Adding directors right after the AGM, plus Hoag stays, pay for bottom quartile, and attendance bites again

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PROXY COUNTDOWN

Free Float Media, Inc.

63 episodes

2 weeks ago

2025 REVIEW FROM MIKE LEVIN: Big proxy contests: PHX-Elliott Significant situations: PEP-Elliott TSLA AGM SEC rules on shareholder proposals Proxy advisor pressure Delaware under scrutiny US stakes in INTL, others XOM retail voting program 2026 PREDICTIONS: DIRECTORS Will a director be voted out in an uncontested election this year for a reason OUTSIDE of attendance (re: Netflix’s Jay Hoag’s 78% NO vote) at a big US company? The average percentage of directors getting less than 50% of the vote is 0.2% - generally it happens due to activism OR attendance. Will it happen for some other reason? Canary in a coal mine: what will Hoag’s FOR votes be in 2026? The average percentage of women on boards will be? Most recent data shows a 22% drop in new diverse candidates on boards, and Damion pulled a stunning number of “Down to 2” as a common refrain for boards looking to diversify away from women. The current average number of women on large cap US boards is 30% - how far does the average move after 2025-6? SHAREHOLDER PROPOSALS Which company will allow the most shareholder proposals? In 2025, Alphabet clocked in with the highest number of shareholder proposals at 13, followed by Meta at 9, Amazon at 8, and Walmart and Berkshire tied at 7. Which one of these shareholder proponents will see the highest number of exclusions in 2026: Activists: (23% supports in 2025) Anti woke: (2%) AOs / Pensions: (12%) Woke: (10%) Governance: (29%) Religious: (10%) Number of shareholder proposals that will WIN in 2026 (approx 50 in 2025)? E vs S vs G (45 vs 5 vs 0) Palo Alto Networks on Tuesday: 93% YES on a James McRitchie bid to eliminate its classified board, despite the company being AGAINST. PAY How many companies will fail Say on Pay in 2026 (27, About 1.2% of Russell 3000 companies, failed Say on Pay in 2025)? Palo Alto failed Tuesday: 54% NO How many post-Musk billion dollar+ CEO pay packages will we see in 2026? Which is more likely: Which is the SEC more likely to have to redefine to address the December 11, 2025 executive whining titled “PROTECTING AMERICAN INVESTORS FROM FOREIGN-OWNED AND POLITICALLY-MOTIVATED PROXY ADVISORS”, which asks the SEC to “consider” rescinding rule 14-8a, investigating if proxy advisors committed securities fraud (and should be registered), consider forcing methodology disclosure, “investigate” collusion with asset managers, and calling proxy advisors “fiduciaries” if they charge a fee to pension funds: Anti-fraud laws - currently the laws deal with the “purchase or sale” of a security, not saying “this non binding shareholder proposal about donut hole size is a vote YES based on the criteria you provided”... they would have to redefine scienter to include advice for sale, not securities? Or they would have to decide that they had a coordinated scheme to defraud THE ENTIRE MARKET? Investment advice fiduciaries - ERISA sets duty of loyalty, care, and prudence, and it applies to anyone exercising discretion over a pension for a fee - they would have to consider the purchase of ANY data, rating, opinion, or even made-to-order service (like back end data dashboards) a form of advice, and thus make them all fiduciaries. Unless they just change the rule and say “proxy advisors are fiduciaries” because kabuki theater? ESG - they’ve included in here considering rescission of rules that “advance” ESG policies - but there’s a G in ESG. That would include literally the act of voting, the election of directors, special meetings, bylaws amendments - EVERYTHING that happens. In which case, do they need to redefine ESG to just mean “woke stuff we don’t like” (which could, in fact, mean G also)? And is every activist investor then woke? The SEC No-Action gaslight - where they no longer will oppose shareholder proposal exclusions - is more likely to: Result in more votes against directors - between the 13g vs. 13d guidance and the “we’re just too busy to read shareholder proposals for an entire year” guidance, and ISS [i think it’s actually glass lewis that’s moving away from recommendations entirely] suggesting they won’t actually provide a recommendation anymore, there’s not much else for investors to do, right? Fuel a rise in shareholder proposals - and disclosure from proponents about exclusions to “name and shame” companies who are using the feckless SEC as cloud cover to avoid governance or shareholder demands. Fuel a rise in activism - in the absence of being able to ask a company to make an amendment to a bylaw or declassify a board on the proxy, doesn’t it just make activism more hostile? If a company is underperforming, investors don’t have the SEC behind them as much any more? Coupled with Texas rules that make it harder to file proposals at all, and the move toward mandatory arbitration vs. regulatory/legal oversight, it’s all activism now, right? Push more companies to Texas - the SEC is basically Texas-ifying guidance, but Delaware isn’t biting yet. Inevitably, do more companies move to Texas to take advantage of having fewer shareholder rights? Musk’s mega pay package is more likely to: Open the floodgates to mini-Musk packages - instead of 10 years and 12 tranches, expect pay committees to start putting forward 4 years and 6 tranche billion dollar packages for companies that make hydraulic presses and deli meat. Push investors to vote against pay EVERYWHERE, since they already feel bad giving Musk so much (like after you eat too much chocolate, you just never want it again) End say on pay - what’s the point really? Some fringe investors vote against pay, and it’s non binding? If you are excluding shareholder proposals anyway, why not end say on pay and force investors to just vote against pay committee members? DO NOTHING. No one actually cares how much an executive gets paid, all the CEO pay ratio data and disclosures are kabuki theater anyway. DExit winner is most likely: Nevada Texas Delaware No one

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Adding directors right after the AGM, plus Hoag stays, pay for bottom quartile, and attendance bites again

PROXY COUNTDOWN

6 months ago

Adding directors right after the AGM, plus Hoag stays, pay for bottom quartile, and attendance bites again

Trade Wire - BUY/SELL Top Stories: Netflix Rejects Jay Hoag’s Resignation, saying “Mr. Hoag’s continued service as a member of the Board is in the best interests of the Company and its stockholders” despite the glaring flaw in its logic that 79% of stockholders said NO. In new hires: DTE Energy announced that COO Joi Harris would be the new CEO, succeeding Jerry Norcia, who will become executive chair. Joi is a double ceiling breaker: becoming the first black woman in the role. UDR’s new CFO is David Bragg, who lasted only 16 months as CFO at Roots Management Group from March 2024 to June 2025. The new interim CEO at Hormel Foods is former CEO Jeffrey Ettinger. For 15 months of service to provide cover for poor succession planning he will get a salary of $1.2M, a target short-term award equal to $2M, a one-time equity grant of $7.2M, and 10 full weeks of paid vacation. The new CFO at Pure Storage, Tarek Robbiati, who lasted as CEO of RingCentral for only 5 months and has not held a full-time executive position since 2023, will get about $30M in equity awards, more than third of which will vest simply over time without performance-based conditions. Starbucks appointed two uber-networked directors to its Board of Directors: Dambisa Moyo is on the boards of Chevron Corporation and Condé Nast and previously served on the boards of SABMiller, Barclays Bank, 3M, and Seagate Technologies. Marissa Mayer previously served as CEO and director at Yahoo!. Mayer currently serves on the boards of Walmart, AT&T, and Hilton Hotels & Resorts. She also served on the board of Nextdoor. In ‘circumventing the alternative democracy’ news: Netflix appointed Airbnb CFO Elinor Mertz to its board a mere 16 days after its annual meeting. Democracy avoided. Similarly, PayPal appointed Deirdre Stanley to its board 19 days after its annual meeting. Also waiting 19 days was MicroStrategy, who snuck Peter L. Briger, Jr. onto the board and gave him a golden hello equity award valued at $2M. On top of that he is also due to receive about $500,000 in annual director compensation. Peter joins a board with only one woman so let’s hope he’s comfortable in a men’s locker room. In ‘here’s some more money for hanging around’ news: Somnigroup International has renewed the contract of CEO and Chair Scott L. Thompson. As a result, he gets a $10M cash transaction bonus for the company's acquisition of Mattress Firm and 1.2M stock options valued currently at about $22M. Flex CEO Revathi Advaithi gets a one-time supplemental equity award valued at $25M if the Company’s relative total shareholder return (“rTSR”) over a three-year period is below the 25th percentile, $50M if the Company’s relative total shareholder return over a three-year period is below the median, and $62.5M if the Company’s relative total shareholder return over a three-year period is at or above the median. Howmet Aerospace has renewed the contract of its CEO and Chair, John C. Plant, as such, John will get a special retention award of restricted stock units valued at $45M. Starbucks named executive officers are getting a surprise July 4th “Back to Starbucks” bonus for staying at their jobs. The equity award is worth $6M if an operating expense reduction is met and up to $12M for the achievement of the easiest set of goals known to humankind: (i) the rollout of the Company’s Green Apron Service program, (ii) coffeehouse uplifts, (iii) new food and beverage platforms, and (iv) a reimagined Starbucks Rewards program. And finally, in a tribute to simpler times, here’s the announcement: “On May 20, 2025, at the Contractor Connection RESTORE Conference, Larry C. Thomas, global president of Platform Solutions of Crawford & Company announced his plans to retire from the Company effective at the end of the year. Mr. Thomas has been with the Company since 1983.” Retiring at a conference; seems so old-fashioned PROXY CAGE MATCH ISS Recommends “Withhold” votes on long tenured Brookdale Senior Living directors Lee Wielansky, Chair of the Investment Committee, and Victoria Freed, Chair of the Nominating and Governance Committee: “Given the tenure and positions of Wielansky and Freed, they are arguably the most culpable among incumbent directors for the current state of affairs.” 2024 vote: Wielansky (99.6% YES) and Freed (98.8% YES) ISS Supports Compelling Case for Change to AstroNova Board of Directors ISS finds “change at the Board level is warranted to improve independence and oversight” 2024 vote: 97% YES for entire board last year ISS advised investors to vote against the re-election of Shari Redstone to the Paramount Global board, citing concerns over the company's governance and executive pay structure. They also recommended a vote against directors Barbara Byrne, Linda Griego, and Susan Schuman. 2024 vote: Against: 2.4%; Abstain: 12.1% Texas Enacts New Law to Regulate Proxy Advisory Firms SB 2337 aims to limit proxy advice based on "nonfinancial" factors such as ESG and DEI and requires proxy advisors to provide a "specific financial analysis" for any recommendation in opposition to management's position. And lastly, Lamb Weston reached a settlement with Jana Partners allowing the activist investor to add six new directors: four Jana candidates and two other mutually agreed-upon directors. The Jana candidates include Timothy McLevish, a former Lamb Weston executive chairman and Jana's portfolio manager Scott Ostfeld. The other additions are: Bradley Alford, a former Nestle USA CEO who will become chairman; food industry executive and Continental Grain adviser Ruth Kimmelshue; and the two new mutually agreed on directors are Lawrence Kurzius and Paul Maass, who both have food industry experience as top executives. VOTE RESULTS TABLE Here are the highlights from 33 large-cap annual meetings over the past 2 weeks: 16 total SHPs: but from only 9 companies, meaning 24 meetings had zero SHPs Only 2 “wins” overall: Vertiv Holdings: Joseph van Dokkum 46% NO Jacob Kotzubei 54% NO Viridian Therapeutics 51% NO increase equity plan by 8M shares 7 “moral” victories (over 30%): EBAY call a special meeting 49% YES Equity Incentive Award Plan 45% NO BJ's Wholesale Club GHG emissions reduction 30% YES: Trillium ESG First SHP since its 2018 IPO DELTA AIR LINES Act by written consent 42% YES COSTAR GROUP transparency in political spending 33% YES 46% NO Pay ANSYS Act by Written Consent 41% YES The shareholder disconnects: COSTAR GROUP: Musslewhite 4% NO (lowest NO); 46% NO Pay IonQ: classified; 19% NO Singh; 36% NO on Pay; no Pay Committee members up for vote The shareholder connects? DELTA AIR LINES: Act by written consent 42% YES ANSYS: Act by Written Consent 41% YES The directors : 5 over 20% Losers Core & Main: Gipson 35% NO (classified) Okta: Epstein 29% NO (classified) Viridian Therapeutics: Gheuens 23% NO (classified) BIOGEN: Dorsa 22% NO; Rowinsky 22% NO Freire 17% NO; Hawkins 17% NO; Langer 17% NO; Mantas 19% NO; Sherwin 17% NO COMCAST: Baltimore, Jr. 21% NO; Bacon 25% NO Bell 15% NO; Honickman 16% NO VEEVA SYSTEMS: Carges 20% NO; Ritter 38% NO; Wallach 40% NO Vertiv Holdings Joseph van Dokkum 46% NO chairman of the Nominating Committee: 1 woman; 9 men Jacob Kotzubei 54% NO Mr. Kotzubei attended 50% of the aggregate meetings of the Board of Directors and was not able to attend the balance due to last minute emergencies and other extenuating circumstances CrowdStrike Holdings: Cary J. Davis 34% NO; Laura J. Schumacher 38% NO (classified) Winners Robinhood Markets: John Hegeman 99.94% YES Dell Technologies: David Grain 99.93% YES The oddities: Smallcap: Red Cat Holdings: 4 out of 5 directors about 57% NO; Thompson 2% NO CEO Jeffrey Thompson controls 14% of voting power Mastercard: racial equity audit report 11% YES: SEIU MasterTrust affirmative action risks 0.4% YES: National Center for Public Policy Research COMCAST: CEO pay ratio factor 4% YES; independent chair 27% YES KROGER: discarded cigarette pollution 9% YES: Sister of St. Francis of Philadelphia third-party mandated framework on U.S. farmers 15% YES: Domini Impact Equity Fund safeguarding the privacy of consumer health data 14% YES: Rhia Ventures NVIDIA: eliminate holding period requirement to call a special meeting 7% YES: John Chevedden new director election resignation governance policy 18% YES: The New York City Carpenters Pension Fund modify existing reporting on workforce data 18% YES: Trillium ESG Global Equity Fund THE BIG VOTE PICKS MATT MATT: The Plus30s Damion steadily pulling directors added to boards right after AGMs Why it matters: Most vesting, turns out, isn’t 1 year, it’s “directly prior to the annual meeting” and pro rata from start date Directors get nearly full salary PLUS fully vested stock before ever getting a vote Directors are added often as part of board expansion without vote - investors are voting entirely on incumbent slates The owners don’t choose their representatives, the representatives choose themselves The average director tenure for a large cap company is about 7 years - that means nearly 14% of the average tenure is over before investors weigh in I got to asking how often this happens - and are there patterns Methodology: Get AGM dates in the last 5 years Get director start dates in the last 5 years Find all non-executive directors that started 30 days or less after the AGM How many directors have a year of no accountability? Find the nom chair at the time of the election Are there nomination chairs that do this repeatedly? Results Totals: Average days for director adds (plus/minus the AGM) is 90 90 days before or after the AGM on average, directors get added 292 directors added within 30 days post AGM in 5 years 79 times, directors were added INSIDE A WEEK of the AGM 227 companies added those directors The companies with multiple directors in a single year are often merger agreements 29 companies added directors ONE DAY after the AGM Worst of the worst: Rockwell Automation Only US company to do this three years in a row - 2022, 2023, 2024 - classified board In 2022, Robert Soderbery added after board expansion ONE DAY after AGM Not in proxy, no mention of expansion Kalmanson chair of nom committee, Holloman, Kean, and Payne on it In 2023, Phillip Holloman retired the day of the AGM, the replacement director Alice Jolla was added ONE DAY after the AGM Holloman on the proxy, no mention of retirement Jolla not in the proxy Kalmanson nom chair, Gipson, Holloman, Keane on committee In 2024, Rockwell expanded the board AGAIN adding Tim Knavish ONE DAY after the AGM It was not discussed in the proxy, nor was Knavish up for vote Bill Gipson nom chair with Jolla, Parfet Common directors: Parfet was lead “independent” chair at 15 year tenure Keane on the board for 12 years, on and off nom committee Moret CEO for 7 years - but this seems like the Parfet show Pattern 1: classified boards 48% of the boards are classified - so directors already have limited accountability, and that’s 40% more than companies who HAVEN’T done this So about HALF of the director adds won’t see a vote for nearly TWO years or more rather than one Pattern 2: board expansion Board expansion right after the AGM is unusually common among these companies Pattern 3: network power The boards that do this tend to be highly networked and powerful boards - 16% more network power on average than non Plus30s Pattern 4: LESS insiders on the board By 15% on average - which seems surprising unless you think of these being “board run” companies, not management run? It gels with seeing more Socialist boards (boards run by the committees rather than management) Directors Two directors stand out as having this done TWICE at two different companies in the last five years Jodi Taylor Mister Car Wash, Inc - added 7 days after AGM JM Sucker - added 1 day after AGM Jorge Titinger Formfactor Inc - added 24 days after AGM Ichor Holdings - added 20 days after AGM

PROXY COUNTDOWN