Transcript
And this is proxy countdown. Welcome to the Big Show for the week of May 19th. 2024, I'm Matt mascardi filling in for Damien. Rolis on today's countdown, a mysterious CEO departure that respects quote individuals privacy. Pension fund that isn't holding back at Exxon. Meanwhile investors are holding back at Boeing. And on the big vote a strategy for dealing with dual class companies like meta. Kick it off with the trade wire on May 18th. Kenneth Wilson cease to serve as chief executive officer and director of jabil Inc. Following the completion of an announced internal investigation related to corporate policies as spokesperson for the company said, in an email that quote. In order to respect the privacy and confidentiality of the individuals involved, we will not be speaking about the details of the investigation or the results. Wilson had to enter into an agreement with jabil that subjected him to a two-year non-compete ongoing obligation to cooperate, and make himself reasonably available to jabil, a non-disparagement confidentiality non-disclosure requirement, and a requirement to assist stability, in the event of certain legal proceedings. And for violating, what clearly is the investigation of the corporate policy. He will need to be available for those legal proceedings and to build decided that it would be nice if he got a payment of 2 million dollars. Less taxes in eight quarterly installments of 250,000 each and he gets to retain his long-term incentive Awards vesting in 2024. So not clear what's actually happening here at Jubilee. There's been no disclosure around it, but clearly they're anticipating some sort of legal proceeding. It, corporate policies. It happened. All the sudden there's been a shift, the board now has been reduced to 9 people and will stay that way for the media, future and jabil has to keep quiet to get his 2 million and his vested options. Otherwise, those are claw backable. In other news, Vanguard named former Black Rock executive as CEO, Salim ramji, who led black rocks ETF business. Left in January is named the CEO of Vanguard Here's the question. Does that mean we can likely expect a proxy votes at Vanguard to mirror? Blackrocks. And the open question, then is if all the executives that these passive managers are traded to each other? Should we just expect you to votes? Did we at a sensibly? Achieve you think in voting? That's we'll find out soon enough. But that is the news from the trade wire. Let's move on to our proxy cage matches. Two things to talk about here today. The I think the big one here is Calpers Calpers. The California pension fund. Announced that it will vote against all 12 Exxon, directors, citing the lawsuit that Exxon filed against Arjuna capital and follow this. They said in a letter to their members that any the legal action that Exxon has taken, quote, could diminish the role and the rights of every investor and improving a company's bottom line. The shareholder meeting we covered Exxon here on proxy countdown last week, with some recommendations, you have to hand it to Calpers. They went all in. They are, they are set to vote against every single director that in the meeting next week, a week from today. So kudos to them for that. It's not exactly a proxy cage match but it's close enough. And our Second Story Tesla's chair had this to say about the wealth that she gained. And from being on Tesla's board, she says, life-changing wealth has boosted her independence and blasted the judges critique of the board and their quote lackadaisical oversight. She did say she had to look up what the term lackadaisical meant. But once she figured out what it meant and she she said, I am definitely not that thing. But the facts here is she's calling that, that the board being too close to musk is quote, absolute BS. And that the role of the chair is to make sure the board has a good relationship with the CEO and the executive team, where their quote, where they're on behalf of shareholders to make sure that management is doing their job. And their job is primarily to grow shareholder value over time. So interesting that basically the this is the board fighting back and saying they are independent, forget what a Delaware judge says, forget what the data suggests, how intertwined they are, they are all about shareholder value. Not about individual value despite the fact that they are all incredibly wealthy as a result of being on this board and access to musk, even if not directly through Tesla's, share price. So those are two stories in the proxy cage match. Its move over quickly to our vote results table focusing, just on the large cap, the largest cap are what? We call league, three and four. The big story here is Boeing Dave. Calhoun elected to the board. 23% said, no David Joyce. Actually got a higher percentage of no votes 34% said, no to David Joyce, who is the head of the Safety Committee. He joined the Than 2020, the vote doesn't make much sense, given that these issues far predate, David Joyce, these issues date back to 2011, and long-standing supply chain issues, and a willingness to cut Corners by the management team. Calhoun also has say on pay, he got a 45% raise in, pay that passed 38% said. No, and included. In that pay package is actually 45 million dollars of potential money compensation after he leaves, should the share price increase by 37% 5. Million of that is immediately vested upon him. Leaving his planned. Departure date is later. This year sometime in the fall absurdly. High votes 4 at a couple of companies DraftKings which is a dual-class company but still 99.91%. Yes, on Paul. Liberman 99.91%. Yes, on Matthew kalish 99.9%. Yes, on Josh and more question is, somebody should need to ask Jocelyn Moore, why she got 01 percent less than the other two ninety, nine point nine one for the two dudes, 99.90 for Jocelyn Moore. What is that? Who's the point zero? One percent who said Jocelyn is not as good? At AIG American International Group, John Inglis. 99.6%. Yes, despite hitting a whopping 132 TSR when we look at TSR, when we ascribe we do direct your performance attribution, we are looking across all the boards that they're on. And we compare it to sector and size peers, which means English is batting 132. He is in the bottom 15th percentile. He's a 13th percentile effectively for TSR still gets a 99.6%. Yes, vote. A couple of notes on say, on pay over 20%. No votes. 3M. Failed sampay, 55%, no Black Rock got a 41%, no Travelers companies. 40% know, egg 36% know, Cleveland Cliffs, 26% and phase energy 25%. In fact, it end phase. There was one director who got in the last week who got a 20% or more, no vote against them individually and that was Joseph malchow. There are a couple other big no votes for directors, all of them passed. I think the biggest tier is Alexandria real estate, equities 43% know for James Cain, but every one of them still re-elected. So, even when investors are angry that it's hard to muster enough anger, to actually boot a director off the board. Traction on simple majority voting continues kanoko fill ups passed with 99% yes for simple majority. Voting and akame Technologies passed 91%. Yes we're seeing this trend, simple. Majority voting seems to be a focus of shareholders this year. Continued support for simple majority shareholder. Proposals one, odd vote to go over here at skyworks Solutions. despite receiving about 99% support from shareholders, Because they needed a vote of 80% of the shares outstanding, all in, 90% of shares outstanding for proposal 5, all the shareholder proposals did not pass. They could not get enough shareholders in the room and this is the problem with these supermajority shareholder, vote requirements to change by laws. They did not, I mean shareholders did not approve even though they did. They did not approve an amendment to the restated certificate of incorporation to eliminate supermajority vote. Provisions, for mergers, and consolidations the same thing for our business combinations, the same things for stockholder amendments to the Charter, governing directors. The same thing for amendments to the Charter governing actions by stockholders. So skyworks Solutions, despite the fact that a massive amount of Support comes in for those shareholders that did vote because they couldn't pass the share outstanding, minimum set by the the company that they're these things. Do not end up passing. So another weird Quirk of these markets Let's get on to the big vote. Today's big vote, we are talking about meta. Platforms, but I'm going to talk about something else first. Here's where we're gonna get philosophical, meta, is the encapsulation of a long-standing governance problem? Which is how if you are an investor? Do you deal with a totalitarian board? These are dual-class dictatorships. They're fake public companies. And investors tolerate, these boards largely when they IPO do to fomo, or fear of what they think might be losing key talent in a company founder. Usually, these are structured. So that the founders and oftentimes VCS who funded the founders, they benefit largely from the IPO and the ongoing company. It is a way for a company to be public, but also private because they retain voting control. In our minds, this is actually, there's a, there's a, the risk assessment here. It's an asymmetric trade investors, lose this asymmetric trade every single time because either Italian, I mean, the totalitarian companies by giving dual class shares, it's not really about keeping a Founder along for the ride. They're not going anywhere. It really. This is about choosing a set of people for the founder to keep control of the company. Not just the founder themselves. Often, it removes guardrails. You have. The Kabuki theater of a board who is hand chosen by the founder. And you can choose your friends and you can basically enrich your friends and keep them closed without actually having any guardrails on the company because you have the control of the company. If you're the that dual class holder We are a couple of dual classes or the founder that controls the company and the likelihood that a Founder would actually leave. If not granted dual class shares is near zero. In fact, we know this because the market is functionally, functionally totalitarian already, the average 4 vote for directors, 96%. We, we just talked about it. Only 0.2% of directors are voted out and the annual basis. In fact, the argument for totalitarianism, including at meta has largely rested on the idea that we need time. We want to take a long-term perspective. We need to be able to underperform so that we can scale growth later and dominate later that argument doesn't actually hold water. When you look at how investors vote average vote in favor of directors, in the bottom 10% of earnings or TSR, this is the average vote for directors. Who underperform in the bottom. 10% is 95.6 and 96.5% respectively, meaning. Directors, for the worst of the worst vote them in at an over 95% rate. In fact, the top 10% of earners and TSR get exactly the same votes 95.9% or 98% respectively. Meaning, there is no difference between the bottom performers and the top performers when it comes to how investors vote. So, the argument that we need to focus on the long term, given the fact that investors give every director every person at these companies, the long-term already. Doesn't hold water. Only one director last year at us, large cap companies was voted out who performed in the bottom 10% of TSR. Two directors were voted out and they performed above the 50th percentile in TSR or ebita. So the it doesn't hold any water. You don't need dual-class shares and order to focus on the long term because the directors and the people in charge, almost never get voted out. Dave Calhoun has proven that you can take a company over a decade and you will still maintain your board seat. If you're the CEO, even if you're not the founder. So management chooses their own boards. Without resistance from investors, you are functionally totalitarian already. And this is you can see are we just talked about Tesla? You can see this given the fact that elon's brother and best friends have been on this board and up until a court voided his Paypal package. No one said. Anything about the fact that they were on the board? They it's a functional totalitarian even though it's one share one vote by virtue of the influence exerted by Elon both on investors and on the board itself. It's functionally totalitarian dictatorship as it is. So I don't know that we should an investor should be okay with the Dual class situation given that the founders already enjoyed dictatorships by virtue of being Founders and CEOs and the votes that they get, they already basically have complete control. Why as an investor, would anyone be okay with giving them actual control and eliminating any possibility in the future? That that An investor can change anything. So, let's talk about meta specifically, let's size the problem. Of what our totalitarian boards because I'm talking about the idea of a totalitarian board, but let's size the problem. We Define a totalitarian board as a board where a single person or a set of family or Founders own more than 50% of the influence. At that board, they can own that influence via shareholdings VIA dual dual class share structures Legacy shares from from a family, long time, founder status, there are a lot of ways you can do it, it can be at a one share, one vote company, which is the case at Amazon where you have the executive chair ship of Jeff Bezos. It can be the case at Tesla, where the founder has chosen the entire board. His brothers on the board and it's even though it's one share, one vote, it's a classified board. He owns the vast block of shares or it could be like it is at Metta, where you have Zuckerberg, who has less economic interest in others, in the, in meta. But, 51% control, that is the case at, you know, snap it is the case at Modify there are a number of companies that use this to maintain control despite the fact that they don't have an economic interest. If you size the problem, if that is what we're calling totalitarian for the purposes of this conversation. There are 610 us large cap boards that we looked at 145 of them are totalitarian 24% of the US market is basically controlled. In fact, there are 1400 just under 1500 directors on these totalitarian boards. 2002 of those directors are on multiple totalitarian boards. These are basically shareholder. Oligarchs the number of the largest of which is Greg Buffet, he's on six, mostly family firms or family, run firms. And then there's rule of Botha who he is on Coastal. He's a VC, he's on five totalitarian boards. These are people who go from board to board and their job is effectively to hold up the dictator because they are chosen or they have shareholdings in dictatorships. So considering a 24% of us, large cap, investors portfolios would be totalitarian. They have seeded rights in influence over their own Capital stewards at these companies. I think there's a solution for this and it's not necessarily easy, it might be uncomfortable but let's look at it from meta and that's how we're gonna approach meta. Assuming that directors are still humans with incentives, which they are. even if They're on a totalitarian board where you can't your vote, largely doesn't matter and this is the hard thing to parse, like, how do you approach meta? When you know that Zuckerberg owns 51% of the vote? Those directors, sitting on the boards, many of them. Most of them, in fact, 1200 of them, sit on other boards, they have careers and they sit on other boards. Our philosophy here will be with the goal of persuading, a director to Sunset dual class shares or seed, more control to shareholders to basically stand up to dictators, where there's one share, one vote or to Sunset dual class where there isn't one share one vote. We think you can engage directors, not on the companies where they're is a dictator. But on the companies where there isn't meaning use your vote on other boards to influence the makeup of a board like meta so met his case. That is board is 11, people, strong of which there are seven directors who sit on other boards. Four of those directors sitting on multiple. Dictator boards, Drew Houston is dictator at Dropbox and he's sitting on Meadows board. Haktan a dictator at broadcom sitting on meta's board Marc Andreessen, he's on two other dictator boards and he is getting there by being a VC. He's on the boards of coinbase and samsara and, and all and meta. So all dictator boards and Tony Shu of doordash. He's a dictator at doordash and he gets to sit on the meta board. This is a huge problem because dictators reinforced dictators, they don't provide guard rails. Marc Andreessen job is not to give guardrails to Mark, Zuckerberg. It is telling him to Blitzkrieg. The implications later. There's an argument to be made here that you could go through every one of these boards. Coinbase, samsara doordash a broadcom. Dropbox, and Cascade votes against directors, who sit on other boards through those boards. But let's just focus on meta for now. if four of the directors are off-limits because they are sitting on board, only boards full of dictators, at least of three pressure points at meta. Tracy Travis who sits on the Accenture board. Nancy killefer, who sits on the Cardinal Health Board, she's also on certara, but that's basically a dictator and Peggy Alford. Who's on the mace Rich board. Now, it's likely not a coincidence. That these three are the only three women on The Meta board, who didn't work at meta Sheryl, Sandberg still on the meta board. Basically is meta, right? So, these are the three quote, unquote, independent board members, who are On other boards and have other considerations, I don't like it anymore than anyone else will. Here, you have to pressure the women and vote against potentially vote again, engage in vote against women on other boards. Because they're already is a problem, getting women on boards and in positions of power. But this is how power gets Consolidated, right? So, let's go one by one. Peggy Alford. She's ex-microsoft board. In fact, I work it's reasonable to assume Gates is a mentor to Zuckerberg and that's well known Alfred was on the Microsoft board. There's likely a direct connection from gates to Alfred on The Meta board, right? She's been a meta-director since 2019. Overall she bets 490 on TSR 490. So, middle of the pack, she has a negative 959 million cap value. Add not great there, but she's been on mace's board since 2018. She has six percent of the influence may switch. Has its own problems. Rick Hernandez, Enrique Hernandez is a poster child aboard failure sitting on the mace Rich board. Rick and his was at Wells, Fargo, Chevron McDonald's. There's Chicago links, Alfred has there is it is Not reasonable, is the wrong word. It is uncomfortable, but I think there's a protest to be had here, not at meta, but at mace rich with Peggy Alfred Nancy killefer High influence outside of meta. I'll actually a really poor Ibotta performer. She's on the board of cardinal health, herbet of performance overall is 183 535 for TSR. She's been on the board of Cardinal Health since 2015. She's the paid chair there and Tracy Travis who actually might be the most compromised of the potential targets. Travis said on the Campbell Soup board which is another dictatorship with Sarah Matthew who sits on dropboxes board. So basically it's like an oligarch Loop, we have with director, dictator enablers. She also has links to Robert Kimmitt. Who's on this board, it was on Lufthansa at one point, but not anymore through Accenture and that's where Tracey Travis can be sort of targeted at the Accenture board. She is the lowest TSR performance of the trio and a batting average for controversies of zero, two four, it's horrible. She's been on the Accenture board since 2017 and medicine's 2020, here are my recommend We're going to wrap the show with these recommendations. I think there's a protest vote, that's easy. If you are a meta shareholder, you vote against all directors simply because you didn't get to choose them. And I think you vote for every shareholder proposal including there is a genius, shareholder proposal from the Illinois State Treasurer looking for vote Disclosure by share class. This is effectively saying how did Mark Vaught Because Mark obviously is voting for everything, but let's make it. Let's let's not speculate, let's not speculate where the 10 to 1. Final vote tallies came from, tell us how Mark voted and how everyone else voted. That is really smart. Because then, you know, shareholders are upset with how meta's Board gets chosen. They want change at meta in terms of their rights at meta, but you can't see that because when you disclose the final vote, You're simply saying that it was four and the vast majority of the votes were, you know, in favor. Meanwhile, the vast majority of those votes are Mark Zuckerberg so this is a great shareholder. Proposal vote for it. The proposal for a one share, one vote structure is up again. Your vote for that, even the national legal policy Center, which is in anti-woke anti-esg. Play is asking for a report on the minimum age of social media being 12 years old, vote for him. All vote for that one, too. and I think from a director standpoint, the action here is to engage and vote in other elections. In fact, on May 30th next week. Peggy. Alfred comes up for another board for re-election. not at meta, but at mace rich, There is the opportunity here to vote against Peggy. Alfred at mace Rich, aiming for sub. 90%, I don't think you should kick her off Mason's or just bored because she's on meta's board. That's not what I'm suggesting. But I think the conference station needs to get set needs to get started where, what we want at the other boards that you're on, where there are dictators in place is sunsetting those dictatorships, that could start with an abstention with Peggy Alfred at mace rich. Meanwhile, you can engage with the Nancy kill for a cardinal with a threat of an abstention, in November of this year, at the Cardinal, Health AGM and engage with Tracy. Travis going into the Accenture vote in 2025 all of which the looming threat of abstention into votes against. Should you not begin the process? Or at least the conversation of sunsetting dual class shares that Zuckerberg holds. The fact is Mark Zuckerberg holds way too much power. It's a, it's a social media monopolies and it's resulted in a myriad of academics studies. Linking it to teen depression, the contravention of democracy, all sorts of issues and he just cut funding to his fake oversight board already. He the oversight board which is supposed to be his Supreme Court that was paid for by its. You know, it's it's like if you paid for your own Supreme Court, who were they going to vote for? But still even the optic. Of having oversight, our steadily being eroded at a place like meta. This is the only way I can think to get in. To go for directors that have seats at other boards, where you have a say, to engage them there, to engage them, you talk to them through meta. But say, look, the only place we have leverage here is that these other boards where you have seats and the threat of losing those board seats. If we can't do something to Sunset, these dual class shares is the only way I can think to begin this conversation. So I'm gonna stop there because that's already a lot. It's a lot from one, dude, talking the whole time. Nobody likes to hear one, dude, talk the whole time we missed Damien, but he'll be back next week. That's a proxy countdown. Join us. Next week, when we jump back into the alternative democracy pool Forever on the lookout for shareholders, sharks floating Band-Aids and Wayward directors.