influence of Public Opinion on Investor Voting and Proxy Advisors (August 6, 2014, Georgetown McDonough School of Business Research Paper No. 2447012; available at SSRN) found that investors have been “voting less with the recommendations of management or proxy advisors.” In contrast,
public opinion on corporate governance issues, as reflected in media coverage and surveys, is strongly associated with investor voting, particularly mutual fund voting. In addition, even proxy advisor’s recommendations are associated with public opinion… media coverage captures the attention of proxy advisors, institutional investors and individual investors, and is thus reflected in recommendations and votes.
The researchers looked at each proxy proposal for each firm in the Russell 3000 Index for the period January 2004 through November 2010. They looked not only at voting records and ISS recommendations but also media coverage of executive compensation, as well as Gallup surveys of public opinion.
A few highlights from their research are as follows:
- Mean support for shareholder proposals increased from 23.6% in 2004 to 31.8% in 2010, after peaking at 37% in 2009.
- Institutions voted with management on shareholder proposals 74% of the time in 2004 but only 54% of the time by 2010.
- Investor agreement with ISS advice went from 78.4% in 2004 to 57.5% in 2010.
- In 2004, 60% of investors followed ISS opposition to proposals but only 20% did so by 2010.
- The proportion of shareholder proposals opposed by ISS declined from 156.4% in 2010 to 30.5% by 2010.
- Support for shareholder proposals increases by 3.15%-2.69% if there is a one standard deviation increase in media coverage.
Our results suggest that public opinion, as measure through either Gallop Poll survey or media coverage at the aggregate and firm level, influences shareholder voting. The implications of these results are that financial intermediaries, such as mutual funds, pay attention to the shareholders’ preferences regarding corporate governance. These results hold even after controlling for the recommendations of the proxy advisor.
The Culture Impact: Back to Conference Notes
Executives sometimes make it known they did not want negative feedback. How do directors make changes before a negative story appears on the upper fold of a major newspaper?
If you are a high performer, culture impact may be nonexistent for a while; you can do anything you want. But the buck stops at the board, not the CEO. The board needs to be willing to second guess. The board needs to wonder about what you do not know. The board should insure it has independent sources of information. Some argue they have their own independent staff. Activists often do, and they often turn out to be good board members in part because of those additional resources. Every board member should have a responsibility to visit branches, have many experiences as a customer or user. Uber board members seem to have been blind-sided with rapid growth. They waited to long to go after the CEO. Mandatory unconscious bias training might have helped.
The NACD Blue Ribbon report has many tools. Regulatory or the courts; markets or self-reflection. Unfortunately, too often boards seem to be wearing blinders. We are unlikely to see regulatory reform on culture impact. Pressure seems more likely from major shareholders like BlackRock’ announcement to gunmakers. Shareholders have the ability to push back. They have the right to vote boards off the island. Larry Fink’s letter this year said companies must have “a sense of purpose.” Companies have culture impact.
Furthermore, the board is essential to helping a company articulate and pursue its purpose, as well as respond to the questions that are increasingly important to its investors, its consumers, and the communities in which it operates. In the current environment, these stakeholders are demanding that companies exercise leadership on a broader range of issues. And they are right to: a company’s ability to manage environmental, social, and governance matters demonstrates the leadership and good governance that is so essential to sustainable growth, which is why we are increasingly integrating these issues into our investment process.
Your vote is really important. At Wells Fargo and Uber we saw a failures of courage. Uber had frat boy culture. Culture, character and courage… that is what it takes. Wells Fargo seems to have had a culture of, ‘cheat and you can stay; don’t cheat and you are fired.’ Boards need to be more transparent around reports and actions taken, not just to reduce potential liabilities but also to help your company live up to its purpose.
Investigations must be reported up. HR should number and track complaints so they do not get lost. Boards should get routine reports to assess culture impact — to see trends and outliers. Boards should seek the right answers. Non-financial measures should be to be tied to compensation. In an M&A, which culture will prevail? Which culture to keep.
The role of HR. Is it to protect the company or to protect and develop employees? Heads of HR should address boards more frequently. Directors have to spot the data anomalies. Culture is important and is part of their fiduciary duty.
The Culture Impact: Recent Related Posts
- Culture as a Corporate Asset
- General Counsel: Corporate Culture Influencer
- Director Liability: Boards are on the hot seat over data breaches, illegal sales practices and more
The Walt Disney Company (DIS), operates as an entertainment company worldwide. Most shareholders don’t vote because reading through 74 pages of the proxy AND many more pages of appendices is not worth the time for the small difference your vote will make. Below, I tell you how I am voting and why. If you have read these posts related to my portfolio for the last 22 years and trust my judgment (or you don’t want to take the time to read it), go immediately to see how I voted my ballot. Voting will take you only a minute or two and every vote counts.
Shareholder Hot Topics: Introductory Notes
Most of the Corporate Directors Forums I have attended in San Diego start with “Shareholder Hot Topics.” There is widespread interest in the subject from directors, management, shareholders, consultants and academics. This year the Forum had an overall theme, “How Culture Impacts the Boardroom and Beyond.” Corporate culture is the hot topic, especially after the NACD Blue Ribbon Commission Report on Culture as a Corporate Asset. See also Earning It: Lublin @ Corporate Directors Forum.
Like all Corporate Directors Forums, this one operated under the Chatham House Rule, so you will not find any direct quotes below. These are my notes on Shareholder Hot Topics. As such, they include my opinions as well observations made by speakers panelists and others in attendance at the Forum. This is certainly not a transcript. However, I hope even those who attended the Forum will find the post useful, especially my attempt to provide additional context through links and commentary.
To learn more about the Corporate Directors Forum, click on the following: @corpdirforum on Twitter, tweets from
#CorpDirForum2018 that often link to other posts, website, and Linkedin. Continue Reading →
Spending Against Change, a new report from the 50/50 Climate Project, finds that twenty-one of the largest energy and utility companies in the U.S. that have spent at least $670 million over six years to influence elections, regulators and lawmakers have limited board oversight of climate risk and political spending, and lack climate competent board members.
These corporations face the highest exposure to climate risk and are most in need of transformation. Yet, they are at the fore of fighting efforts to combat climate change in a manner that raises their risk profile over the long term. These companies typically have minimal board oversight of climate risk and almost no board members with relevant climate-related expertise. Continue Reading →
Robotics and AI: How will Boards Embrace Tomorrow’s Technologies?
As advertized: AI and Robotics are coming. There is no question that disruptive technologies are going to dominate not only what is introduced into the marketplace but also how our businesses are operated internally. Two evolving, and already disruptive forces, are robotics and artificial intelligence (AI). From the Board’s viewpoint, how do you get smart on these topics and understand their value to you? What are the implications of enabling a digital workforce within organizations? Are their opportunities for the governance process itself to leverage these technologies? Could you soon be joined in the Boardroom by an AI Bot? The future is already here at some boards. Continue Reading →
US stock exchanges should require sunset provisions for dual-class shares, SEC commissioner Rob Jackson said in his first speech since taking office last month. In the speech at UC Berkeley School of Law, he likened dual-class shares that do not sunset to “corporate royalty” and said such structures were “antithetical to our values as Americans.”
If you run a public company in America, you’re supposed to be held accountable for your work—maybe not today, maybe not tomorrow, but someday.
CII welcomed Jackson’s remarks. “We applaud Commissioner Jackson for using his first major public speech to support CII’s ongoing efforts to address the problem of unequal voting rights,” CII Executive Director Ken Bertsch said in a statement.
A dual-class structure without a sunset provision —‘forever shares’— says to investors, ‘we’ll take your money, but we won’t ever value your vote on how we use your capital to run the business over the long-term.’ That’s not equitable treatment of investors, and it’s certainly not good corporate governance.
CII has endorsed those measures taken by indexes to ban dual-class shares and only reluctantly backed sunset clauses. Jackson did not suggest his fellow commissioners take action, although he did say he hopes they share his views someday. Fellow Democratic appointee Kara Stein already does, saying that dual class listings are “inherently undemocratic.”
I certainly welcome Commissioner Jackson’s remarks. I’ve written many posts on dual-class shares over the last few years. I like the ban indexers are enforcing and also embrace the idea 0f sunset provisions for dual-class shares of two years. However, I don’t see US stock exchanges imposing sunset provisions. That is much more likely to come from the SEC… maybe, under the next administration. Continue Reading →
Mutualism, the subjects of Kara Stein’s recent talk at Stanford Law, has been a subject that has fascinated me since the 1980’s when I was awarded an NIMH Fellowship to study what types of corporate governance structures (including mutualism) might be most beneficial to employees, shareholders, and society. I applied many lessons learned in heading California’s Cooperative Development Program (now defunct) and continue to try to apply concepts from cooperatives and mutualism to publicly traded companies, such as Twitter.
Commissioner Stein gave an impassioned speech on mutualism and the symbiotic relationship between companies, employees, and shareholders. Dual-class shares and other mechanisms are eroding mutualism. Such structures are inherently undemocratic. Where is the symbiosis inherent in mutualism? How do stakeholders mutually benefit? Continue Reading →
The Ford Motor Company ($F) challenged my resolution on Transparent Political Spending and lost. I created a new posting category, “SEC no-action letters.” Posts under this category will include what I believe are precedent setting decisions. By including them on CorpGov.net I will be creating a searchable database going forward of significant decisions for ready future reference. Hopefully, it will reduce the need to recreate the wheel and will save on time defending similar proposals. Read the full no-action file at the SEC. Continue Reading →
Earning It: Introductory Notes
Joann Lublin gave the opening keynote at the recent Corporate Directors Forum 2018 in San Diego. She spoke largely about her new book, Earning It: Hard-Won Lessons from Trailblazing Women at the Top of the Business World. This year the Forum had an overall theme, “How Culture Impacts the Boardroom and Beyond.” Corporate culture is the hot topic, especially after the NACD Blue Ribbon Commission Report on Culture as a Corporate Asset, and within that umbrella topic nothing is more timely than women and diversity. Continue Reading →
The United States has become the second largest tax haven in the world. That’s according to a new report published Tuesday by the Tax Justice Network (TJN), partnering with the FACT Coalition. TJN’s 2018 Financial Secrecy Index (FSI) finds the U.S. has surpassed the Cayman Islands. Now we are the second largest secrecy jurisdiction, next to Switzerland. TJN partnered with Transparency International and the Financial Accountability and Corporate Transparency (FACT) Coalition. They held an event in Washington on Tuesday afternoon. I would love to see the FACT Coalition follow up with research on how this corruption impacts corporate governance and civil society. Continue Reading →
The 2018 CES (Consumer Electronics Show) and its impact on boards was the subject of a January 31 meeting of the NACD’s Northern California Chapter. We met at the offices of WilmerHale in Palo Alto. We heard primarily from Maureen Conners, Fashion Incubator San Francisco board director and former director of Deckers Brands (NYSE: DECK); Erin Essenmacher, NACD chief programming officer and founder of the NACD Technology Symposium and the NACD CES® Experience; John Hotta, Kaiser Permanente board advisor and former Microsoft executive; and Sandra Lopez, vice president and general manager of Intel’s Sports Group. Continue Reading →
CII sent an important letter to the SEC on a recent no-action issued to the AES Corporation (AES) (not yet posted). A similar no-action had been granted in 2016 to Illumina (ILMN) on a proposal I (James McRitchie) had submitted. ISS referenced both. From the facts regarding AES, it appears John Chevedden submitted a proposal to lower the required threshold for shareholder to call a special meeting. The current standard is 25%. Chevedden’s proposal requested 10%. The SEC’s no-action letter gave the following rationale: Continue Reading →
I will not bother taking Marrone Bio Innovations (MBII) to court. The company is young and inexperienced in dealing with SEC rules and shareholder advocates, such as myself. However, I cannot give them a complete pass. Below is a draft of my remarks to be delivered to those attending the January 31 Annual Meeting. Today is the last day to vote online. Please see Marrone Bio Innovations, Inc: Proxy Vote for my recommendations. Continue Reading →
Today’s lead director and non-executive chair face a seemingly never-ending set of risks, governance decisions and strategic initiatives as a result of investors’ growing emphasis on board transparency, accountability, and independence. This insightful panel focused on the evolving roles of board leaders, specifically, the independent chair and lead director. Drive higher-performing boards through improved processes, strengthened director evaluation, recruitment efforts, and more effective shareholder engagement.
This was yet another great event sponsored by SVDX and Stanford’s Rock Center for Corporate Governance. I am so glad I only live 120 miles away, so can easily participate in these events. These are my notes, with no guarantee of accuracy. This one was more packed than usual with lots of on-point participation from the audience. Like a good lead director, Ms. Gomez-Russum did an excellent job moderating. Her job was made a little easier, since none of the panelists seemed compelled to dominate. Each had interesting insights.
Continue Reading →
$COST, Costco Wholesale Corporation, together with its subsidiaries, operates membership warehouses. It offers branded and private-label products in a range of merchandise categories. $COST has supermajority vote requirements (66.67%) to amend certain charter provisions, a classified board with staggered terms, and no written consent unless unanimous by all shareholders. In short, reasonable shareholder rights are missing. By way of comparison, Amazon.com ($AMZN) has no supermajority vote requirement, a declassified board elected annually and written consent by majority.
Citi reached an historic agreement to disclose wage data and adjust employee salaries in a company-wide effort to achieve gender pay equity. Arjuna Capital agreed to withdraw its gender pay shareholder resolution after the agreement.
Citigroup (Citi) and Arjuna Capital disclosed that Citi is taking steps to provide gender and ethnicity wage data and commit to closing the gap, making it the first U.S. bank to respond to shareholder concerns. In response to Citi’s steps, Arjuna Capital withdrew its gender pay shareholder proposal on Monday, January 15, 2018. Continue Reading →
Michael Garland: In the News
Michael Garland, his boss Scott M. Stringer and the New York City Pension Funds are setting a higher bar for corporate boards and other funds with regard to corporate governance standards. I wish more would try to do half as much for shareholders. Continue Reading →