Tag Archives | Cisco

Stock Buyback: Shareholder Initiative

A stock buyback can increase senior executive pay, unrelated to performance. First, stock buybacks increase the value of long-term performance stock options and other forms of equity pay. Second, senior executives sometimes time their own stock sales to take advantage of the bump in price that usually accompanies stock buyback announcements. Such behavior defeats the purpose of incentivizing a long-term focus. To address our concern that performance pay should not be artificially boosted by a stock buyback, I recently submitted a proposal to Cisco Systems and expect to submit similar proposals to other companies.

Last year, I submitted a similar proposal to GE. The updated submission to Cisco Systems adds a provision to address market timing. As always, I welcome suggestions and comments from interested readers. How can such resolutions be improved? What have I missed? Or, if you disagree, why are my concerns unwarranted? Use the comment section below the post or email me. Continue Reading →

Continue Reading ·

Cisco Systems: How I Voted – Proxy Score 50

ciscoCisco Systems, Inc. (CSCO) designs, manufactures, and sells Internet Protocol (IP) based networking products and services related to the communications and information technology industry worldwide. Cisco is one of the stocks in my portfolio. Their annual meeting is on November 19, 2015. ProxyDemocracy.org had collected the votes of four funds when I checked. I voted with the Board’s recommendations 50% of the time. View Proxy Statement.

Read Warnings below. What follows are my recommendations on how to vote the proxy in order to enhance corporate governance and long-term value.  Continue Reading →

Continue Reading ·

Take Action: Join Nader's Penny Brigade

RalphNaderSome have argued that Ralph Nader started socially responsible shareholder activism with Campaign GM, when the group filed shareholder proposals to expand GM’s board to include consumer advocates and empower shareholders to place their board nominees on GM’s proxy ballot (proxy access).  According to a recent article in the WSJ, the longtime consumer advocate is now putting together a shareholder-activism group. (Ralph Nader Adds Shareholder Activist to His Portfolio, 1/15/2014) Continue Reading →

Continue Reading ·

Take Action: Proxy Advisory Services Roundtable Seeks Comments

SECActNowOn November 27, 2013 the SEC Announced the agenda and panelists for their 12/5/2013 Roundtable On Proxy Advisory Services. In the first session, participants will discuss, among other topics, the current use of proxy advisory services, including the factors that may have contributed to their use, the purposes and effects of using the services, and competition in the marketplace for such services.  In the second session, participants will discuss, among other topics, issues identified in the Commission’s 2010 concept release on the U.S. proxy voting system, including potential conflicts of interest that may exist for proxy advisory firms and users of their services, and the transparency and accuracy of recommendations by proxy advisory firms. It is critical that members of the public, especially unrepresented retail shareowners submit comments, so your interests can be considered.

See Notice, Comments of James McRitchieComments Received, Suggested Email Comment, and Submit Comments

While the panelists look well qualified and reputable, none appear to represent retail shareowners. True, under the current framework Continue Reading →

Continue Reading ·

Cisco: How Our Proxy Competition Would Work – The Short Version

ciscoVoteAfter posting Cisco Systems: Prime Target For Proxy Advisor CompetitionCisco Systems: Proxy Proposal #5 – 11 Q&A, and Cisco Systems (CSCO): How I Voted – Proxy Score 56 I am still getting the most basic question from funds trying to determine how to vote. That’s understandable. People lack the time necessary to analyze proxy issues. That’s one of the reasons behind the proposal. More resources and more competition could make for better voting at Cisco for all shareowners.

I keep getting the same fundamental question. How would it work in practice? Here’s what I tell them.  Continue Reading →

Continue Reading ·

Cisco Systems (CSCO): How I Voted – Proxy Score 56

ciscoCisco Systems, Inc. $CSCO is one of the stocks in my portfolio. Their annual meeting is next week on Tuesday, 11/13/2013. ProxyDemocracy.org had collected the votes of 2 funds when I checked on 11/13/2013 (there have been more since). I voted with management 56% of the time.  View Proxy Statement.

Warning: Be sure to vote each item on the proxy. Any items left blank are voted in favor of management’s recommendations. (See Broken Windows & Proxy Vote Rigging – Both Invite More Serious Crime) Continue Reading →

Continue Reading ·

Cisco Systems: Proxy Proposal #5 – 11 Q&A

ciscoI received a series of questions about my 11/5/2013 post Cisco Systems: Prime Target For Proxy Advisor Contest. Since other $CSCO shareowners might have similar questions, I am posting the questions and our responses below regarding proxy proposal #5, APPROVAL TO HAVE CISCO HOLD A COMPETITION FOR GIVING PUBLIC ADVICE ON THE VOTING ITEMS IN THE PROXY FILING FOR CISCO’S 2014 ANNUAL SHAREOWNERS MEETING.

Question 1. I understand that your goal here is to increase retail investor participation – a goal we share. I certainly agree that individual investors are at a significant disadvantage without professional advice on their proxy voting.

Response: That’s not the main goal, but it would be an additional benefit. The main goal is to solve the shareowners’ “free-rider” problem, which hurts institutional investors too. For most investors it is not worth paying for good voting advice, unless you own more than 5% of the shares. (The Agency Costs of Agency Capitalism: Activist Investors and the Revaluation of Governance Rights, Ronald J. Gilson and Jeffrey N. Gordon, January 1, 2013) Continue Reading →

Continue Reading ·

Cisco Systems: Prime Target For Proxy Advisor Competition

ciscoCisco Systems (CSCO) faces challenges as never before. For example, see Here’s What Happened When Cisco Lost A $1 Billion Deal With Amazon. Meeting those challenges will take a concerted effort by management and the board of directors. Shareowners, who elect the board and vote on major proxy issues facing our company, also play an important role in Cisco staying competitive and profitable. Yet, most shareowners are passive. Most of us don’t even bother to vote our proxies and who can blame us? This year’s Proxy materials are over 80 pages long. Who has time to read, digest and make decisions on all that information? Finally, we could have the help we need with a proxy advisor contest paid by all shareowners (through Cisco) and chosen by a vote of shareowners.

Proxy Advisors and Research Providers Continue Reading →

Continue Reading ·

Stanford Academics Focus on Wrong Problems at ISS

StanfordRockIn a recent Stanford “Closer Look” publication (How ISS Dictates Equity Plan Design), Ian D. Gow (Harvard but graduated from Stanford), David F. Larcker, Allan l. Mccall, and Brian Tayan argue ISS dictates pay equity plans. ‘Nonsense,’ was my first reaction. ISS policies generally reflect the will of its customers. The authors have a point but they miss the main problem. Their arguments begin in familiar territory. Continue Reading →

Continue Reading ·

Proxy Advisor Competition at Cisco OK'd by SEC


Mark Latham came up with a brilliant idea in the late 1980s: Shareowners should use their corporation’s funds to pay for external evaluations of governance and performance of the board and management. Shareowners would vote to choose among competing organizations to provide this service.

It was a simple concept but SEC rules made subsequent proposals unnecessarily complex and excluded advice on director candidates, often among the most critical decisions on a proxy. Continue Reading →

Continue Reading ·

Corporate Elections: Looking in the Wrong Places

Congress$Bartlett Naylor, Financial Policy Reform Advocate, and Taylor Lincoln, Research Director, both with Public Citizen’s Congress Watch division, wrote an excellent post recently, Looking for Conflict in All the Wrong Places. They criticize the the Congressional hearing entitled “Examining the Market Power and Impact of Proxy Advisory Firms.”

Instead of proxy advisors, Congress should be looking at the JPMorgan proxy vote, where $5 million of the company’s money – shareholders’ money – was used to contest the resolution to split the CEO and chairman roles. And, of course, our money – the money of shareholders – is also being used right now to lobby Congress to weaken our rights. Continue Reading →

Continue Reading ·

Cisco: How I Voted – Proxy Score 83%

Cisco ($CSCO) is one of the stocks in my portfolio. Their annual meeting is coming up on 11/15/2012. ProxyDemocracy.org had collected the votes of five funds when I voted on 11/8/2012.  I voted with management 83% of the time.  View Proxy Statement. Warning: Be sure to vote each item on the proxy. Any items left blank will be voted in favor of management’s recommendations. (See Don’t Let Companies Change Shareholders’ Blank Votes) Continue Reading →

Continue Reading ·

Deceptive Vote Counting: Cisco We Hear You Loud & Clear

As the press release from Boston Common Asset Management below reports, Cisco Systems made a deceptive announcement of vote results because they used two different methods to calculate proxy results announced at the annual meeting. They reported their own proposals as a simple ratio of those voting but included not only abstentions in the ratio for proposals put forward by shareowners, but all outstanding shares.

Of course, that is different than the simple formula used by the SEC to determine if a proposal is eligible for resubmission and it makes it look like shareowner proposals have much less support than they actually do. The deception moved support for a Boston Common proposal down from 34% to 19%. I’ve reported on similar deceptions by other companies previously. (Hat tip to Adam Kanzer of Domini. I had earlier reported Cisco had only included abstentions, not all outstanding shares… a huge difference, when reporting the vote on shareowner proposals.)

The SEC adopted new rules recently requiring that voting results be reported on a Form 8-K within four business days after the end of the AGM or other meeting where vote are held. Item 5.07 of that form doesn’t require companies to include voting percentages, so one reading would allow companies to report the voting percentages to the public as they wish, as long as they report the raw voting data as required.

Unfortunately, it appears that shareowners, including us, were asleep with regard to this issue during the rulemaking process. None of the questions asked by the SEC in its proposing release addressed the issue of reporting ratios consistently. According to Broc Romanek at theCorporateCounsel.net, nor did any comments from shareowners, at least not to his knowledge.

Complicating the matter further is the fact that state laws govern how to calculate whether a proposal is passed (some require counting those “present,” including abstentions) and a company’s bylaws can also come into play.  (An Emerging Hot Topic? Whether to Disclose Voting Result Percentages, theCorporateCounsel.net/Blog, 5/5/2010) But “passage” actually has little consequence for most shareowner proposals, since they aren’t binding and I’m relatively certain no state laws require reporting voting results on management proposals using a different formula than reports on shareowner proposals.

Cisco is obviously trying to influence the perception of shareowners, particularly individual shareowners and small institutional investors who don’t subscribe to proxy advisory services.

Large institutional investors are unlikely to be fooled. Risk Metrics, for example, reports vote results under the formula use by the SEC in Rule 14a-8(i)(12) to determine eligibility for resubmission. That method is FOR/FOR + AGAINST without counting abstentions or broker votes in the denominator. They use the same formula when applying their policy to recommend a withhold-against vote against directors who fail to respond to two majority-supported proposals. See 2011 US Audit/Board Policy: Frequently Asked Questions (Question 1 under the Board Responsiveness). Hat tip to Ted Allen for informing me of their policies.

However, Risk Metrics doesn’t have a policy to withhold support from directors at issuers that report vote results one way for management and another way for shareowner proposals. Those who subscribe to their services may want to propose such sanctions in the future.

The Council of Institutional Investors has a policy that “Boards should take actions recommended in shareowner proposals that receive a majority of votes cast for and against. If shareowner approval is required for the action, the board should seek a binding vote on the action at the next shareowner meeting.” Therefore, they are looking at the percentage as a percentage of cast votes, excluding abstentions. Again, members of CII might want to urge some sanction on deceptive reporting practices, such as those used by Cisco.

One could argue that reporting voting results of management and shareowner proposals using differently formulas could be considered a misleading statement under Rule 10b-5 that is arguably material, since it may influence vote decisions in subsequent years. If the company’s spin could be considered making false statements in order to drive up or sustain share prices we might have a case.

However, I’m reminded of Soviet reporting (or was it simply our own propaganda on their reporting?). The story I heard as a kid was that Pravda reported that the USSR placed second in a race, whereas the US place next to last (There were actually only two in the race. The US came in first; the USSR second.)

They may be deceptive but Cisco’s statements aren’t false. However, As Glyn Holton indicates in the press release below, Cisco’s actions speak “volumes about management’s attitude towards their own shareowners.” (Disclosure: The publisher of CorpGov.net, James McRitchie, holds investments in Cisco Systems.)

Boston Common Asset Management, LLC has divested of its holdings in Cisco Systems, Inc. stock (NYSE: CSCO) due in part to the company’s weak human rights risk management and poor response to investor concerns. Cisco’s deceptive announcement of vote results on proxy items at the 2010 annual shareholder meeting has raised further alarm about the company’s commitment to transparency.

Since 2005 Boston Common has led a growing coalition of investors, representing over 20 million Cisco shares, in asking Cisco management to ensure its products and services do not stifle human rights. Cisco has testified before federal law makers twice since 2006 over questions on its human rights record, including its marketing of equipment to the Chinese Ministry of Public Security.

“Boston Common’s decision to divest comes after years of campaigning Cisco for greater transparency and accountability on key human rights and business development concerns,” stated Dawn Wolfe, associate director of environmental, social, and governance research at Boston Common Asset Management. “Freedom of expression, privacy, and personal security are all critical elements in maximizing network traffic. Politically and socially repressive policies related to speech and privacy has a chilling effect on users and violates universally recognized human rights. When pressed for details on how Cisco addresses these risks, they come up short.”

At the November 18, 2010 annual meeting of shareholders, Cisco did not answer yet another request for engagement with shareholders. This followed a September 30, 2010 letter to independent board member and Stanford president John Hennessy requesting his assistance in establishing a meaningful dialogue between Cisco and shareholders on human rights. Similar to previous attempts to engage the Board as a whole, Hennessy did not respond to the request.

“As technology becomes more prevalent in the world, we expect human rights related concerns will become more, not less prominent,” said Nevin Dulabaum, president of Church of the Brethren Benefit Trust, a long-time shareholder of Cisco Systems and active participant in the investor-driven human rights campaign. “For all its talk about the ‘human network’ and adherence to the United Nations Universal Declaration of Human Rights, Cisco has not demonstrated in any concrete way that it fully recognizes its potential impact on human rights around the world.”

Boston Common’s ESG Team recommended the removal of Cisco Systems from its portfolios because of strong reservations about its human rights performance and poor shareholder engagement on the issue.

Deceptive Vote Tallying Behind Proxy Results Announced at Annual Meeting

In an apparent attempt to downplay votes in favor of shareholder sponsored proposals on the proxy ballot, Cisco used two different methods to calculate proxy results announced at the annual meeting—one for proposals put forward by its own management and a second for proposals sponsored by Cisco shareholders which served to dilute support.

“If management is reporting votes one way for their own proposals and another way for shareowner sponsored proposals, that is deceptive. It speaks volumes about management’s attitude towards their own shareowners — a flashing red light. Ignore it at your peril,” stated Glyn Holton, executive director, United States Proxy Exchange.

Boston Common’s human rights proposal was supported by 34% of voted shares when calculated using the standard SEC method, the one Cisco used to calculate support for its own proposals, including the advisory vote on pay.

If Cisco used the same method based on all outstanding shares to calculate support for its own proposals, not just those sponsored by shareholders, its executive compensation package would have received support from just over half of its shareholders.

“The voice of shareholders fall on deaf ears at Cisco,” stated Wolfe. “About a third of Cisco Systems shareholders voting their proxies have supported our proposal over the years, voting in favor of greater disclosure on issues of censorship and privacy. Cisco’s deceptive tallying practices in 2010 do not change that. The investor coalition will march ahead, and perhaps one day Cisco will wake-up and realize how dedicated these shareholders are to the company’s success. Until then, significant questions remain about its ability to manage risks it is reticent to recognize.”


Dawn Wolfe, Associate Director of ESG Research, 617-720-5557. [email protected]
About Boston Common Asset Management
Boston Common Asset Management is an investment manager specializing in sustainable and responsible equity and balanced strategies. We pursue long-term capital appreciation by seeking to invest in diversified portfolios of high quality, socially responsible stocks. Through rigorous analysis of financial, environmental, social, and governance (ESG) factors we identify attractively valued companies for investment. As shareholders, we urge portfolio companies to improve transparency, accountability, and attention to ESG issues. Our focus is global; we manage U.S. and international portfolios, customized to the needs of institutional and individual investors.

Continue Reading ·

How I Voted at Hain, Cisco & Accuray

I waited too long to vote on the MoxyVote.com platform. However, even waiting until the day before the meeting, I was still only able to get minimal advice. I hearty thanks goes out to CalSTRS and their cooperation with ProxyDemocracy.org. At least they had announced votes for Hain and Accuray as I cast my votes this morning.

At Hain, I voted down the line with CalSTRS, withholding votes from director nominees Berke, Futterman and Meltzer, as well as voting against the long-term stock plan proposed by management. At Accuray, I would have voted with CalSTRS and management. However, the ProxyVote platform wouldn’t accept the control number provided to me by my broker. With all the proxy plumbing issues mentioned in the SEC’s concept release, I guess I shouldn’t be too surprised with this glitch. I contacted my broker. We’ll see how quickly they can resolve this.

Since not even CalPERS had announced votes at Cisco, I was on my own. I voted abstain on all the director nominees and other measures except that I voted in favor of the shareowner resolution on environmental sustainability reporting and steps to reduce possible human rights violations. Just as an experiment, I left one field blank to see if Broadridge had addressed the blank vote issue. They had not. After voting, a second page comes up asking to confirm my vote. At the top of that page, in very small print obscured by the gray background the following note appeared.  “*No vote entered.  Your vote will be cast as recommended by the soliciting committee.” And there was a small asterisk next to the vote I left blank.

Obviously, there is much work to be done to improve proxy voting. Here in voting three stocks, I was only able to obtain voting advice on two. On one of the stocks I ran into a proxy plumbing issue. I also confirmed that blank votes are still being turned over to management with only the most obscure warning. For more about that issue, see Don’t Let Companies Change Shareholders’ Blank Votes, HLS Forum on Corporate Governance and Financial Regulation.

Continue Reading ·

Powered by WordPress. Designed by WooThemes