Final comment letter to the SEC on Shareholder Proposals, re File Number 4-725, including 11 recommendations highlighted on bold. Thanks to several readers for their excellent suggestions for improvement. See prior post: SEC Proxy Process Video 11-15-2018
Tag Archives | John Chevedden
SEC Proxy Process Video: November 15, 2018
In the interest of documenting important events in corporate governance, I am here bookmarking the SEC Proxy Process Video from November 15, 2018, for future reference. Read transcript by downloading the following pdf: SEC TranscriptShareholderProposalsRoundtable. (full day)
Glass Lewis 2019 proxy advice updates address many issues. See 2019 Proxy Paper Guidelines: An Overview of the Glass Lewis Approach to Proxy Advice.
I have reproduced much of the summary of changes below, leaving off the section discussing clarifying amendments. One that stands out for our small group of so-called ‘gadflies’ addresses our concern that several boards hijacked shareholder proposals this past season by seeking ratification of existing policies and the exclusion of a shareholder proposal though a no-action request. In an email, John Chevedden noted the following: Continue Reading →
The November 15 SEC Roundtable on the Proxy Process will include me on the SEC Shareholder Proposal Panel. Public announcement with instructions for submitting comments. I will only have a few minutes at the Roundtable. What should I emphasize? Where should I stay in DC?
Take Action: Readers of CorpGov.net know far more than I do. Please email your suggestions and supporting evidence. Without your help, I will ramble off topic to connected tangents, difficult to explain in a few seconds. This post is sure to be an example. Continue Reading →
The FedEx 2018 annual meeting is September 24th. Vote AGAINST John A. Edwardson, Paul S. Walsh, Marvin R. Ellison, John C. (“Chris”) Inglis, Shirley Ann Jackson and Susan C. Schwabas, as well as the pay package. Vote FOR all three shareholder proposals. Continue Reading →
Shareholder Collaboration is a new ECGI working paper by Jill Fisch and Simone M. Sepe. Fisch is one of my favorite researchers, being insightful and less predictable than many of those in the primary academic hubs of corporate governance (Harvard, Stanford, and Delaware). In Shareholder Collaboration, the authors discuss the growing importance of a collaborative model, in contrast to models based on management power or shareholder power. (download paper in pdf) Continue Reading →
Shareholder Alert – PX14A6G 1 g815180px14a6g.htm
Voluntary submission by John Chevedden, Redondo Beach, CA.
NetApp, Inc. shareholder since 2011
Vote Against Proposal 6
Proposal 6 asks shareholder to give management a pat on the back because management adopted a watered down version of a 2018 shareholder proposal on the right of 10% of shareholders to call a special meeting. Continue Reading →
Netflix Approach to Governance: Genuine Transparency with the Board (download) by David F. Larcker and Brian Tayan takes a look at one aspect of corporate governance at Netflix and finds “a radically different approach to information sharing” by management with the Board. Shareholders are largely left out of the equation.
Netflix Approach to Governance: Management
Netflix Approach to Governance has the appearance of a balanced look at how management shares information with the Board. There is no suggestion the approach can be widely copied. Says Larker,
I think it would be hard to put this type of system in place at older and more mature organizations. Innovative organizations that want and need the insights from board members can clearly adapt this type of approach. You need a CEO who wants a high level of discussion about strategy, etc., and is open to alternative points of view.
Transparency works at Netflix, at least in part, because CEO Reed Hastings understands board members would not have the confidence to make tough calls unless they have a better understanding of the company.
Transparency is hard to argue against, unless it leads to directors leaking information that reaches competitors. Larcker and Tayan interviewed CEO Reed Hastings and most of the board members. They describe two key features of what they appear to believe is remmanagement transparency.
Board members attend monthly and quarterly senior management meetings as observers. Communications to the board take the shape of approximately 30-page memos that are heavy on analysis and contain links to all relevant data on the company’s internal computer systems. (Another Netflix Disruption: A Transparent Board)
More frequent meetings with senior staff and more information allows Netflix directors to work more effectively, since they are better able to assess strategic developments. It is hard to tell what impact transparency is having on the company but,
Netflix has been enormously successful over the last five years. Revenues have nearly tripled, increasing to $11.69 billion from $4.4 billion at the end of 2013, while the market cap soared to $133 billion from $4.4 billion.
Directors like the approach.
The overall tone Reed has set, really from early days, is around transparency. … There is no editorializing. There’s no censorship.
It’s just a deep desire to hear rational, well-argued pros and cons of any decision.
No censorship and frank discussions between management and board; if other companies are not operating that way, why not? Equally important, why does that approach not carry through to the relationship between shareholders and the board?
Netflix Approach to Governance: Shareholders
Their research, part of the informative Stanford Closer Look Series, begins with the following sentence:
The hallmark of good corporate governance is an independent-minded board of directors to oversee management and represent the interests of shareholders.
The only other significant reference to shareholders comes later in the following sentence:
While fiduciary rules allow directors to rely exclusively on information provided by management, dynamics such as these can reduce the quality of that information and impair their ability to make good decisions on behalf of shareholders.
Even through the law allows directors to rely on what the CEO and other senior executives tell them, directors make better decisions when the company is more transparent – when they can observe meetings further down the chain and have more direct access to company relevant data. Yet, the Netflix approach to governance appears one-sided. Transparency and dialogue are missing when it comes to management and shareholders.
As I pointed out in a recent post, Netflix has repeatedly ignored shareholder votes. (Will Netflix Ignore Stockholders Again?) While proxy proposals are generally precatory, most companies implement those receiving a majority vote and often those that do not. The Netflix approach to governance appears to ignore proxy votes whenever legally possible.
- In 2014 a majority voted to declassify the board and to require a majority vote to elect directors.
- In 2015 similar proposals were voted and won. A majority of shareholders also voted against director Barton, who, although he lost, was up for reelection this year.
- In 2016 a majority of shares were voted in favor of proxy access, reducing supermajority vote requirements, and declassifying the board.
- In 2017 a majority of shares were voted in favor of proxy access, to declassify the board, to require a majority vote for electing directors and to eliminate all supermajority voting requirements. As far as I know, none of those proposals were implemented by the Board.
- In 2018 a majority of shares were voted in favor of the following:
- Reduce Ownership Threshold for Shareholders to Call Special Meeting (57%)
- Adopt Proxy Access Right (58%)
- Provide Right to Act by Written Consent (52%)
- Adopt Simple Majority Vote (85%)
- Amend Bylaws (72%) This was a binding proposal to require directors in uncontested elections to be elected by a majority of shares voted
Given the Netflix approach to governance with regard to shareholders, I expect the only proposal that will be adopted from this year is the binding proposal to require a majority vote in uncontested directors elections. The vote in favor surpassed the bylaw requirement of a two-thirds threshold.
Although I do not question the scholarship of Larcker and Tayan, their discussion of the Netflix approach to governance would benefit from an examination of shareholder relations with the board. We hope that is on their agenda for a closer look.
Netflix Approach to Governance: Other Views
- Netflix Shareholders Again Fail to Change Rules to Elect Board Members by Simple Majority Vote
- Consider Director Conduct at the 2018 Netflix annual meeting when you vote regarding directors in 2019
- Netflix Rejects Claims That Exec Bonuses Hurt Shareholders
- Netflix investors, once again, seek change in proxy access, voting rules
Alphabet 2018 proxy recommendations. Alphabet is run by an Oligarchy. Will $GOOG overlords give up their position as a dictatorship? Are companies governed by dictatorships and oligarchies healthy for democratic governments? Shareholders can vote for change.
Alphabet Inc., through its subsidiaries, provides online advertising services in the United States and internationally. Most shareholders do not vote because reading through 80+ pages of the proxy is not worth the time for the small difference your vote will make. Below, I tell you how I voted and why.
If you have read these posts related to my portfolio for the last 22 years, have values aligned with mine, and trust my judgment (or you do not 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.
Ford Motor Company (F) designs, manufactures, markets, and services a range of Ford cars, trucks, sport utility vehicles, and electrified vehicles; and Lincoln luxury vehicles worldwide. Placing a big bet on the continued profitability of gas guzzling SUVs and trucks, they recently announced phasing out most sedans. Most shareholders do not vote because reading through 100+ pages of the proxy is not worth the time for the small difference your vote will make. Below, I tell you how I voted 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 my rationale), go immediately to see how I voted my ballot. Voting will take you only a minute or two and every vote counts.
Gilead Sciences (GILD), a biopharmaceutical company, discovers, develops, and commercializes therapeutics in the areas of unmet medical needs in the United States, Europe, and internationally. Most shareholders do not vote because reading through 80+ pages of the proxy is not worth the time for the small difference your vote will make. Below, I tell you how I voted 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 my rationale), go immediately to see how I voted my ballot. Voting will take you only a minute or two and every vote counts.
Exempt solicitation use by shareholder proponents will continue to surge. Almost six years ago, SharkRepellent.net documented the rising use of PX14A6G filings. (Proponents Increasingly Proactive Promoting Their Issues by John Laide)
Read any good PX14A6G filings lately? During the 2012 proxy season, sponsors of shareholder proposals have been increasingly making use of rules allowing them to further press their case to stockholders to support their issues. Pursuant to Rule 14a-2(b)(1) of the Exchange Act, a shareholder can freely communicate its views to stockholders without having to comply with the proxy filing and disclosure rules associated with a contested solicitation if it is not seeking proxy voting authority (i.e. the shareholder is not seeking the power to act as proxy for a stockholder and does not provide its own proxy card in its materials). The filing itself generally takes the form of a letter to fellow shareholders attempting to persuade them to vote for a proposal the shareholder is sponsoring, to vote against a management proposal, or to withhold votes for directors, and will appear on the SEC’s EDGAR filing system alongside the company’s other filings. An exempt solicitation provides an easy, cost-effective way for proponents to express their views and lobby fellow shareholders beyond the 500-word limit imposed by Rule 14a-8 for a proposal and supporting statement in the company’s proxy statement.
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.
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 →
The Northern Trust Corporation (NTRS) is moving toward more democratic governance, thanks to a proxy access proposal submitted on my behalf by John Chevedden in November. Since I own no where near 1% of NTRS (market cap $23B), we would have been denied the right to file the proposal if the Chamber of Commerce, Business Roundtable and others had their way.
SLB 14I (CF): Issued During 28th Annual SRI Conference
The latest SEC Staff Legal Bulletin, SLB 14I (CF), was issued on November 1, while 800 attended the 28th Annual SRI Conference in San Diego. I was flipping though the agenda when I got an email from a Bloomberg reporter asking for feedback on SLB 14I, which will further discourage shareholders from submitting proposals, especially those focused on environmental and social issues. It is yet another move against the ability of shareholders to fight for a salubrious environment, while seeking a healthy return.
28th Annual SRI Conference
First, a brief few words about the SRI Conference (#AllinForImpact), then I will dive into SLB 14I. I should have been attending these conferences for 28 years but they did not seem focused enough on governance issues. Over the years, governance and engagement have become more of an issue for them, while environmental and social issues have become more important to me… a happy convergence. Continue Reading →
At Alphabet, Inc.’s most recent annual meeting on June 7, 2017, class A shareholders overwhelmingly supported a shareholder proposal asking company management to recapitalize the share structure so that each share has one vote. According to the proponents of the proposal, assuming that all outstanding class B shares were similarly voted, then up to 99.8% of class A shareholders supported the proposal. Of class B insider shares, if only executive officers and directors of the company are counted, then an estimated 88.7% of class A shareholders still supported this proposal. Continue Reading →
At the June 7 annual shareholder meeting of Alphabet, shareholders will vote for a sixth year in a row to weigh in on tech-giant Alphabet’s unequal voting structure. Today is the last day to vote without attending the meeting tomorrow.
Shareholders are expected to vote in favor of the Recapitalization Plan for all Stock to Have One-vote per Share the but winning depends on getting far more than a majority vote. It means those holding shares with out-sized votes being willing to yield their power. What will make them see the value of more democratic corporate governance? The election is more symbolism than real. Still, symbolism can be powerful. Continue Reading →
Haranguing – A speech addressed to a large public assembly; a popular oration; a loud address to a multitude; in a bad sense, a noisy or pompous speech; declamation; ranting. A speech before a multitude or on the hustings.
Once again, the Deal Professor blasts gadflies John Chevedden, James McRitchie and William Steiner – this time for haranguing directors at annual meetings. A couple of years ago, Deal Professor Steven Davidoff Solomon equated our activities with terrorism (Deal Professor Equates Filing Proxy Proposals with Terrorism). Last week he wrote that we “make a habit of haranguing directors at corporate meetings.” (Online Shareholder Meetings Lower Costs, but Also Interaction, NYTimes, 5/31/2016).
In an otherwise fairly balanced article on the positives and negatives of online shareholder meetings, Solomon writes, Continue Reading →
International Business Machines Corp. (NYSE:IBM, $IBM) provides information technology (IT) products and services worldwide. It is one of the stocks in my portfolio. Their annual meeting is coming up on April 26, 2016. ProxyDemocracy.org had collected the votes of four funds when I checked. I voted AGAINST the pay plan, and most of the directors. I voted FOR the report on lobbying, written consent, split CEO/Board Chair positions – voting with the Board’s recommendations 21% of the time. View Proxy Statement.
I don’t own ExxonMobil $XOM stock or the stock of any other oil companies, so won’t be examining their proxy when it comes out or making voting recommendations. However, oil companies do remain a potent economic force and won’t be going away anytime soon… even though folks like me hope to be driving around in electric cars fueled by the sun and wind within a few years.
ExxonMobil may be a special case, since they appear to have essentially funded a disinformation campaign on climate change for many years. See Exxon Knew, among many other sources and campaigns. I thought it would be interesting to take a look at shareholder proposals grappling with the beast. If you own stock in ExxonMobil and want to be a responsible fiduciary, how do you get them to take climate change seriously?
Since the proxy hasn’t been published, I don’t know what proposals will be included. However, ExxonMobil requested four no-action letters from the SEC that were refused. Let’s look at those. Continue Reading →
Who Withdraws Shareholder Proposals and Does It Matter? An Analysis of Sponsor Identity and Pay Practices is the title of an import study in the November 2015 issue of Corporate Governance: An International Review. Examination of this topic is long overdue. Companies constantly take full credit for corporate governance reforms, such as the addition of proxy access bylaws, when they are doing so only to avoid a vote on a more robust shareholder proposal. Continue Reading →
Sonoco Products ($SON) recently sought no-action relief from the SEC to omit a proxy access shareholder proposal by William Steiner. The Division of Corporation Finance denied their request. The 1% now owns as much worldwide as the 99%, so why should Sonoco limit shareholder proposals and presenters to the 2%?
I was happy to play a small role in helping John Chevedden present Mr. Steiner’s case. This was not a great victory destined for the annals of history. However, if Mr. Steiner had lost to Sonoco, it might have meant the beginning of the end of shareholder proposals as a mechanism of shareholder democracy. A similar case was fought sixty years ago. Continue Reading →
Yahoo! Inc. (YHOO), one of the stocks in my portfolio, is engaged in providing Internet search, communication and digital content. Their annual meeting is coming up on 6/24/2015. ProxyDemocracy.org had the vote of three funds when I checked and voted on 6/15/2015. I voted with the board 46% of the time and assigned YHOO a proxy score of 46. Continue Reading →
General Motors Company (NYSE:GM) designs, builds, and sells cars, crossovers, trucks, and automobile parts worldwide. It is one of the stocks in my portfolio. Their annual meeting is coming up on 6/9/2015. ProxyDemocracy.org had the vote of two funds when I checked and voted on 5/3/2015. I voted with management 62% of the time and assigned General Motors a proxy score of 62. Continue Reading →
New York State Comptroller Thomas P. DiNapoli and Trillium Asset Management today announced that they have withdrawn the shareholder proposal they filed at eBay Inc. (NASDAQ: EBAY) after the company agreed to revise its Governance Guidelines to include gender and racial diversity among the qualities its seeks in its board members. Several other issues remain on the proxy. Continue Reading →
Just a quick note to other shareholders who have filed proxy proposals this season. If the company you filed with requested and obtained a no-action letter from the SEC under Rule 14a-8(i)(9), you might obtain a reversal of that sanctioned exclusion. However, as far as I know, you need to ask for reconsideration. I don’t think the SEC is automatically reversing such letters without being requested to do so by the shareholder proponent. See letters to shareowner activist John Chevedden below.
As previously reported (SEC Withdraws No-Action: Rule 14a-8(i)(9) Suspended), the SEC has essentially suspended Rule 14a-8(i)(9) Conflicts with company’s proposal. Chair Mary Jo White issued the following: Continue Reading →
Entrenched corporate elites may need to up their public opinion game. Robert Monks and Nell Minow are near the top of their attack list. (Shareholder crusaders Monks and Minow speak out) Having been sued several times for having the audacity to make recommendations to boards via shareowner proposals, I’m on there too. (see EMC v. John Chevedden and James McRitchie: Case Dismissed, as well as Deal Professor Equates Filing Proxy Proposals with Terrorism) Of course, proxy advisors, such as ISS and Glass Lewis are at the top for frequently advising clients to vote in favor of shareowner proposals and against those of management. Research now indicates, public opinion may be next. Continue Reading →
The Manhattan Institute‘s Proxy Monitor Project would call it another failure by gadfly shareholders, since United Natural Foods Inc. (UNFI) filed and was granted a no-action request by the SEC to exclude our proposal to allow shareowners with 15% of the outstanding UNFI shares to call a special meeting. Since the proposal cannot receive a majority vote from shareowners, the Proxy Monitor Project and SEC Commissioner Daniel Gallagher will count the proposal as a loss for shareowners and a waste of money for the corporation. Continue Reading →
Most people don’t like their behavior criticized. CEOs and boards almost always fight my proxy proposals aimed at improving corporate governance. Likewise, I wasn’t happy with the Deal Professor’s criticisms of my shareowner activism in his August 19th NYTimes article, Grappling With the Cost of Corporate Gadflies, which also criticizes John Chevedden and William Steiner. I stewed for days but finally took the advice of a good friend, who is Assistant General Counsel & Corporate Secretary at a major company,
Better to be engaged than enraged!
If I had more time available, my response would have been shorter but I have a number of projects that demand attention. When I submit proposals, I want boards to weigh them carefully on the merits. I have tried to do that with the Deal Professor’s criticism. I hope our mutual use of hyperbole doesn’t preclude further engagement. Unlike the character in the cartoon at right, I feel no need to irritate… but I do often question mechanisms in corporate governance that isolate and concentrate power, rather than distributing it. I prefer structures that distribute power, making us of the wisdom found at all levels. Continue Reading →