2025 Proxy Season Review: Unelected directors, non profit interlocks, illogical voting, and SHP kabuki theater

This is Proxy Countdown. Welcome to the big show for the week of July 7th, 2025, alongside my tag team partner, Matt Mascardi. I'm Damian Rollis. On today's countdown, our wrap up of the 2025 Proxy season will do our best, including some of our top theories. Things like the Fortune 500's quiet rejection of having a minimum of three women on the board. Companies who sidestep the alternative democracy by appointing directors less than a month after their annual shareholders meeting. We look at highlights from the proxy cage match season, including shareholders suddenly paying attention when an activist comes knocking, and some of the quirky battles between ISS and Glass Lewis. I look back at some of the trends from the meeting votes, including illogical shareholder voting patterns and the fact that director votes still don't matter at all. And then finally on the big vote, Matt takes a much deeper look at all of the 2025 proxy season data. I got that right? Good summary. as much as all is possible. Let's give this an attempt. we both look back at all of the shows for the year, all the data, all the notes that we've compiled. We're going to do our best to kind of sum this up. I'm going to start with some of my top theories in the news stories that we collect. The first in no particular order, the first is just an absurd golden hello season, including really for the first time we're seeing really crazy, absurd. golden hellos for CFOs. Especially given the fact, you'll see in some of my examples that these CFOs don't even last long at their company. So they're just jumping ship and collecting golden hello packages like Zscalers, new CFO Kevin Rubin, who starts with a golden hello equity word of $23 million. despite the fact that he lasted only 11 months at his last role as a CFO. So... It does seem like this, it's like the Gen Z job mindset of CFOs. Nothing's more than two years. How about this huge CFO package? Roblox, CFO Naveen Chopra gets $6 million in cash, $28 million in equity and $15,000 per month for temporary housing and a million dollars for relocation expenses. What stuff do you have that it costs a million dollars to move it from one place to another? And finally, the new CFO at Pure Storage. Despite the fact that he hasn't had an executive job since 2023 and he only lasted five months at his last job, he comes in at CFO with $30 million in equity awards. So again, CFOs, massive golden hello packages. Were you ever seeing directors? Getting golden hello packages, two that I'm highlighting here include MicroStrategy, which announced that all new directors will get a golden hello package of $2 million in equity, which is one of the highest we've ever seen. Apollo Alto Networks, they appointed two new directors and gave them each a million dollars worth of equity. So this is a new trend. And then of course, CEOs, you know, this is nothing new, but we're tracking all the massive packages. We have so many highlighted here, but I'll just give you a few of the crazier ones. The new CEO at Intel, Lip Boothan, his Golden Hello package could be worth as much as $400 million. Remember United Health Group, their CEO step down, Andrew Witte. So they brought back in their former CEO and their current executive chair and he's getting $60 million in options just for bad succession planning there. That one seems, and that's unlinked to performance, the interim CEO who was an ex-CEO getting non-performance-based, just giant grants, does seem, I think we've seen two or three of them in the last two months. And then even at companies that, and most of the stuff that we look at are the largest cap companies, roughly correlating with the Fortune 500, but even companies that aren't huge names like Factset, Research Systems, their new CEO gets $22 million in options and then $13 million in cash and then another $36 million in equity. So there you go. Wow. The next big thing we're covering are retention awards. I feel like that we've seen an uptick in retention awards. This is where companies are paying massive amounts of money just to keep people around. Goldman Sachs started this trend off earlier in the year. CEO and Chair David Solomon and COO John Waldron each received retention grants worth $80 million. Thermo Fisher Scientific gave $60 million in equity to CEO Mark Casper, named executive officer to Capital One Financial, got $43 million. I have a bunch more, but the last one that is notable is Starbucks. They're getting six million, each executive officer is getting $6 million worth, could be worth up to $12 million just for implementing the plan that the new CEO is putting into action, which is a. called Back to Starbucks, which is really just cleaning up some of their cafes, adding some mugs. They're just doing their jobs essentially. And let's not forget the background here where the workers, the baristas, continue to be in a kind of a standoff about their wages. So that's the most notable retention award that we've covered recently, yeah. You know the But taking those two things back to back, right? You have the sort of golden hellos and the CFO turnover and you have retention bonuses. There's a really simple solution. We know that the percentage, especially on management teams of women or people of color, I mean is dwarfed by men, particularly white men, right? If you wanted to pay less, Isn't there a cultural arbitrage which feels icky to say out loud? But you can find a massive talent pool that's untapped. Instead of giving retention bonuses to COO John Waldron at Goldman Sachs, why not tell John Waldron, you know, there's like hundreds of people who don't get this position and aren't white men who are Equally if not more qualified we don't need to give you a retention bonus We don't need retention bonuses like we can't replace DJ D's all that guy were almost replaced himself by playing Lollapalooza So much the board thought about firing him. I don't understand this sort of lack of Measurement of the available talent pool. It just seems like you're looking around and saying like I really want you to stay with me, buddy and then you end up with golden hellos and golden, you know, retention awards. And look, this is one of the things that we used to highlight back when people seemed to care about corporate governance and pay programs is why you don't want too many, if you don't really want any CEOs on the compensation committee, because really they're just there to pay their brotherhood, right? So when I was a compensation analyst, corporate governance analyst, whatever you want to call it, really we were critical about... All of these, all golden halos, all golden parachutes, all special retention award, anything outside, if you can't figure out how to pay the executives in the already exorbitant pay packages, and believe me, they can, they have figured it out. If you have to go outside of that plan, first of all, it means your original plan sucks. And second of all, that's it, really. That's the only point that matters, right? So they're... Yes. Second of all, it sucks. So they're all bad and I don't care if some of these are attached to performance or not. Someone's not doing their job. That's really what's happening. Every single company if you listen to the show you we can provide you the list every single company that you've pulled with one of these retention awards or That with CFO turnover and a massive golden. Hello's every one of those companies It should be a red flag that they don't have succession planning down They think if they really can't afford to lose anyone with plans where they've already structured it such that they make millions upon millions of dollars already. If that doesn't work and you can't find anyone else because you have bad succession planning, that should be the board should be stepping in and saying, what are we doing? This shouldn't be necessary. except they're afraid to do that because they're also named executive officers at the companies where they serve and they often serve on boards with some of their network pals and they want to get the same bonuses and special awards and. Yeah, but the investors, that should be a signal. The flag is for investors to go to their boards and say, you need to, I don't care where you're from. The succession planning should not cost us millions upon millions of dollars because you did it badly. For investors, yes, for shareholders. Yeah, yeah. The next big trend we covered this year was something I refer to as down to two F. So that means that there's this sort of quiet pattern happening where a lot of the big market, the large cap boards are suddenly under that threshold of having three women on the board, which was. I don't know when that number kind of became the accepted target, but that's where you saw most S &P 500 boards landing, right? They would get hit at least three women on the board. Part of it's based on the math of it, where there is a wider understanding that having, that the goal of 30 % women on the board was an acceptable goal, and most boards had roughly about 10 directors. So there you go, three women on the board. Now we're seeing that trend, and I don't know. if this correlates to lot of companies dumping their DEI programs, dumping diversity initiatives, but what we're seeing very quietly happening is that women are stepping down and they're not being replaced by other women. Men are often stepping down on boards with only two female directors and they're not being replaced by a woman given the opportunity with a board vacancy. So we've been following this trend. And the other thing that's really happening too, which you can only see in the data at freeflowanalytics.com, is that not only are these boards dropping to two women, but often they're dropping to two women with a combined influence percentage of under 10%, meaning the two women have no leadership positions, they have no voice on the boards. As an example, Meg Crofton stepped down at HCA Healthcare. Their board only has two women now with a total of 3 % influence. Emerson Electric down to two women with 7 % influence. Even at a retail company, a place like Domino's Pizza, which sells to the masses, Diana Cantor stepped down, they only have two women with a total of 8 % influence. So this is, again, a trend that we're seeing a lot of this year. You know, and it's not even the the method is sneaky, actually. And it's something that most investors don't pay attention to, which is we notice that a woman will come off the board voluntarily. They're not voted off the board. We don't know behind the scenes whether they're basically asked to leave. There's not nefarious reasons, but it's like the great female replacement theory is really replace them with a white guy. Yeah, there's no nefarious reason. We don't think so. Yeah, we don't think so. Right. And more the time that happens the most often actually isn't a woman leaves and is replaced with a white guy. It's most often they expand the board and they only put in white men. So it's actually dilutive, right? Like you're diluting diversity rather than getting rid of diversity, which is effectively the same thing, but it's much more palatable from a a from a sort of public facing perspective. You can say, we didn't We didn't ask any women to leave. We're not removing women or diversity from the board. But they're expanding the board and only putting in white men. Yeah, one of the cases we followed this year was that American Financial Group that expanded its board from 11 to 13 members and famously said that there are no arrangements or understandings between the new directors or any other person pursuant to which they were elected as directors of the company, despite the fact that one of the new directors is the son of one of the co-CEOs and the nephew of the other co-CEO. Yeah, I mean, I mean, that's one way to do it, right? You want to it's one way to do it. There you go. Yeah, that's one way to do it. All right, and finally, the last big trend that we kind of started to look at towards the end of this proxy season as it was all starting to make sense to me was I noticed this pattern of companies kind of almost immediately appointing directors for their boards right after the shareholders meeting, which struck me as at a minimum, Rude, right? they're not breaking any bylaws or listening exchanges rules or anything, but it just strikes me as a big middle finger to shareholders because there is no doubt that their succession planning, whatever they do to find new directors, they had to have known about these people. There's no way that 14 days after the meeting, they took that time. Rude, after the meeting ended to get together and decide upon a new director, call that director, offer a contract, get it through their lawyers. It's no way. They knew, they knew. Yeah, 100 percent they knew and I and I've talked to board placement agents who have said the process can take months, right? Like several months, which even if you're conservative about how long it takes and you assume it takes two, two to three months to find a new director for the board, you either are admitting you have a list of predetermined directors, which means you're not actually doing any due diligence, right? Like you basically are just it's the next person up on your list or you're admitting that you had planned this well in advance of the AGM and didn't tell anyone that might have mattered and executed almost immediately thereafter. One of the more concerning parts of this that we've seen that you unearthed was that this is often happening at classified boards where electors are not elected annually, meaning that sometimes directors are appointed to the board two or three weeks after the annual meeting and won't even be up for reelection for almost three entire years. Yeah, for very long stretches of time. And they're getting paid for each of those years before investors actually get to weigh in. And to highlight that point that they're getting paid, one of the companies that we looked at, MicroStrategy, they snuck Peter Breiser Jr. onto the board 19 days after their meeting, and they gave him a Golden Hello Equity Award valued at $2 million. He's also gonna get $500,000 in annual director pay. So, again, he's coming in with $2.5 million and... shareholders don't even know who he is. mean, there was an opportunity for the company to tell the shareholders about him at the meeting. They didn't do that. So they don't have an ability to vote him in. They don't have an ability to assess his background. So yeah, this is one of the bigger trends that we followed this season. I mean, I like the way you wrote it too as circumventing the alternative democracy because, you know, we pointed out earlier that another way that they'll do that's that is like one major continual way that we see happening. In fact, we pointed out that Rockwell Automation has done this three times in the last four years, right? Like where they add them a director one day after the AGM. So they effectively serve the whole term without getting a vote. But we pointed out that Ron Sugar Apple just waived the age restrictions for the last three years. They set their own policy of an age restriction and then they waive it. We pointed out, you know, everybody knows how J. Hogue lost the Netflix vote. It's just staying on. Effectively, what's happening here is a broader trend of, I think it's always happened to some degree, but it's pretty egregious at this point, of directors just saying, yeah. No one cares if we stay around or when we join. No one cares. So we're doing whatever we want. Yeah, that might be the biggest takeaway here is that they're not worried that anyone's gonna care. Because I'm looking at Netflix, you're talking about J. Hogue, 79 % said no to J. Hogue, and Netflix said, you know, tough, he's good for you whether you like him or not. 16 days after their annual meeting, they appointed Airbnb CFO Eleanor Mertz to their board. So they're sitting at their annual meeting, not only are they not listening to the vote, but they're walking around, they're talking to shareholders, they're giving presentations. They know that the CFO of a pretty important company, Airbnb, is gonna be joining their board. They're not even giving shareholders the opportunity to say, well, wait a minute. Maybe they don't like what's going on Airbnb. don't know. There could be a look. Maybe they do like Eleanor Morris. Maybe they don't, but they're not even giving them the opportunity to weigh in on. Maybe they don't like Netflix and they're just gonna say everyone you've chosen so far like has been chosen by Jay Hoag who we have voted out twice now and you've ignored so Who knows, right? Twice, yeah, that's true. Yes. All right. Those are our biggest trends of the season. So far, let's move over to our proxy cage matches. I had a harder time summarizing this. The biggest takeaway that I could see was something I called the activist sway, which is that when an activist investor came knocking on the door, suddenly shareholders or maybe proxy advisory firms, I don't know, suddenly they started paying attention. The one that got the ball rolling on this one was at the Walt Disney Company where, remember last year, Maria Elena Lagamacino, 37 % of shareholders had rejected her reelection. That's a very high number, 37%. This year, only two, only 2 % now that there's no proxy contest. Yes. It's unbelievable. And no other facts on the ground effectively changed. They still don't have a succession for Bob Iger. They still don't have, you know, like a board that isn't compromised. If you read through, there were two activists involved, you read through their decks, the facts on the ground are not dramatically different from last year. The stock isn't outperforming. And yet... Despite the fact that ISS last year said of Lagomassino that she is, because she was long tenured, that she was one of the most culpable for the outcomes at Disney and their failures of succession, despite that, she's now fine? She's now good at it? There's no evidence of it? It's just there's not an activist. The other ones I want to highlight here all had to do with ISS. At Brookdale Senior Living, there was a proxy cage match and ISS agreed to withhold votes from Lee Wielanski and Victoria Fried. Despite the fact that those two directors received an average support of over 99 % the year before. The same thing goes to Astronova. And again, with the directors, this year they wanna vote out, last year they got 97 % support. And again, ISS is saying that the reason why they should be voting out is given their tenure, given their leadership positions, because the change would improve independence and oversight. Like all things that magically are happening this year that didn't happen last year, yeah. But we're the same last year. I think we can move on from this category. I had some stories kind of highlighting some of the disagreements between ISS and Glass Lewis, but I don't know that we need to a lot of time there highlighting those. I think we just had a little bit of fun this year when ISS would say yes to someone and Glass Lewis would say no. really there's just, what it pointed out to me is that unless an activist investor comes along, they're really, is no set of quantitative criteria that makes ISS or Glass Lewis make a decision either way. There's just no real rhyme or reason to it. So, yeah. I mean, I do think the overall takeaway for proxy cage matches this year is really the word probably, which is like ISS and Glass Lewis's favorite hedge word. Whenever they're supporting an activist candidate over an incumbent candidate, they're probably right for the position. And the incumbent is probably the one to blame for whatever the outcome is until next year. Yeah. when they're still there, no one cares. So they're probably fine now. I think probably is sort of the word of the year. And not just to make fun of ISS, Glass Lewis had one of my favorite moments of the season where Penn Entertainment, where they decided against withholding, wait, they were against supporting a dissident nominee because they said the board's unanimous decision not to support him raises questions as to whether he would bring distinctive value at this time. So. The board's saying no. because the board in place was saying no, that that director wouldn't be beneficial to the board, which I don't know what that is. I mean, we also saw quotes in their reports where they said, I think it was ISS, but might have been Glass Lewis now, who said bringing in an ex-CEO could disrupt this current boardroom and therefore is not good for this board. In which case, there's so many companies that have ex-CEOs that's which could apply to so many companies, yeah. what an executive chair is. Should we vote out Jeff Bezos? How many times? The lack of any real consistency is pretty much the story. And finally, before I hand off to you, Matt, I attempted to kind of summarize all of the vote results that we looked at in this proxy season. I think I focused on just the votes from since the beginning of May, which really is the largest cap companies in the United States. Looking at over 500 annual meetings. The biggest takeaway is that nothing happened. Is that a good summary? I out of 522 large cap annual meetings where you typically find the most noise, there actually were only 315 total shareholder proposals, which is extremely low. And those only came from 188 companies, which means that roughly two thirds didn't even have a proposal. And. Some of that was because some of the bigger companies had a lot of proposals like meta platforms. I think they had like 13 proposals. So 132 of these proposals came from only 29 companies. So again, the takeaway here is nothing was going on. There just weren't a lot of votes. In fact, there were very few wins where shareholders actually prevailed. There was like a handful of say on pay wins, about six wins there. The big winner here, especially with shareholder proposals was a simple majority vote, asking for, that got 12 wins. Yeah. Honestly, from a vote, I'll go over deeper data on the votes. I actually think from the standpoint of the voting results, the disconnects were by far the most interesting sort of trend. The disconnects, yeah, and let me get to that. Let's talk about the disconnects. Let me start with the one big disconnect out of the shareholder votes is this, that there is no rhyme or reason between one company to the next company. I don't have a full slate of examples here, but I'm looking at the shareholders' ability to call a special meeting. They had a lot of near wins, often trending. eBay, 49 % yes, PayPal, 44 % yes. Even Netflix, 42 % yes. And then you have companies like Devon Energy, 8 % yes. I just, I can't follow that on any level. But let's get to the, this was the main trend that we covered all season long was this idea of shareholder disconnects and where you could really correlate the data here was a high vote against pay and yet a high vote for directors. Who set pay? who the directors, not just the directors in the compensation committee, although those are the ones that they should have targeted, all the directors. basically shareholders angry at pay but not blaming anyone. As an example, Goldman Sachs, 34 % no on pay, all directors at least 92%. Truist, 41 % against pay, all directors over 90. Citizens Financial Group, 41 % no, all directors over 92%. It goes on and on. Even at some of your bigger companies like BlackRock, where 33 % rejected pay and the lowest two directors were 92 % yes and 96 % yes. Chipotle was a big one. 45 % rejecting say on pay because of one time retention awards given to the named executive officers valued at $40 million. That nearly failed that pay vote and yet, All directors received at least 96 % support. So again, this is the big shareholder disconnect of 2025. I mean the one I don't get is Otis Worldwide, which pay failed. 61 % no. And yet the lowest director vote was 93%. Yes. With an average of 98 % across the board. So you don't like pay so much so that the majority of investors say no to pay. And I get it, it's advisory. Yes, for the whole board, yeah. That's a big not like, yeah. Resounding no. But that would be like, you know, I really don't like your work product. I will hire you for life. Right? Like why are the directors not seeing the implications of poor work product? Why are they the ones who they get away with it? 93 % is the lowest you could muster against a director, even the ones on the pay committee. And then directors themselves. I only counted roughly 30 directors that even got over 30 % no. I kept checking my math, it seems wrong. That's over 500 companies, roughly what's the average board size we're saying for these large gaps, about what, nine or 10? Well, I can front run some of my data there, is, Well, we'll come back to it, but the number is incredibly low. Okay, yeah. The only large cap directors I could find since May, and I'm not saying they're leaving the board, but that got higher than 50 % no, were Thurman, John Rogers at Enphase Energy. I love this one because the company said that they believe the outcome was primarily due to. concerns regarding his service on two additional public company boards, basically blaming the overboarding policies of independent proxy advisory firms, which is a straight out lie because the other director up for vote that year also sat on two boards and he didn't receive the same amount of votes. What the company failed to report was that this guy was involved with related party transactions, he's involved at a different company where he's CEO. He was the CEO at a SPAC company where like two or three other directors also served. He's also the chair of the pay committee. I mean, there's just a lot going on with him. And I just thought it was humorous that the company just completely ignored all the relevant facts. Vertib holdings, Jacob Katsube, he got a majority now. That was because of attendance concerns. He was one of my favorites, yeah. Pure Storage, Scott Dietzen, he got a majority vote against. That was most likely because he's the former CEO of this company and the company has the gall to refer to him as independent. So, at least shareholders are doing their job on that one. And finally, the most noteworthy case that you cited earlier was, of course, Netflix, where a massive, I think it's 79 % of shareholders said no to his reelection because he failed attendance. But as we pointed out, there is a litany of concern at Netflix where shareholders passed numerous, I think up to almost 20 shareholder votes over the past 10 years and Jay Hogue, who was the lead independent director at the time, ignored all the votes. And as you pointed out, yeah, and as you pointed out, he was actually voted out in the past, so that's the... Including the ones against him. that Netflix, I think a week or two ago said that they, again, they're rejecting that vote. They're not paying attention to that vote. do I have anything else here? the other thing I wanted to point out here was we started to see for the first time really in a while that there's a little bit of dissent against auditors. I counted at least 10 companies. Okay. Well, let's dial it back. At least 10 companies, companies like First Solar, IDEX, Striker, where the auditor itself actually got 10 % against their vote, although they all landed at between 10 and 13%, so I don't really know. Yeah, 10. Yeah. It's not a lot of dissent. Maybe 20 years from now, there'll be real dissent and we'll get to 30 % against. Yeah, other than that, let me end with this. I have a lot of things highlighted here that I could talk about, but I want to end on this story. I want to end on Berkshire Hathaway. This is one of my favorite companies, always. They had seven shareholder proposals this year. That's one of the largest amounts out of any company. And they're the only company in their 8K filing that announces the vote. that the only company that refuses to tell you what the shareholder proposal was about, they just list shareholder proposal number one, number two, number three, they can't be bothered to tell you what the hell is happening. And on top of that, had to be the lowest support out of any shareholder group. Now this is the company where Warren Buffett, he would always kind of in a very folksy way praise how shareholder is king, right? We hold these annual meetings, we give them muffins and Diet Coke and whatever, cheeseburger. We love our shareholders. All seven proposals received about two, let's call it an average of about 2 % support. So this is a company that disdains its shareholder proposals, disdains voting on shareholder proposals. Doesn't really even wanna tell you. Yeah, anyway, I like, and I wanted to end on that one. you Seize candy. loves shareholding. Yeah. Again, there is a lot more behind this. We're working on starting a sub stack. I'm gonna try to get, maybe we'll start with this show and publish all of the, there's a lot to look through. But I've already bored you enough for 30 minutes. So I'm gonna hand off to you, Matt. What do you have from the 2025 proxy season? There's so much here. Yeah, there's so much here. All right, well, I'll bore you more. Here's a lot of numbers. But I want to start actually with just the number of votes cast. So I looked at US companies. When we talk about share, like proxies, we're talking about US proxy season because proxies go on all year. There's all sorts of patterns globally in different jurisdictions. But for the most part, the vast bulk of proxy voting happens in the US because that's where the vast bulk companies are. Yeah, please. And the season basically is roughly October to June, but really April, May, June is really the most of the companies. 73 % of all votes for the 2024-25 proxy season were for directors. 25 % were for management proposals. That's auditors and pay and things like that. And 3 % of all the companies were for shareholder proposals of all votes. All What do mean the votes? Votes cast? mean actual individual votes? I mean like actual proposals like you have to cast a vote on this thing. So Yeah, because director votes are, yeah, they're management proposals. It's a, their management proposals. So effectively, 98 % of votes are management proposals of which two, know, three quarters are for directors, choosing your directors. Although we should say that director votes are effectively shareholder proposals. You didn't propose them. That's the only problem, but they are your representatives. That is the one big lever you get. You know, most of the other things are actually non-binding and Right. But lot of director votes are non-binding too. But they often have a bylaw that says they have to submit resignation if they're voted out, right? Well, they're they're they're binding. Right, exactly. Yes, there's a binding process that doesn't typically reward shareholders. Let's just say it that way. But here's my big problem with the 24, 25 proxy season in the US. The media share. Those are your vote shares. The media share. 95 % of the media focused on anti-ESG shareholder proposals. Yeah, this was the year of the the citizen journalists, the citizen ESG companies, the right, all the all the angry political theater. Yeah. Yeah. The rollback of DEI, that we're angry about all of the woke companies. This was the year where we saw shareholder proposals rise for the anti-woke, the anti-ESG. And the reality of that is they are non-binding and it's 3 % of your voting capital if you are an investor. 3 % spent. We're talking about 3%. Far more, like like leaps exponentially more than we talk about the other 97 percent 98 percent of what you actually vote on so of I'll start with it because it's what everybody talks about of the 40 companies that were targeted by the anti ESG anti woke shareholder proponents 14 of the those companies were also targeted by ESG proponents. So we actually have straight-up head-to-head duels You have an anti woke proposal and a woke proposal head to head in those. That's the best way. If you want to describe the nothing burger that we spend all of our time talking about in the head to heads, the anti's average 1.2 % support and the pros average 7.7 % support. So the, the, pro ESG community is seven X returns. Feel free to claim victory guys, even though Okay. 93 % of investors didn't care about it. On average, 93 to 99 % of investors said no to all your proposals. It didn't matter at all. Now, what are you referring to here when you say ESG proposals? Does this include traditional governance proposals like from the McRitchies and Chevadins? Woke, environmental and social concerns. not traditional governance. I'm talking about what would be considered straight woke, you know. And when I'm talking about anti and pro ESG, I'm talking about the proponents because really this is the year of the shareholder proponent, not the shareholder proposal, right? The proponent type is really the important thing. And Proponents will do different types of, you know, proposals, but the as-you-so's of the world, the vast majority of what they ask for is going to be something like, you know, a climate proposal or a human rights proposal. They're squarely in the ESG camp. The John Chevedans of the world, he's asking for simple majority votes and ability to call special meetings. That's the governance, you know, that's squarely in the governance camp of proponents. Then you have asset owners slash pension funds. That proponent type, they kind of flip between ESG things and governance things and director things. They're a little all over the place. Really, they just represent the pensioners. That's really what they represent. Then there's the anti's, the anti-ESG. They effectively are doing press releases. There's the activists. There were a number of activist proposals this year, usually around director slates, but not always. Sometimes bylaw changes so that they could get activists, director slates next year or changes to voting like we saw at Fox, right? We saw activists take on the idea of the the dual class shares. And then there's the religious investors who I separated out from ESG investors because Generally the religious investors focused on certain types. They didn't typically do climate They typically do like human rights human rights violations things like that or the nuns I saw, had more than one on cigarettes. Cigarette smoking, cigarette waste, they like cigarettes. Exactly, yeah. Historically, they did guns, lot of guns and cigarettes. You'd think they were sitting under a 95 overpass right now. Right, guns and cigarettes. Well, yeah, all the nuns I knew as a kid, they were always smoking, so it doesn't surprise me. So when it came to who investors trusted the types of proposal the types of proponents that the investors followed governance proponents got on average 29 % of the of the yes vote Governance still is king when it comes to proponents activists got 23 % Everybody else was 10 % or lower for the most part Well, I wonder if that's just because of how mature they are as a proponent class because when these votes first started occurring, course, they didn't use the word woke then. They probably used like anti-capitalist or politically correct or whatever, but they've been around so long. Maybe they're just like, okay, fine. Yeah, sure. But the ESG crowd, like all the conversation about shareholder proposals is like how the rise of the anti-woke and anti-ESG, the ESG crowd, the average is 10%. The average for the anti-crowd is 2%. So both stink, right? Like both are not great. In fact, when you look at the win rate, which is the only thing that really matters when you're talking about a shareholder proposal, Right. Sure. Sure. Win rate meaning over 50%. Yeah, very few, very few. Did they win the vote 50 % or like 50.1 % of the vote, right? The only proponents that won were governance proponents. They had an 18 % win rate in 24, 25. 18%. Everyone else had a 0 % win rate. They were the only ones to win a shareholder proposal. So stop talking about shareholder proposals. That high? Really? Yeah. Yeah, see. Yeah. Yeah, I see 12 simple majority vote wins, seven call special meeting, some declassifications. Yeah, that those are only ones. Chevedin alone got greater than 50 % shareholder proposal votes on 27 proposals this year. He's the winner of the year by far. McRitchie came in second with 38 % average vote getting and three wins himself. No one else got a win. There wasn't a win anywhere to be found. But there are zero articles about Jim McRitchie and John Chevedin. So he's the big winner this year, John Shevin. Okay. Yeah. Sure. Like, there are a hundred articles about the National Legal Policy Center, National Legal Center for Public Policy, Boyer Research. There are hundreds of articles. Well... It's funny that you say that because, in the past, correct me if I'm wrong, the reason why Exxon sued its shareholders was they were essentially saying that they were using these proposals as a political statement, right, political platform. What I'm seeing now with the anti-ESG proposals is that, yes, it's political, but also I think they're using it a fundraising platform. I think what they're doing is they're only putting these in, Yes, correct. Yes. because they can then share with people that they're fighting the horrible woke masses of Verizon communications that are ruining our world, and they're just raising money off of that idea. That's all they're doing. the woke masses and Larry Fink and... Think that's 100 % correct. They are this isn't about change. This is about narrative, right? This is about a marketing tool a press release tool if you stop talking about them and paying attention to them They will disappear and I want to give one shout out to a proponent who was in your notes as well Jing Zhao who who? files files proposals virtually every single year for the last 20 years but Yes, the classicist. Small, small proposals. He had maybe the quote of the year in his Sheraldor proposal in which he said, in arguing for, you know, like a like cap to CEO pay ratio, Aristotle demonstrated that in a stable community, the ratio of the rich citizens land to the poor citizens land should not be over five to one. I love anyone who's going to go back and quote Aristotle as a reason in a 2025 Sheraldor proposal. You got my vote. Yeah, I think it's perfect perfect Hey, I can't think of a better way of dealing with CEO pay ratio. What would he think about Starbucks? The Starbucks CEO pay ratio this year, 6,666 to one. Now that's a big piece of land. Well, I'm sure he would quote like like Aristotle or Plato or Socrates to give us a reason why that's ridiculous is what I'm sure. So that's the Sheraldic proposal roundup. You're to get that in 50 other places. But the fact is it's Sheraldic proponents, not proposals. And the anti ESG proponents are just fundraising off of your fear and your conversation around what they're doing. Ignore them like you have. Hi. ESG proposals for the last 20 years and Move on there's nothing to see here. There's no substance. There's nothing to see which gets us to directors 73 % of your voting capital remember that when you go to vote 73 % of the votes you are going to cast are going to be on directors overall averages This is this you care so much about shareholder proposals Somehow you don't care about who runs the companies because the average high vote was 97.8 % the average low vote was 88.4 % or 88.5 % the company median was 95.2 % What do you mean the average high vote? as in the max vote inside a company, the average of all the maxes and the average of all the mins and then the median, the average vote was over 96%, right? The median's 95.2. But while we're talking about shareholder proposals that are targeting like the rise of anti-DEI, the death of diversity has been dramatically overstated when it comes to actual directors. Now, what we know Okay, for one director. Got it, got it, got it. Incredible, incredible. Really? in terms of voting okay terms of voting, what we know is the replacement of diverse directors is happening with white men. It is the reverse replacement theory. That's what's, it's very slow, but that's exactly what's happening. But when we look at the vote getting, investors are clearly like there's everybody's winning, right? So like it's not exactly, there's a big difference, but investors are clearly slightly happier with diverse candidates than they are any other candidates. White How so? male non-executives got the average, had the lowest average vote getting in 2024-25 at 94.8%, while black women were the highest at 96.8%. Well, I would suggest, my instinct would tell me however, one of the reasons for this is that a lot of the white male non-executives had been on the board for a very long time and the length of their tenure is dragging down their vote with some of the, right, some of their percentages are being dragged down by this. Right. Yes. It's I didn't correct for tenure. I didn't correct for age either. Because what I often see, especially with new directors, who often, a new director could be a person of color, could be a woman, because you didn't see a lot of that 20 years ago, they often get the highest votes. The newest directors on boards seem to get the rubber stamp from all investors, like sure, like we trust you. Yeah, because they're which is which is what makes that sneaky adding a director inside 30 days so sneaky because they when they show up for the next proxy, they have a year of tenure. They're a new director and they're likely to get the rubber stamp more to add a higher rate. But I did compare non executive director versus executive directors with diverse cohorts to find the executive premium for men. The executive premium is six times that of women. If you are an executive, you definitely want to be a white man. If you are non-executive, you definitely don't want to be a white man. Male executive directors get 1.34 percentage points higher vote than male non-executives, while female executive directors only get 0.24 % higher. Okay. Interesting, is this because again, there's a correlation between maybe the shareholders having a relationship with those executives or some of the executives are shareholders or? Well, again, didn't look at tenure, but all I know is that if you are a black executive director, that was the only cohort with a negative premium of the diversity that I looked at. Black men actually get 1.55 percentage points less votes than the non-executive black director. Right. Mm-hmm. Really? Well, this also could could suggest there's some correlation with this. glass ceiling effect when it comes to women and people of color where oftentimes these executives are, the only reason why they're even appointed is maybe they're being appointed at companies that are going through some kind of a crisis or they're looking for some kind of a big change and you know, so maybe investors are already a little upset at these companies or you know what I mean? So maybe they're getting a little extra level of scrutiny, who knows? I'm just throwing that out there. I mean, in the data, doesn't there's no suggestion, but that it's an it's an intuition which gets us to actual votes out because the fact is no one gets voted out. I'll spare you all the numbers. We don't have to go through it. I corrected for activists. I corrected for performance. I looked at everything. In fact, the if I look at just the worst of the worst for performance, if you voted performance, it would have suggested you would vote out. 5.4 % of directors would get voted out this and this this proxy season that's looking at underperformant bottom third performance for TSR and earnings and controversies these are controversial directors who make no money and get no shareholder return Right. And frankly, find that that number is almost kind of perfect to me because I've been advocating for, you should be refreshing your board annually anyway. And so 5 % vote out would suggest that maybe half the companies are struggling and half those companies could use some turnover, right? You could just... Find someone to add onto your board for a myriad of reasons, but anyway, keep going. But out of 11,500 director votes, there were only 12 vote-outs not related to an activist, one of whom was Jay Hogue. That is a .01 % vote-out rate. .01%. That's low. That's absurd. So are we saying that literally 99.99 % of directors are perfect at their, are great at their jobs, should keep their jobs? In fact, one of the things I looked at was vote gaps. Those were directors who were in the bottom third of performance, about 333 according to Freeflow Analytics data on TSR. And I looked at their vote getting. I wonder how many of those had to do with attendance. Yes. Yes. versus the average vote getting at the company. And the average vote gap was actually plus 1.3%, meaning the bottom directors got more votes on average, over 1 % more votes than the average director inside their own company. So you can underperform and not only is there no penalty, there's actually positive, like it's clear that no one is looking at it. And the most aggressively stupid version of that was at Harley Davidson where the vote gap was 15 % because there was so much effort and energy put in voting out directors that had nothing to do. You know, the flip-flopping DEI, the underperforming to the company, they didn't vote out directors that were underperforming directors. They targeted other directors. So the underperforming directors Yes. by virtue of the fact that they weren't targeted ended up getting 15 % more on average than at Harley Davidson. Which gets me to, and I'll end on this because it's already going to be the longest show ever. Well, it's a 2025 proxy season wrap up. It deserves a bit of tedium. My favorite topics and and things that we covered this year from a data perspective. First and foremost, I think the top the fit, my favorite thing that we covered was the idea of merit. We built an entire system to combat the talking point of the return to the meritocracy. We talked a lot about if you're going to say we're we're we're going to you know, we're not going to do D.I. We're going to do everything based on merit, then You should have a measurement for merit. What is merit? You should state it somewhere that it should be. There should be certain criteria. It doesn't have to be set in stone, but you should at least have guidelines for what merits a position on your board or as an executive of this company. We built it. Absolutely. Yeah. And that's up to each company, right? Because there is no standard set by the SEC or the listing exchanges. Yeah, there's no standard. So you absolutely should have set your own standard because otherwise what you've said is we are not going to bring in people who are people of color or women because they're people of color or women. We are going to bring in people that we choose with no criteria at all. Right. There's no criteria. So we built our own to test the theory. And what we found was less than 25 percent of U.S. directors actually have merit. Right. and the highest cohort with merit when we considered merit to be leadership experience. We considered it to be you could have an economic stake that would merit a board position. You could be connected to other board members that that's a reason to have somebody there that merits potentially a board position. Core industry knowledge or like you are just a genius like you have advanced degrees and like you're just a very, very smart person. Between those five items, you should be able to find, we said any three of those, that's an easy win on paper to get on a board, right? Easy win. But only 22 % of US directors even had that little, right? Like any three of those. And the highest group of merit was actually black women, was what we found. So DEI is not DEI, it is the meritocracy, right? Like that's merit. There you go. We did a whole show on that. have the data on that. We've been using it for a little while now. That's one of my favorite things we did. Another favorite, like a throwaway thing we did, we covered Lamb Research early in the season, back in October, and we looked at Director Pay. And one of my favorite things that happened this year is I spoke at a conference and I mentioned the fact that on a pro-rata basis, Directors effectively make as much as executives They're there any owes they just show up 12 times a year instead of every day That's how they get paid when you look at realized pay for directors because they get one year vesting on their grants it's very easy to make a lot of money if you just get market returns and you're a director and One of my favorite things that happened is somebody argued with me from the audience when I was saying The reality is directors get paid on a pro rata basis as much as NEOs do and they said that can't be right. Directors work a lot more than you're giving them credit for. And I thought to myself that's probably a director, right? that's, I mean like the fact that you make a lot of money and you do what, prep for meetings? I mean we know anecdotally that Yeah. And I've spoken to directors who have said they can't even get sort of meeting packages until the day before the meeting anyway. How much prep are you doing? You're going to show up in the meeting. You're going to talk. You're going to let the executives go over everything. they have its information asymmetry. They have the information. So you're getting paid like any of those. But that was almost a throwaway. And it was was fun because I got to argue at a conference while I was on stage. Somebody yelled out, that's not true. which is always great, I love that. Another big item we covered this year, nonprofit board interlocks. At Free Float, a lot of people have board interlocks. We actually got US nonprofit data over the last five years and mapped the trustees and the people on boards of nonprofits to for-profit boards. And we added, we had 100,000 loops between directors and we added another 36,000 loops between those directors. In 95 companies, we didn't know how directors were connected and we found loops through nonprofits. And in fact, the biggest jump was from CEOs and chairs who on average were about 4 % connected to their boards. They became 15 to 17 % connected to their boards on average just through nonprofits. So a big conversation about the feeder system that is nonprofit board seats that we don't pay that close attention to, but you're on the, you know, you're a trustee of the Philadelphia Philharmonic and you're going to galas that is a definite demonstrable feeder system on to corporate boards publicly traded corporate boards talk about merit there's no that that does not seem to be the place you know that's not a reason to add somebody because you both are on the Philharmonic board together We did a long conversation about lead independent directors and the lack of independence they have. Average tenure for lead independent directors, 15 years. Why are we pretending that these are independent directors? Lead independent directors are the longest tenured directors on average on the boards that they sit on. Your independence should actually be independent. If you want them to be lead independent director, don't just hire another insider. That doesn't make any sense. Mm-hmm. Right, especially when you consider that the reason why they usually have, one of the reasons why they usually have a lead independent director is that there's a CEO and there also might be an executive chair. So you already have two very powerful voices and you're gonna have a third person who's been sitting alongside them for so long. mean, it's not a recipe for independence. It's nonsense. Matt Moscardi (01:00:20.202) It's it's nonsense. It's nonsense. We did a big bid on CEO succession data. In fact, we we named a few of the the active directors with the most success, most transitions, as in they sat on boards where CEOs have come and gone. They've seen it happen the most. And then and we actually identified failures in transition, which would be things like the CEO leaves inside of three years. HZRallis (01:00:32.811) That's right, that's right. Yes. HZRallis (01:00:38.231) Mm-hmm. Matt Moscardi (01:00:47.064) There's accounting investigations inside of three years, all sorts of issues that could happen inside of three years of naming a new CEO. And the director with the most fails came from the icon family. That's, that's Carl icon, the activist investor, Brett icon had four transitions, all of which failed in one way or another. So we demonstrated that activists may be good at stirring the pot, but they're definitely not good at governing the pot. Like they don't choose succession. Well, HZRallis (01:00:47.084) Right. Matt Moscardi (01:01:16.686) And you already mentioned the plus 30s, which is adding directors inside of 30 days of the AGM completion It actually and you mentioned that it happens often on classified boards. It's actually happened 29 times It's happened one in the last five years. It's happened one day after the AGM three of those at Rockwell automation, which is insane and then I want to just end with my favorite company that I covered this year and HZRallis (01:01:36.236) Wow. HZRallis (01:01:45.101) Okay. Matt Moscardi (01:01:45.814) It's a company that most people don't know. It's called Parker-Hannafin. There are 25, when we covered it, were 25 connections between the directors in the last decade. 16 of them went through one company. Turns out that one company named Nordson is headquartered in Westlake, Ohio, which is a 45-minute drive away from the Parker-Hannafin headquarters. So these two companies are sharing more than a dozen director connections and that's a 45 minute drive between these the two companies. In fact, we found that four of the nine independent directors were less than 250 miles away from headquarters. And when we factor in where they went to college and where they graduate institutions, two thirds of the board lived a dry under 200 miles from Parker, Hannafin. It's basically just people who go to Starbucks together. The influence of directors just from Ohio was 40 % on the board. love doing that because it's so, it's one of those things that you never think of like, did everyone live in the same state and go to, you know, like where do they live? What are the communities they know? Talk about group think. They all come from one state in a 200 mile radius. I thought that was great. That's all I got. HZRallis (01:03:08.301) I'm not going to ask you if you have any more because that's that's more than plenty. That's our twenty twenty five proxy season wrap up. This is this has been and is proxy countdown. Join us again next week. Are we going to continue to this show weekly? But we'll be back. We'll be back and we'll we're going to put a lot of this information up and we'll and we'll share where we drop that later. That's it. That's all we got. Matt Moscardi (01:03:25.048) We're gonna take a couple weeks off, we'll come up with some new stuff. If there's anything to report, we'll come back.