Is Parker Hannifin the most parochial board ever? Also, Pfizer’s activist “defense” and Champions Oncology’s superstar

This is proxy count on, Welcome to The Big Show for the week of October 14th 2024 alongside my tag team partner. Matt muscari I'm Damian Ross and today's Countdown the Qualcomm boardroom smells a lot more like Hewlett-Packard an early Christmas at Motorola Solutions. Pfizer is playing defense with a man named Mortimer. A moral victory for Arjuna Capital at the Procter & Gamble annual meeting. And on the big boat, Matt waxes poetic about Parker Hannifin the company. You think you might have heard of it one point, I don't Maybe. Go to our top stories in the trade wire. The Qualcomm board has added Hewlett Packard Enterprise CFO, Marie Meyers? This is a positive development for fellow Qualcomm board member and Livermore who also comes from Hewlett-Packard go friends in the room. Finally, two Auto Zone directors are stepping down D, Brian Jordan and Anderson Grammys. This is a positive development for our very own map mascardi. Who suggested that Jordan be voted out at their last annual meeting the company we covered here. You want to Jordan out now we stepping down. F5 the company. F5 is increasing from F3 to F5, I'll let that one linger for a bit. The company name is that's confusing as two. Women are joined the board, Julie Gonzalez and Maya, McReynolds both of whom will join the audit committee. So now there will be five women, F3 to F, I got you, I got you, that's terrible, terrible, who's the writers fired them after just four months of board, 10 year. Actors singing bouchelle has decided to step down from the board of Cisco Systems. That's it. No way. No other information from the company. Maybe it's because the board at Cisco Systems is dominated by 89% male influence that comes from six men on their board. This includes a male CEO A male chair. A male lead director. A male audit committee, chair a male, compensation committee chair. And yes you can see where this is going. A male nomination, committee chair, shocked, even the chair of the environmental social and public policy committee is a man, the former CEO of the world's largest weapons. Manufacturer Wesley bush from Northrop Grumman. Can you believe that's just a troll? They're just trolling us. I mean, I don't blame back to if she's just like, I don't need this tokenism. Thank you very much. I'm actually a little surprised, it doesn't happen more often, because the directors are appointed Not Elected, and then they're elected later on, which means she probably didn't even hit an election inside of four months, right unusual. So, that means she could have signed up gotten a slight golden. Hello, like some sort of options package and maybe there was like a signing bonus and she takes the signing bonus and quits before an election. compensation committee at Motorola Solutions as announced an early Christmas for all employees named chief Okay, that's a chief executive officer and Cherry Gregory Brown his Equity Grant will now include an extra five million dollars also special retention, grants valued at 12 million dollars. Each will be given to Chief Financial Officer. Jason Winkler Chief Operating Officer, John, Malloy and chief technology officer Mahesh saptarishi. That's, that's a lot of money. That's what am I there? Hanging out special Equity? Grant. I don't know how it's possible. I don't know that. Just keep happening. Yeah, that's that means you're, you're policy, right? Your PayPal policy reading is sucks. It's poor. What, I mean, there isn't a policy because you can just hand them extra money whenever you feel like it. And lastly Mortimer, J, Buckley, that's a great name. Is joining the board of Pfizer, that's from Trading Places, right? That's that guy Mortimer is the former CEO of the Vanguard group, right? Matt not to be confused with Mortimer Duke. Ah, one of the two controlling founders of Duke and Duke Commodities Brokers alongside his brother Randolph Duke. That's why I screwed it up. Yeah, according to one report Randolph and Mortimer, Duke are both greedy, ruthless and dishonest, and both believe that their wealth and social status entitles them to do, whatever they want with no consequences that, that's not to be confused with more Buckley. I don't want any difference and I've glad you're not drawing any sort of inference. Let's move over to our proxy cage matches and stick with Pfizer, because as I just announced, Pfizer is playing a bit of Defense. And its ongoing battle with activist investors starboard value by adding. Mortar or Buckley to the board. So Tim as they call them is the former CEO of Vanguard Pfizer's biggest investor with 9% of voting power. Buckley's announcement was announced one day before Pfizer and starboard value are scheduled to meet and you know yell about stuff and argue and all that works. Yeah about stuff. Don't forget, Matt. It was just last week that starboard accused Pfizer of threatening litigation against two Renegade, former Executives, former CEO Ian Reed and former CFO Frank d'amelio that initially were supportive. Of of starboard value. But then they changed their mind and decided to support. Pfizer like actually fight, good fight going on. It's fascinating fight. It's going to keep going, but I'm mostly disappointed that Mortimer Buckley more Tim Murray. Tim, I had spent some time looking at that to figure out how that's the most disappointing part. Yeah. activist investor Blue Bell, Capital Partners has called for BP chair, Helga loans, just quit Blue Bell, co-founders Giuseppe. Bavona and Marco Tirico. Described BP their recent performance as unacceptably, Dyer and embarrassing, voicing particular concerns about the lack of clarity from leadership around its long-term approach to fossil fuel. So that's really what this is about. Bluebell wants BP to be more fossil fuel hungry, like shell and Exxon Mobil last week, though, Reuters claimed that BP has abandoned. Its Target to cut oil and gas out by 40% by 2030. And in June, don't forget, CEO Murray. Ocean Clause of BP, pause all Recruitment and new projects and its renewable division. So I don't really don't really know why Blue Bell is so upset here they're calling the lack of clarity indefensible and utterly outrageous. So this is one of the most hyperbolic activist investor fights. We've seen in a while in defense of utterly outrageous. Embarrassing, unacceptably, Dyer. They're really coming out with some good strong language there. At least they're using, A lot of adjectives BP's flip-flopped already. Yeah. Already a flip flops. What are we complaining about? And lastly, activist investor Palace Circle. I haven't heard for that one. They are pushing for change at AI, chip, investor skates Square. They want more board members with asset management experience. I don't know why anyone would want that and they want to tie executive pay to company performance. I I'm surprised it's not already but anyway that's what's happening over there SK square. If you're an investor and you own SK Square. Why would you vote for more asset management experience on that board? I don't ask a square one. Yeah they are awesome manager. I suppose let's move over to our vote results table. Not a lot going on quiet time of year. The winner of the week is Champions. Oncology director Scott Tobin. Who received the support of 99.99% shares at the last, I don't think I've ever seen a total. So high, a bunch of, I will say a bunch of those votes. Came from Tobin, who was himself, who controls 18% of voting power. But in case you were keeping score, it was roughly 9.2 million vote for Tobin and only 58 and 5800 and put this at this love into perspective. There were actually Four directors who received over 10% no votes. So they really do love Tobin. They love this guy. It 508 the market? Cap of the company is 61 million. Yeah. Like, which means you can buy for four dollars and fifty cents to shares right now, right? So, if you were that 508 shares is 2,200 to 2300 dollars worth of stock, that's like a guy in Poughkeepsie. Yeah, who just doesn't like, I know it's like his, it's, like, Scott Tobin's, neighbor, who's really pissed about, like the tree Shadows before I move on, is this not the greatest company named Champions oncology? That's a good name, right? You've ever seen those two words together. And all I got, I got a shout them out and they had the wonderfully candid board diversity Matrix in their proxy. It is a big, big diversity, Matrix boarding, things, like, You know whether the directors are black Alaskan, all the good stuff alright lgbtq and it's just a wonderful board where there's just a seven under mail. White male directors that's it. Nothing else. It doesn't say white. Oh that's true but it doesn't say anything else. I just says there are seven men on the board. There's right. They say they did not just close their demographic background. Meanwhile you go to their website and you look at them and they're all white. They just didn't say that they're white, I just love the chart because there's a lot of blank space on this chart, it. I like the inefficient use of space. That's one of my favorite things. There are some pissed off shareholders at Bayou Nexus Gene, Lab Corp about 60% saying no For CEO and acting CFO and directors, suing 10, Lee. Also, the chair of the compensation committee who's also the chair of the nomination, committee Muhammad, Azul bin, Abdul Hamid, and the chair of the audit committee. Chiang Yap, all basically being voted out all the, I don't know what they're voting. Paul says, I don't know if they're actually going to leave. Sure holders are clearly pissed off about the company, stock price, which is currently 38 cents. So I get it. And finally, let's move on to our two large cap companies that had annual meetings this past week. At RPM International. Here's an old school vote. The company needed at least 80% of outstanding shares to vote. Yes to require the annual election of directors, right? They got 80.2%, they did it. I mean, think of how that champagne soaked celebration was, that's just an incredible victory at RPM International. And finally at the Procter & Gamble company assure her proposal from Arjuna capital, Requesting report on both quantitative median and adjusted pay gaps across race and gender receive the support of 30% of sure Elders. Again, another moral Victory here, considering Vanguard and BlackRock control more than 16% of the vote. Remember, I I stated earlier one of these shows that there is a data point that most International corporate governance, research firms has determined means effective control of the company. If someone if an entity owns 30% of shares that is effectively, a controlled company means they effectively control the company. I think it should be the same for sure. They're proposals. If they get to this 30% threshold, That Should Be an Effective effective. Yes, both that's my bizarre. I like your bizarre democracy. Why not live inside? Yeah, all right. Let's move over to the big vote. This week recovering a company called Parker Hannifin, Matt their annual meeting is coming up next week, October 23rd. I don't even know, I don't know what to say here. This is a company that's that's so Boring. So middle of the road, I don't really even have. I usually I have a bit of an introduction for you to hand off. I don't have much to say I'm just gonna hand it off. How about that? Okay all right that sets me up nicely. This is one of the few companies that can sneak up on you with the fact that it's an 82 billion dollar company, that's why we picked it. We always pick large, cap companies to cover 18 million. 82 billion is a lot of money for a company that you probably don't know who they are and or care about them at all. 64% of their sales are Us sales, 36% nine us, 10% of the revenue is from defense contracts. So what they make are industrial Parts. They make like Hydraulics and they make like sensors and they make like, you know, the parts inside of stuff that actually do something. In fact, the CEO a woman named Jen parmentier. Yeah, I assume she says it with a French accent, chair and CEO. 19% of board influence. Rare when you see a female chair and CEO combo, they usually, let's turn allowed to have the chair, but good for her. Her sexy background includes she worked in the motion systems group. She worked in engineered material group. The instrumentation group hose products division, and the fluid connectors grew, like she's a lifer. These are well, she's worked in a couple different places. Do in groups inside those organizations in these groups. There's this whole there is an sort of incredibly unsexy Industry of Parts manufacturers that are largely in the Midwest of the United States, or headquartered there that do you like the hoses? That connect two things together or like, the, the grease that, you know, are hydraulic press? Like, those kind of things, right? Those necessary things. This is one of those companies where the stock is just gone up, it trades, like a almost like a commodity, but the commodity is just like industrial parts. So it's linked to other Industries in some way, the whole game is diversity and buyers because you don't want to just sell entirely to like Caterpillar and then have ago, you know, down the drain and you don't have any buyers, right? They in classic American companies style, they went out and hired Consultants to come up with a strategy that they trade marked called the wind strategy which sets out a few goals strategy. Yeah, you know winning is great. One of their goals is and this is A Verbatim goal its goals. Environmental social and governance. That's a goal. That's it. It doesn't say anything about. That's one of our goals here. It just says that. Yeah. And they subscribe to Kaizen, which is a Japanese incremental Improvement theory of business. It is literally like textbook a bunch of people make hydraulic presses every once in a while. Someone comes in and says we need a new strategy. Hire McKinsey have them put together a deck for us with a Japanese, you know, philosophy attached to it. That we can trade mark. This is not a unionized company and there's Rumblings about unionization. Oh, but the company is literally so boring as to be utterly, deceiving as Fortune, 250 S&P 500 company that you've never heard of. Okay. Yeah, that's the backdrop for these people. Yeah, and I will say unusually for a company of this size. It is, as you said, there's quite a bit of female power on this company. They have a positive female power Gap. Yes, rare of 8% meaning that 45% of the board is women. In 53 percent of influence is held by the women, so it is rare. Um, but like most Midwest Mafia companies or these mature, classic America middle of the country headquartered companies. It is the board members on this company are no different in their sort of local parochial nature and that is effectively all the. When I look at like the high level that's 50/50 male female. There is a positive female power Gap, it's 20% racially diverse, the knowledge spans things that you'd expect mechanical building construction economics. This is medicine, you know, backgrounds on the board the even their own self. Disclose skills Matrix, which I put in our notes. There are they they list. Company leadership, corporate strategy, Risk Management, International experience, manufacturing technology. Like they have like 10 things. Only two people don't have all 10. Oh and they're only missing like like Linda Hardy is missing two things. She doesn't have Innovation or sales experience. And Lobo is missing. One thing he didn't work in Aerospace. That's it. Everybody else has everything else. They didn't even bother to try to differentiate these directors. There are a bunch of long tenured directors but it's a literal snoozefest. When I got done, I was like half asleep. I've tried to make this interesting. And this is when I have to make everything. Interesting. Well, this is when I started digging into who they actually are. Okay. The company's nominating policy for the board is they will review at least annually, the board for skills qualifications experience and an assessment of judgment skill and integrity Independence, conflicts of interest business and organizational experience and then oversight abilities, among other factors that the board deems relevant, this is very standard and boilerplate. Yeah. What I realized was 70% of the board. Sits on the nominating committee almost the entire board is on the nominating committee and knows that The talent pool, that that you'd think with a board where you have 10 people on the board and seven of them run the nominee committee. That they could they'd have a long wide Talent reach right? Like they'd be going all over the world for the best talent. the reality is, they haven't gone more than a couple hundred miles and I mean, that literally 25 of the connections between directors in the last decade 16 of them. Go through one company nordson, okay? Nordson like mostly, this is these are X directors. Now but the currency CEO is connected to Laura Thompson, who's on the board through nordson nordson headquarters are in Westlake Ohio. Parker Hannifin headquarters are in Cleveland Ohio. This is a 42 minute drive. That's right, that's that's right next door. Yeah. In fact, 100% of the directors on the board are less than a two-hour flight from headquarters, 100%. The farthest by miles are Linda Hardy, and Lance Fritz. Fritz is a client. He basically, he was on a train. He worked at a train company and they a lot of their buyers are trained companies and Hardy is long tenured and highly connected to everybody else. Four of the nine independent directors are inside of 250, miles of the headquarters. You know, it's it's funny you mentioned this because one of the one of the notes I took was that for all the companies we look at the thing that stuck out to me was that there are a lot of what I call lifer directors life for meaning that these are Executives that come from companies and that's the only job they've had that, right? That's it. They don't have disparate backgrounds. They just have this very like normal Midwestern. Like this is where I come from. This is where I've always been. I started here in 1985 for 40 years, a full 70%, 7 out of 10 directions, so much that I even had to make a note of this because I don't think I've ever seen that before. It's so it's, it does strike me as interesting what you're saying. Like, there's something very risk-averse about this group, I don't know if that's the right. Amazing part about it is not only are their life first at their companies, but I mapped all those companies and where they were. And then I went took the extra step of saying, well, where did they all go to college? Where did they get degrees undergrad? And where did they get graduate degrees, if they have them? in fact, when I use Whichever all the institutions that they went to in their careers and map all the headquarters or the locations of the universities. If I use the shortest distance to Parker Hannifin headquarters, yep. For our 66% of the directors, want fully 2/3 of the board. Have lived learned or worked, 250 miles away from Parker. Okay, half of them are under 200 miles, that's a Drive. That's, that's like a two and a half hour. Drive the influence of directors University of thinking lived and worked in just Ohio is 40% on the board. Just Ohio. Remember, this is a company that we're fully a third of their business is international. 10% of their business is defense, Contracting. What are we doing? Is there not? I I looked at the what they listed as peers, they list peers and in their pay, right. Like who's his peers? There are actually 175 active directors. At those peers, many of whom have backgrounds more than 200 miles from like, Parker Hannifin headquarters. None of them were available, just sit on your board, not one. It the level of local parochial Insanity on this board, which would be a nothing Burger Company. Otherwise, but this is an 80 billion dollar company. Yeah. It is just a nothing company. Something tells me. They like they like the lighting low. They like it quiet. Right. Maybe there's some white white noise in the background. No. Sudden movements, right? Everything's very calm. I mean, these are all people whose kids could have sensibly, go to the same private schools because they're not that far away from each other. That is not what you want when it comes to an independent assessment of the long-term strategy of a company and 80 billion dollar Investment Company. You think the talent pool could expand Beyond 200 miles of headquarters? I literally think they have one guy who's just driving around from Starbucks to Starbucks being like, have you ever worked at an international company? We can add you to our board and it's whatever the radius. He's willing to drive, it is 200 miles. So here are my well, you might have been talking about, you might be talking about James wainscot, he's the lead director and the nomination committee chair and and I think well he's one of the most long tenure directors. He's been there for at least 15 years. 15 years. Yeah. He might be the architect. And not only that, he's an Excel CEO. And his company was 100 miles away from Parker Hannifin. So that's perfect right in the middle, right? It's literally, he's, it's, it might be him driving 100 miles in any direction, just a circle, and saying, who's inside this circle, that I can just put on the board. So, here are my recommendations vote against Comanche, he's retiring, he's got to retire. He hits the mandatory retirement age. Anyway, he's got duplicative skills to everybody else according to own disclosure. He's he's one of the people inside the 250 mile bubble. Basically, what I'm going to say is the longest tenured directors, inside the 200 mile bubble, sure. Get rid of them, like, you don't need like, Wayne Scott, who's not independent after 15 years. He's been there for 15 years. You could do better than Wayne Scott and you can look outside 100 miles away. Like, he's in West Chester, Ohio. I literally think they probably he's meeting people at the local Walgreens to add them to the board. And vote against Laura Thompson. She's actually never left Akron Ohio. She got it. I'm she probably vacationed in Aruba once, but her undergrad degree is from Akron University, her graduate degrees from Akron University. She started working at Goodyear, which is based in order in Akron, right? Yeah, it's had not only did she start at Goodyear in Akron, her father and grandfather worked at Goodyear in Akron. I'm gonna guess her favorite basketball player would be LeBron James, right? He's from, there's no, there's no right? There's no contest, no contest. She actually. Is has never been more than 30 miles from Parker headquarters. Yeah. Okay. Why go where are you going? Why is she an? And she has a connection to the CEO of parliament here through nordson. She's the one that connects. Why are we doing this, why? I mean, I'm sure you can find somebody usual with an accounting background who's got skills, who even worked at Goodyear that didn't live their entire lives. 30 minutes from where your headquarters are. I, I just applaud you for making Parker Hannah from memorable because I'm gonna, because this is remarkable honestly. If we ever really come across this before, I've never seen it, we've done. We've talked about, like, like red States, like, conservative, like bigger bubbles, right? But we're now talking about in Ohio, like that, that's of life for directors, who don't who don't take other jobs. So those are my recommendations for the board. Let's get out of the idea that an 80 billion dollar company should be run by people who live 30 minutes away from each other. Anything else you want to Cover, before we wrap up. They have a, I don't think they have a show. No show. Of course they have no shareholder proposals, right? Does that surprise that? There's no drama in the boardroom. I don't know if you want to add anything about say on pay or the auditor vote. I'm assuming I only picked one thing out on sandpaper, you pointed out that they changed the L tip awards from. So the as is common practice. Now the L tip pays out 50%, if you fall below a certain threshold meaning like you could be the worst company in your entire industry and you'd still get 50% of your bonus, right? Yeah. I guess just for existing, you still get the bonus. So you pointed out that they actually went from 35% tile. So, if you fall below the 35th percentile, you get 50% to 25% tricky to tricky the little change there. Yeah that not only is that a tricky little change but they were holding them to a slightly higher standard before and they lowered the standard they get they get more pay now for being between the 35th and 25th percentile, which, What are we doing? They and they there's it's so little tricky that they actually you pointed out that they mentioned Mercer, the consultant who presented this to them. To be in line with best practice. Yeah. Meaning that compensation committee is not coming up with this on their own, as we want to have a higher standard at Parker hanafin. They are saying, well, Mercer said, everyone else makes it easier for their Executives to make that everyone else get paid for failure. So we will too, so pay for failure. Yeah, just The the chutzpah for people who live, 20 minutes away from each other, to basically lower the bar as much as possible. The lowest common denominator I'm voting against pay. Yeah. I mean, I pointed it out in my notes because just be happy with with the 35th percentile. There you still suck, don't worry, don't bad there. What are we doing here? All right, that's that's it. That's Parker, Henner for. I'm one of my new favorite companies because it just for being oddballs, right? I and I, I look forward to seeing I now look forward to see who their next directors, they add because they do have a mandatory retirement policy, which means that it's not like these directors of all sat here forever, they do keep adding directors. Yeah, so let's just see if this trend continues. And again, this cross is gender lines because five of The Seven, Last directors appointed at Parker and I've been women. So there, they're finding men and women who fall into this strange. In. Category. Right? So I, I really excited for them to rename like, the Cavaliers like Arena, the Parker hanafin Arena and they, they can all drive to the games together because that's how close they are. All right. That's it. That's the proxy countdown for the week of October 14th 2024. Join us next week, when we jump back into the alternative democracy pool Forever on the lookout for shareholder, sharks floating Band-Aids and Wayward directors.