Trade Wire - BUY/SELL Top Stories: This week the focus is on egregious golden hello and goodbye packages: State Street’s new CFO John Woods gets a one-time cash payment of $1M and then One-time buy-out awards consisting of $3M cash and $12M equity. New MongoDB CFO Michael Berry will get two equity grants: a new hire grant worth $9M and a sign-on bonus grant worth $3M. It’s cute how they each have their own name. Peggy Alford, eBay’s new CFO gets $14M in new hire equity along with about $7M in one-time equity make-good payment equity Again, thanks for naming complicated stuff eBay Insulet’s new CEO, Ashley McEvoy gets $15M in equity while the former CEO, James Hollingshead, walks away with $8.3M, including outplacement services of $25,000 and a $500 per hour consulting fee for 60 days. So if you see James hanging around a lot in the next few months I think you know why. Not bad for a dude who was CEO for nearly 3 years. Speaking of getting paid for barely doing anything: retiring Teledyne Technologies CEO Edwin Roks, who has hired less than two years ago, gets to keep his current pay until September as strategic advisor to the Executive Chairman, then he gets $1.8M in cash and a bunch of benefits including $100,000 in outplacement services; $100,000 in relocation costs, and price protection for the sale of his primary California residence to the extent it is sold for a price less than the price he paid for it. Finally, the Carlisle Companies does the right thing and honors its director retirement policy, saying goodbye to Robin Adams, Robert Bohn and Gregg Ostrander. PROXY CAGE MATCH We have a fun twist at the proxy cage match between Harley Davidson and H Partners, who are 9% shareholders and have started a withhold vote campaign against long-tenured directors Jochen Zeitz, Thomas Linebarger, and Sara Levinson: Glass Lewis says “withhold” but ISS says “support”? Through lackluster reasoning based on hunches and not performance analytics, ISS revealed, without satire, that "[T]here are compelling reasons to believe that as a group [the targeted directors] still have a perspective that can be valuable” and, in discussing the candidacy of departing CEO Jochen Zeitz: “[I]t appears that his time in the role has been more positive than negative, which makes it hard to argue that his vote on a successor is worthless.” VOTE RESULTS TABLE Here are the highlights from 97 large-cap annual meetings over the past 2 weeks: 73 total SHPs But from only 41 companies (56 had zero SHPs) About 55 companies had basically nothing happening, shareholder dissent on nothing. The wins: Say on Pay Molina Healthcare: 59% NO Simple Majority vote Boston Scientific: 95% YES Duke Energy: 98% YES Entegris: 89% YES Shareholders ability to call a special meeting Molina Healthcare: 69% YES Revvity: 65% YES CMS Energy: 70% YES Teledyne Technologies: 59% YES The almost wins (over 30%): Say on Pay Truist: 41% NO Citizens Financial Group: 41% NO Bank of America: 27% NO Lattice Semiconductor: 44% NO Pfizer: 47% NO Goldman Sachs: 34% NO Shareholder approval on excessive golden parachutes Adobe: 47% YES Citigroup: 32% YES Intuitive Surgical: 44% YES Simple Majority vote Marathon Petroleum: 48% YES Shareholders ability to call a special meeting IQVIA Holdings: 43% YES Paccar: 32% YES Independent board chair Dover: 37% YES Eastman Chemical: 30% YES The shareholder disconnects: Goldman Sachs: 34% NO on Pay; all directors at least 92% Truist: Say on Pay 41% NO; all directors over 90% Citizens Financial Group: Say on Pay 41% NO; all directors over 92% Lattice Semiconductor: 44% NO on Pay; highest NO director Lederer (11%); all else at least 97% Pfizer: 47% NO on Pay; lowest director Echevarria (11% NO); all others at least 91% Molina Healthcare: 59% NO on Pay; lowest director 16% NO Wolf Stanley Black & Decker: 21% NO on Pay; all directors at least 96% The directors (over 20%): Snap-On: James Holden 24% NO Ball: Pengor 26% NO Moderna: Nader 22% NO (classified) Coca-Cola: Thomas S. Gayner 23% NO American Express: Baltimore 20% NO The oddities: Domino’s Pizza: a dirty trick at pizza land as the board introduced a competing proposal to drown out a shareholder’s proposal: while the shareholder wanted a group of shareholders holding 15% of shares to have the right to call a special meeting, management’s proposal raising that group to 25% (a near impossibility) won out: the shareholder proposals got 36% support while the management proposal got 79%. At the old man’s club, there were 7 SHPs at Berkshire Hathaway, but of course the company refused to name them in their 8-k filing announcing the meeting’s vote results–why honor shareholders when your whole pretend game is to honor shareholders?--on top of that, support for all 7 proposals ranged from 0.7% and 3.5%. Despite such low support, there were actually 5 directors (Burke, Chenault, Decker, Guyman, Murphy, Jr): an unusually high in this voting climate at the world’s most beloved equity. Coca-Cola had 6 SHPs but two really stood out to me: One called for an Assessment of Non-Sugar Sweeteners (11% YES); it just made me laugh for some reason. Here’s my assessment: non-sugar sweeteners are weird, just try drinking water maybe. And then the anti-woke/anti-ESG parade, the National Center for Public Policy Research, asked for the creation of an Improper Influence Board Committee, which is basically a board-level committee to fight off anything to do with the climate, black people, women, and human rights. That feels even weirder than non-sugar sweeteners. (less than 1% YES) At Wynn Resorts, a proposal wanted a report on the potential cost savings through the adoption of a smokefree policy for the Company’s properties. I just like this. Imagine how annoying it is cleaning those yellow-stained walls in the room 1537. (9% YES) And finally two from classicist Jing Zhao: At Intuitive Surgical, he’s asking the board “to improve the executive compensation program” by actually considering the CEO Pay Ratio (5% YES). He claims that “Aristotle demonstrated that in a stable community, the ratio of the rich citizen’s land to the poor citizen’s land should not be over 5 to 1.” I’m a believer. And at Bank of America, he requested the nomination of more director candidates than board seats (2%). Another no-brainer. THE BIG VOTE PICKS MATT BLACKROCK The exertion of power - or abdication of it: Votes for its own directors “on behalf of clients” Of the 16 BLK directors, they hold at least 15 board seats outside of BLK on other public boards Verizon (BLK owns 8.5%) Cisco (9.2%) IHEARTMEDIA (13.3%) Apple (7.6%) BP (0.3%) Zoetis (8.6%) US Steel (11.7%) - largest holder Halliburton (9%) George Weston (X) BCE (X) Samsara (4.9%) Fox (5.5%) We have vote results at 13 of them from last year… 3 director got votes below the 25th percentile of all votes globally (>94% approval - and yes, that the 25th percentile) Cheryl Mills, IHEARTMEDIA, 93.2% Charles Robbins, Cisco, 91.1% Hans Vestberg, Verizon, 90.2% In every case, Blackrock voted for their own directors, including when those directors were in the bottom quartile for votes received Blackrock can even sway the vote on itself: Blackrock also owns 6.7% of itself through funds, primarily index The average vote FOR a BLK director is 97.3%, higher than the 96.4% US average In fact, the directors with the lowest votes elsewhere… got the highest votes at BLK? Robbins = 99.67% FOR Vestberg = 99.65% FOR Mills was middle of the pack at 97.15% FOR But there’s data to show that BLK has largely ignored performance of directors - particular its own directors: Performance: Vestberg is the second worst TSR performer at .329, and overall the boards WORST performer Robbins is THIRD worst on TSR at .399 Mills ranks 5th worst out of the 16 at a still below average .412, but is solid on controversies compared to everyone else Connections… There are several connection loops between directors through other boards, but it also includes Robbins being connected to Vestberg through Dan Schulman (on Cisco and Verizon) Knowledge: 8 of the 16 members come from investing, but 3 of them are the founders Good mix otherwise, arguably largest secondary overlap is tech/telecomm with Vestberg, Robbins, Johnson Big problem is the trifecta of power and Robbins/Vestberg weakness Which makes this shareholder proposal intriguing: Shareholders recommend that BlackRock, Inc. (the Company) reform the election of the board to list more candidates than the number of directors of the board to be elected. The American corporate boards and executives have become a class of oligarchy, as defined by Aristotle, according to his _Politics_. One of the main problems of corporate governance is that American corporate boards are not democratically elected. The Company’s board needs a democratic reform to elect members from more diversified candidates. Shareholders should have the right to choose from more candidates than the number of directors of the board to be elected. It’s from this guy: Jing Zhao “Think tank” - US-Japan-China Comparative Policy Research Institute - whose handful of members are all a mix of Chinese and Japanese nationals Has same proposal at Juniper Networks, Bank of America Website from 1998 Oligarchy as defined as a small group of people controlling the organization According to Free Float data - BLK is actually an Aristocracy, not an Oligarchy, but we’re actually wrong Three founders on the board (with minimal stock holdings now, but Fink is CEO and chair) BLK’s response confirms it IS AN OLIGARCHY Having competing nominees would result in contested elections, which may in turn discourage collaboration among our directors, politicize the election process and deter talented candidates. Given the increased uncertainty, contested elections could also disrupt our Board’s ability to oversee management and our business in the long-term. This approach would also impede the NGC’s ability to ensure an appropriate Board composition overall that would most effectively oversee our business and best serve our shareholders’ long-term interest. The proposed approach would also be burdensome to management and the NGC and would not be an effective use of the Board’s time and BlackRock’s resources Directors DON’T WANT A CONTEST FOR THE POSITION - they don’t want competition Even though sports teams actively compete for a spot on the team (and for contract dollars), directors wouldn’t be able to collaborate because they have to earn their spots? Blackrock as a massive asset manager with tremendous brand value couldn’t attract talent because they would have to work for the slot? Is that true when they hire middle management and get 2,000 applications for 1 position? This is basically saying the quiet part out loud: there are two classes of jobs, the oligarchy jobs (which shouldn’t be earned) and the plebian jobs (which you should all compete for) …Our shareholders already have the ability to convey their views on our Board composition to our Board. For instance, in 2024, we offered engagement with shareholders collectively holding approximately 65% of our common stock. Shareholders also have the ability to recommend candidates for consideration by the NGC, as well as the right to nominate candidates for election to our Board under the proxy access and advanced notification provisions of our Bylaws Because shareholders can talk to companies, they don’t to vote on more than the company choices for their own representation Blackrock “proves” it by saying they talked to 65% of shareholders - in this case, 25% of the shares are Vanguard, BLACKROCK THEMSELVES, State Street, Temesek (who bought the shares in 2020 and immediately partners with Blackrock on a joint fund), and Bank of America - wonder how those conversations went? Here are the proxy access rules I could find in the 2012 bylaws: Except as provided in a Stockholder Agreement, to be timely, a stockholder’s notice to the Secretary must be delivered to or mailed and received at the principal executive offices of the Corporation not less than one hundred twenty (120) days nor more than one hundred fifty (150) days prior to the anniversary of the mailing date of the Corporation’s proxy materials for the immediately preceding annual meeting of stockholders; provided, however, that in the event that the annual meeting is called for a date that is not within thirty (30) days before or after the anniversary date of such meeting, notice by the stockholder in order to be timely must be so received not later than the close of business on the tenth (10th) day following the day on which notice of the date of the annual meeting was mailed to stockholders or public disclosure of the date of the annual meeting was made, whichever first occurs. So definitionally, BLK’s response to the SHP accusing it of being an oligarchy is to confirm it is: A small number of investors choose from a pool of directors appointed by an even smaller number of board members on the Nom committee - who are almost entirely beholden to the founding trio Blackrock is a 5% or more holder in more than 2,100 US public companies - and to summarize how it views elections: An election built on a contest of merit would discourage directors doing their jobs The political process is good for federal elections, but not for boards A board that is contested can’t attract talent Shareholders can talk about board members if they have enough shares What are the chances that the three founders (Fink, Wagner, Kapito), one of whom is Chair and CEO with full discretion to vote against his own board members on OTHER BOARDS, will ever see a dissent? What to do about it: Vote YES on the shareholder proposal - this is a true opportunity to innovate into a true democracy in corporate governance - every election is a contested election where investors vet who is best positioned to align to THEIR interests Vote AGAINST Vestberg, Robbins, and founder Fink still CEO if he’s not on the board Begins to eliminate the trifecta - next year is Kapito and Wagner Vestberg and Robbins flatly underperform There are 39 ACTIVE loops between directors on Vestberg’s Verizon board implicating EVERY director on the board! ALL OF THEM! Verizon’s board has returned a .388 in TSR as a group, and .264 controversies - this is a deeply underperforming board with ZERO directors batting above .500 on TSR or controversies despite only TWO of the directors being on just the Verizon board - this is pattern and consistent Blackrock voted FOR all of them - it’s a blatant conflict when the firm whose job it is to enforce shareholder interests (ie, TSR) has a glaring conflict that wouldn’t allow it to vote against its own board members underperforming board Robbins’ board at Cisco also bats under .500 on TSR, but while they’re overall better, Robbins has Dan Shulman on his board - and Vestberg does too at Verizon These aren’t coincidences - these are purposeful, connected men working together AND UNDERPERFORMING These are easy votes - and just to be clear, State Street, who also has votes coming up, has the SAME PROBLEM