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Getting Out the Vote

Michael Flack

JERRY SEINFELD tells a story about visiting the post office and noticing a wanted poster on the wall. He looks at the poster and checks the guy standing behind him. “If it’s not him,” he says, “I feel I’ve done my part.”

I own some individual stocks, so it’s that time of the year when I vote my proxies. I do the best I can at trying to understand the issues. Sometimes, I wonder whether I’ve really accomplished anything. Just like Jerry, though, when it’s all over, I feel “I’ve done my part.”

When I was younger and busier, I would stack the proxies and their associated annual reports on my desk and methodically go through them, trying to give each its due and then casting my vote accordingly. Now that I’m retired and have more free time, I can’t be bothered. I use the following shortcuts to allow me to vote as efficiently—meaning as quickly—as possible:

  • I vote for all proposals that would require an independent chairman. If I owned 100% of a company and employed a CEO, I would immediately fire him if he asked to be chair of the board. Why should a publicly owned company be any different?

Having an independent chair just makes common sense from a governance perspective. How can management manage themselves? Additionally, if a CEO has such little self-confidence as to demand to also be the chair, an investor needs to wonder about his or her leadership ability.

  • I vote against so-called classified boards, which have directors serving different term lengths. When I was employed, my performance was reviewed annually. Why should a company’s directors be any different?
  • I don’t vote for executive pay packages that include options. Since I own shares of a company’s stock, why would I want to incentivize executives with options?

After using these three heuristics, I then spend time only on proxies that pique my interest. This is what has piqued me so far this year:

1. D.H. Horton appointed Benjamin S. Carson to the board in April 2021 and he is now running for a permanent seat. Politics aside, what sense does it make to have a medical doctor, however talented, on the board of a company that builds houses?

Also, anyone who touts oleander extract as a cure for COVID based on the word of the My Pillow Guy should not be on the board of any company. This was an easy vote against Dr. Carson, though I would love to know WTF is going on.

2. Myra K. Young of Elkgrove, California, proposed that Agilent give 10% of shareholders the power to call a special shareholder meeting. Despite Agilent pleading that 10% was too low a threshold, I voted for Ms. Young’s proposal, thinking, “What the hell?”

3. An unknown shareholder of the Boeing Corp. proposed that Boeing create a report listing all its charitable contributions greater than $999. The board’s two-page response against the proposal seemed like overkill. It never mentioned anything detrimental that would come of the proposal.

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I felt that the time it took to generate the response could have been used to generate the requested list, so I voted for the proposal. I also voted against any director who was on the board in the runup to the whole 737 MAX debacle.

4. The Jay Stanley Weisfeld Trust of Rochester, Vermont, proposed that IBM prepare “a public report assessing the potential risks to the company associated with its use of concealment clauses in the context of harassment, discrimination and other unlawful acts.” In the time the IBM board took to recommend a vote against the proposal—saying that “IBM does not prevent employees from discussing the terms and conditions of their employment”—it could have published the report, unless, of course, it does unethically use concealment clauses.

Companies may legitimately use concealment clauses in employment agreements to protect corporate information, such as intellectual capital and trade secrets. But many companies use concealment clauses to limit their workers’ right to speak openly about harassment, discrimination and other unlawful acts.

I must admit, before reading this specific proposal, I didn’t know what a concealment clause was or why it was used. It appears this was all stirred up by Apple’s recent unsuccessful attempt to exclude a similar proposal from its annual shareholder meeting, which in the end was voted down. After reading this IBM proposal, I felt the whole thing kind of stinks, so I voted for the proposal.

5. The DI Foundation proposed that, by the end of 2022, Enbridge—the oil and gas (O&G) pipeline company—”strengthen its net zero commitment such that the commitment is consistent with a science-based, net zero target.”

Now, as a former O&G man myself, I may not be the most impartial net-zero observer. But asking the largest pipeline in North America to work to “develop, communicate, and implement a decarbonisation strategy” seems a little much. What’s next, asking Philip Morris to work towards a net-zero cigarette target?

It’s only about halfway through the proxy season and it’s all starting to get a little old. I’m thinking I should either come up with a shorter heuristic—or sell some of my stocks.

Michael Flack blogs at AfterActionReport.info. He’s a former naval officer and 20-year veteran of the oil and gas industry. Now retired, Mike enjoys traveling, blogging and spreadsheets. Check out his earlier articles.

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Syfer Polski
Syfer Polski
5 months ago

It seems reasonable to ask a pipeline company to reduce it’s Scope 1 emissions – those are literally leaks! Scope 2 and 3 might not be profitable on their own to reduce, but Scope 1 seems like a no-brainer

mjflack
mjflack
5 months ago
Reply to  Syfer Polski

Syfer Polski, hmmmm? I think you may not be correct, as “Scope 1 covers all direct GHG emissions by a company. It includes fuel combustion, company vehicles and fugitive emissions.” They are literally not leaks, they are emissions.

Duane Kirking
Duane Kirking
5 months ago

What irks me is the common statement that gives permission for the proxies to vote for anything else that comes up without input from me.

mjflack
mjflack
5 months ago
Reply to  Duane Kirking

Duane Kirking, a very good point. Thanks for your comments.

holylandphotos
holylandphotos
5 months ago

Could someone write an article on how the leadership of companies who sponsor ETFs vote their shares? That would be a very very large voting block. I suspect that some of us would not be happy with the way that they vote their shares—especially when it comes to “social issues.” e.g., Blackrock.

mjflack
mjflack
5 months ago
Reply to  holylandphotos

holylandphotos, I think the administrators of each fund vote their shares the way they see fit, though I have a feeling they generally side with management. I’m far from an expert though.

parkslope
parkslope
6 months ago

Out of curiosity, I read Enbridge’s recommendation for opposing DI’s net zero proposal. Enbridge argued that We have completed $3 billion of sustainability-linked financings that tie borrowing costs to ESG targets and performance against our emissions goals, and our business units have developed long-term emissions reduction plans. https://drive.google.com/file/d/1vN6XQrDoS4-EuqDMpULbVfQWLCcLQBMW/view

Enbridge’s ESG activities reflect the fact that many energy companies are responding to pressure to be more climate-friendly which suggests that excluding O&G companies from ESG funds is counterproductive.

mjflack
mjflack
5 months ago
Reply to  parkslope

parkslope, Every company needs to make continuous efforts to increase efficiency. It may very well make good business sense for an O&G company to use less oil and gas to transport their oil & gas, but to use zero! What’s next Altria mandating that their employees stop smoking? Jim Beam mandating that their employees stop drinking liquor?

Andrew Forsythe
Andrew Forsythe
6 months ago

Mike, I never thought proxy voting was good for a laugh but you’ve proved me wrong!

mjflack
mjflack
5 months ago

Andrew Forsythe, thanks for the kind words.

Harold Tynes
Harold Tynes
6 months ago

For all of us that just own index funds, WTH are they voting for?

mjflack
mjflack
5 months ago
Reply to  Harold Tynes

Harold Tynes, I’m not sure.

IAD
IAD
6 months ago

In total agreement! I also vote against any board member that doesn’t own any shares of the company they are on the board of. They literally have a zero stake in the company and are just showing up for the paycheck.

mjflack
mjflack
5 months ago
Reply to  IAD

IAD, I agree, though it’s just too much work to review the details of each and every director.

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