Transcript
This is proxy countdown. Welcome to the Big Show for the week of January 29th. 2024 alongside my tag team partner, Matt McCarty. I'm Damien Wallace on today's countdown, a strange game of musical board chairs at Superior Energy Service a climate denier activists at BP, Vote results at becton Dickinson and Walgreens and our first foray until a non-us annual shareholder meeting at German technology, conglomerate Siemens where we test Matt's analytical patients in prowess. Let's begin on our trade wire where it's been a quiet week and player moves. as it seems that most large cap, companies have an idea, Of their early 2024 rosters already. Cintas, Corporation added Beverly, Carmichael Beverly is a director at viad and brings Decades of Human Resources expertise to send tests including she was formerly Chief, people officer at Red, Robin, Cracker Barrel, and Ticketmaster Trimble added two new directors, Cara Sprague and Ron. Naresh. Cara is Chief product officer at F5. This is her first directorship while, Ron is the former CEO and current chair at keysight Technologies where he controls a board leading 19% of influence. At S&T Bank Corp. Say goodbye to Stephen Weingarten who is stepping down at the company's 2024 annual meeting. And lastly at Superior Energy Services, we have an unusual director dance that I haven't seen before. Bear with me here first. Okay. Julie Robertson resigned and then shareholders elected Ian. Foster. Three days later to fill the vacancy created by the resignation of Julie, Robertson, then Timothy Winfrey. Also resigned and shareholders elected. Julie Robertson three days later to fill the vacancy created by the resignation of Timothy Winfrey. Matt the same Julie Robertson. Who is resonated resignation created? A vacancy that was filled by Ian Foster. So the real question is, why couldn't Julie Robertson replace Julie Robertson This is weird. It is the it's the same Julie Robertson. This is the exact. Yes, this is the exact language from the filing. This is exactly how they how, they, how they fill the vacancies in that order. So here's Tea Leaf reading and this is what you sometimes have to do in these people situations. Julie Robertson and Timothy Winfrey hated each other. Oh Timothy Winfrey refused to leave. Despite being asked so Julie, Robertson made a threat, and then walked out investors brought him back and then the rest of the board said, we Tim, you get out, get out. We we want Julie back and it allowed getting Tim out, allowed, Julie to come back. That's my that's right here. Pure conspiracy theory for all listeners at Superior Energy Services, reach out to the proxy countdown, let us know what happened. Moving over to our proxy cage matches, nothing new at Disney to report. So let's move over to a strange case at BP where activists investor blew Bell Capital Partners has called on BP to ditch its commitment to cut oil, and gas output as well as other key parts of its strategy to transform the company into a clean energy. Provider in a letter seen by the financial times Bluebell said, BP's pledged to reduce oil and gas production by 25% by 2030 compared with 2019 levels. Meant it was destroying shareholder value. By moving away from hydrocarbons faster than Society, the hedge fund also challenged the pace and extent of investment in BP's, transition businesses, biofuels, convenience charge, charging, Renewables and hydrogen by stating that BP should reduce investments in bioenergy hydrogen and Renewables by 2030, by 28 billion dollars. Or 60%, Most of the reduction according to Blue Bell could be achieved by stopping all investment in Renewables a sector where BP has no right to win. It said against Specialists incumbents, how about that? From Blue Bell. Well, let's remind everybody who Bluebell is, they are effectively the strive asset management of Europe and for memory sake. They just a few years ago were writing letters to acts Larry Fink from BlackRock because of his focus on ESG. So they were an early anti-woke player but they they are about a successful as strive has been in having any action behind their letter writing. They have 250 million in assets under management, which is even less than strive has. They have asked Glenn Court to do more coal stuff and now they're after BP to stop doing all that pesky renewable filed, this firmly in idiot with the megaphone category, this is not something that is actually a serious proxy match. I don't think anything. Anyone will take it, seriously. Moving over to our vote results table. Let's start with one notable vote at a smaller cap company at enerpac tool group. There are over 14 million votes, against sayon, Pei representing 29% of the vote, but only an average of about 1.5 million votes against the compensation committee board members who crafted the pay policies. Big disconnect there. Well it brings up the Elon Musk question, right? We've just seen Elon Musk. See his Peg, it revoked by the Delaware courts. It was one you know, minority shareholder who sued saying this is bad for investors and frankly, the compensation committee has never seen less than 90% support at at Tesla, so people don't seem to be the problem in the equation of people coming up with compensation. At large cap companies. The votes are in at two companies, previewed here at the parksey countdown becton, Dickinson and Company and Walgreens boots Alliance. At beckton. Shareholders are more than happy as no single proposal received more than 10% vote against. On the big vote. Matt recommended a vote against chair and CEO, Thomas Polen. Based on a network power analysis. 8% of shareholders agreed with Matt analysis. While the other 92% voted for the CEO is re-election. Matt also said, no on Sam pay, but again, 92% of Voters disagree with that assessment. You could see the real power of proxy countdown there at Walgreens Matt passionately. Advocated again executive chairs Stephano Pacino. Compensation committee. Chair Nancy. Schlichting and Lead independent director, Ginger Graham. All three directors, Matt, unfortunately were re-elected with ease, but it's worth pointing out that their votes against represented. The three highest values on the board. So, Some influence that the start, Matt said no one pay 14% of shareholders actually agree with that, Matt said no, on a cigarette. Waste report proposed by the sisters of Saint Francis of Philadelphia. Unfortunately, for the nuns 94% of Voters agree with Matt and rejected. This proposal Matt said, yes, on Kenneth Steiner's proposal for an independent board chair. 31% of Voters agreed. But the proposal still falls short of a majority. This is down from 34% support in 2023. That part makes me sad that I actually might have removed support for this, a living wage proposal brought by John chevin was rejected by just over 90% of the vote and anti-woke anti-esg. Proposal, from the troll group known as the national Center for Public Policy. Research received a very sad support of just one percent of the voters. And finally, a pro-choice Church requesting report on risks of reproductive Health Care, legislation received the support of only 8% of share voters. Before we move on to our big vote at Siemens to other notable votes at large, cap companies include 27%, against Sam, pay at Air Products, and chemicals. And 22% of votes against compensation committee, chair, Nancy McKinney Street at Accenture. Despite the fact that Sam pay was by 91% of shareholders, I'm not sure about the disconnect there as well. That's it. That's the from our vote results. Table mat, let's move on to the big vote. Where our covering, our first non-american company. Siemens. Siemens based in Germany, their annual vote is next week, February 8th. Before I hand this Behemoth off to Matt, I want to a few observations at the Top. This is a Germany has a dual board structure. There is a supervisory board that is akin to an American board, right? That's the. Those are the, the directors that are actually voted in by shareholders. And there is a management board where where which is akin to our named executive officers, these are appointed and nominated by this supervisory board, but shareholders cannot vote. In these members, this is where you usually find the CEO. You will not find the CEO of German companies on the supervisory Board of that board. Matt, there are 20 members the supervisory board, 20 members that shareholders can elect ten of these at Siemens are employee representative. All German boards are half employees and half. Just sort of regular independent directors. And finally, I wanted to point out that that there seems to be a real power structure on this board represented by the Chairman's committee. This includes four members. Jim Snape, who's the chair of the board? Werner Werner brand whose second Deputy chair of the board and then two employee Representatives Jurgen Kerner and budget steinborn. I wanted to point that out that the power on this board seems to reside with the Chairman's committee. I, I hope I set this up adequately for you, Matt, because there's a lot to talk about here. This is very unusual structure, compared to American boards. Yes. So I have to start off by saying I am not an expert in corporate governance in Germany. This is very know, Germany is very specific relative to France, relative to Italy the UK and this. Yeah and I'll say that this comes from a request from a listener who asked us to cover a non-american board. So we're more than happy to do so So so there's a there's a lot of nuance here that might get lost in terms of the bureaucracy or the legal structures. For instance, proxy access isn't a thing in Germany. The way it is can be in the United States. The way, the nomination process happens is different. There's a lot of nuance that goes into that that's going to be different but I'll say this. Yeah. Before you get to that, let me point out to two of the differences here that are important to focus on this year. First of all shareholders are not actually voting on The re-election of any board member this year, right? Instead, what the big things instead, what they're asked to do is to ratify the acts of the members of the managing board and to ratify the acts of the members of the supervisory board. So essentially, it's a, it's a vote, it's a no confidence vote, right? It's a confidence vote. It's like moral support, moral support what it is and to put this into context at the 2023 annual meeting, All directors all supervisory board directors were ratified with votes between 99.2% and 99.8% support. I mean, the question I would have about that is who got the 99.2 and were they angry that they didn't get 99.8 but the reality here is, I think, as you're pointing out is these are effectively rubber stamp votes, right? Like there there there, there is very little disagreement on these votes even less. So than when it comes to, you know, us elections of directors. Well, I will say also that last year, there were seven, supervisory board members up for vote, and there was one board member who did receive over 10%, no vote. So it is, it's similar. But that's when they're up for election. That's the ratification 99% agreement. So it's incredibly rare to see a no ratification. Yes. And one other wrinkle before you get to the directors I want to talk about pay is that there are two votes on pay this year. There's a traditional I'll call it a say on Pavo. Although this one is binding where shareholders are asked to resolve on the approval of the compensation report that is for this fiscal year 2023 and the other one is to resolve on the approval of the compensation system. So this is a vote that comes up every four years that analyzes, the entire system to which the board pays its member. So there are two separate pay votes this year and again, different than the US in that the traditional. San Pablo here does seem to be binding So yes, which which is a big which is a big difference but I think actually when it comes to the board, the important thing that you point out is there's two boards but there's really three groups in those two boards, just the management board which is the NEOS effectively the American equivalent of Neos. There's a supervisory board, which is the the board, the elected board, the elected. But inside of that, there's employee directors and shareholder directors, right? And all their genius 10, each year, all German Boards of this side, must have half the board represented by employee Representatives, yes. So what we're going to talk about is the supervisory board and the influence of power dynamics inside of that using our data. So, let's start with the team performance overall. Siemens has the third most powerful supervisory board in Germany by Network Power. And by Network Power that is these directors, the amount of market cap, they control in themselves. And their network of friends on other boards that they've been on, whether it's in Germany or outside of Germany, these are very powerful people inside, a German company, the top boards inside Germany, or zalando and Deutsche Bank. So this is a massive organization with powerful people who work there. Make no mistake, even if you think it's, you know, sort of like a smaller German board or parochial board. It's not 58% of the influence of Siemens is controlled by connected directors. So these are people that know people and 57% of the influences actually controlled by phds and academics. So these are smart people that know people this is a this is a impressive board. Actually when you break it down and let's not forget the that half of the board are employees of seeming who generally do not sit on any other outside boards, right? So I mean, when I talked about these percentages, the interesting part about them is the Vast majority of them are actually in the shareholder Camp, not the employee camp. And I want to, I'm gonna break those two things down in one second because it's important here to know that I know you mentioned that the Chairman's committee is really a center of power. The audit committee is as well. The Chairman's committee is largely represented in the audit committee. The audit committee is eight strong. It is a really big audit committee. And unlike in a US companies, you can even see this in the compensation. The chair of the audit committee, gets an extra $180,000 Euros per year, compared to just 80,000 Euros per year. For being the chair of other committees. It is a very big difference and they value the audit committee, very highly. I don't know what that says about the way either Siemens in particular, or German companies think about, you know, the audit Function, which sort of makes sense that they think this way, but it is a powerful committee other than that, the board overall is purely average. 82% of the members are rotation players. Meaning they just, they're somewhere between the 15th percentile and 50th percentile of directors everywhere. But you are there, and again, you have much, but you're also talk about half of that board. Our employee Representatives. Oh, for sure. Yeah. But there's make make no mistake. There's no differentiating when I, when I broke it down, individual by individual, they're all average. Like 82% is basically all of them. There are a couple that are a little bit better, but for the most part they are very average performers overall, and Siemens is not an average company. There are 201 subsidiaries listed in their, their annual report, their registration statement. It is a large complex, bureaucratic custody with Multiple public listings. It's worth pointing out that they're actually is one Siemens family. Member on this board, Dr. Natalie Von Siemens, she is one of 20 members on the supervisory board but but her That she's 15th generation semen to my right about 12 Generations humans. Right. So this is a, this is a, she only, we're not going to us The Waltons know exactly. This is far removed from the Siemens max power, right? Like that. So the family actually is diminished power and our metric suggests that, in fact the total influence of the shareholder elected portion of this board is 66%, and the highest of them is Jim Snape, who is the chair of the board? Well outpacing. Natalie Von Siemens, the family member, which is not something. You see in a US structure where you have the family on the board. Usually, but this is so far removed that. The data suggests that this is really a chair run company. This is a chair run board, a chair run company. Snave is the highest board supervisory board member by pay $600 and 2000 euros. The next Up is 460,000 Euros for Brant. And the average was 250,000 Euros. So he is almost triple, the average board supervisory board members pay. He's been the highest paid since at least 2019. And he's got the longest tenure on the supervisory board at 10 full years. Yeah. And remember, he's a very powerful actor and remember he also chairs the Chairman's committee, which is responsible for appointing and dismissing managing board members. So, essentially, he's, he know, he's chair the board. He shares the committee that hires and fires Executives at the executives. Yes, some things that stuck out to me. Is there were a bunch of expertise fails here. There are only two boards supervisory board members. Who according to the German stock Corporation, act were Financial experts qualified as Financial experts, just two on a 20 person board and those were Brant And zochert both of them are on the audit committee, but the committee has eight members. So that means one, 25% one in four of the members are actually Financial experts. It seems like a potential oversight when it comes to you can solidated power in an audit committee, but you don't have any Financial experts on the audit committee, really? Like, that's my tire Zachary, who is the chair of the competition committee? And that is a Verner, Brandt, who was, who was second, Deputy chair of the board and all the Chairman's committee? So Brant really has all likely all the power on this audit committee because not chair of the community as well. Right is the only one with the expertise, but he's the chair that committee and he's on the Chairman's committee. Those are, that's that's, that's a trifecta, that's actually pretty strong here. Meanwhile, on the other side of that coin, 100% of the board, 100% of the board tag themselves in their skills Matrix as having sustainability qualifications. 100% really, 100% of the board is qualified in sustainability in some way. Here at that point. The definition is so vague as to be meaningless and that that part of the skills. Matrix Financial expert is, is a mandated requirement of the German corporate stock act. But sustainability expert. There's no regulation on what that means, what that is. In fact, none of the other skills are leadership all those things. Those are just tagged randomly the skills Matrix here, seems random. We talked about this last week on the big vote talking about Apple. And how in the US? This we have the same problem where this this the definitions to, which we Call people experts in certain skill sets is incredibly vague and in fact, even vary from S&P. 500 company to S&P 500 company, where a director at Apple, might have a certain skill set but but miraculously doesn't have that skill set at another company. And, and I think the final thing on the supervisory board that's stuck out to me, was the network power question. Now, Regina Dugan is the most powerful by Network Power, but simply because she has exposure to boards in the US, she is on the board of HP, which is a highly interconnected board. So she has a network outside of Europe in Germany. Snape though, is a European power. Broker he's on Maersk board sap from Alliance. He's two private companies and he's not actually a US. Mid-cap AI company where also on the board was Snape is Condi rice Condoleezza Rice and Bruce Sewell, who is Apple's ex-lawyer reporting to Tim Cook. So he has connections back to Big players in the US but also big players in Europe. This is really a supervisory board the shareholder component that we're really talking about two to three people per year. Point it is Snape it is brant and and it is the Chairman's and the, the third member of the Chairman's board, who is Virginia steinborn, who is the employee rep and the, which gets us into the employee rep of this. The employee reps their total influence for the employee reps is 34%. When we look at them, you can't judge them the same way. And this is part of the Nuance. You can't judge them the same way you judge a shareholder rep. First of all, their mandate is different, right? Like it's not TSR, you know, purely. This is it representing employees. So there's a different ask a different stakeholder involved, the metrics we have, actually most of them have them were unrated because there's not enough history, they sit on just one board, which is this board with the exception of Jurgen Kerner, Jurgen Kerner is on multiple boards because he's a high level representative of the Trade. Union IG metall and IG metall actually has three of the 10 employee reps on Siemens board. Our IG metall reps. Kerner bats in abysmal point 033 on earnings point one zero six on TSR a 200 overall and that's because these on thyson crops board and Siemens board and he says exposure to other companies boards as well. But Kerner is interesting because he's the connective tissue to manage. He was on Airbus with IG. Metall is a union rep for Airbus in Germany, so he knows the Airbus board members Airbus board. Member Amparo Morales set on Mars board, with both Casper rusted and Jim snabe who are on the Siemens. Board. There is a line you can draw inside two degrees to the most influential shareholder rep. And the most influential are among the most influential employee reps given his position. Yeah. And remember of that Chairman's committee that I keep referring to of the four board members, one is Jim, Snape the chair, and the another is Jurgen Kerner so that Chairman's committee actually has two employee Representatives, but they're but they're not Rank and file employees. There are two people that actually represent you pointed out big trade unions in Europe. So let's get to the recommendation, okay? Because we build these a lot to there's a lot going on inside the sport. I mean my instincts here are Snape is a busy man it's time to move on. He's been there for 10 years but he's not up for re-election until 2025. So like when it comes to ratifying there's no sense in not ratifying Jim's name, it doesn't do anything, he's not going to move on. There are too many IG metall reps here. They're Consolidated under Jurgen, my instincts were also be. If this was like an election year you'd cut your again and let the Siemens Works Council which are reps from inside of Siemens. Not not the broader Trade union, let them rise in power to actually represent the Siemens employees over. A broader trade unions that span multiple companies across multiple countries, but since we're talking strictly ratification, I have one member that I would vote against just do it. Yeah. Casper roasted a no confidence vote for Kasper. Rorsted. Why is that? That would be my recommendation. Here's why he has 7% of the influence, he is directly connected to Snape through other for other boards. He that's 355 overall. He's the worst on the board for his 10 years. Overseeing, huge controversies point. Zero, eight one is his batting average. He just sits on controversial boards. One of which was he was the CEO of Adidas when they brought Kanye West in, they kept West doing his crazy stuff. Despite reports that Kanye would spend meetings drawing swastikas and saying sexist things. They didn't fire him until he did it on Twitter and there was a lot of blowback for things that he was saying. But he's one of the worst performers as it as it relates sexual share, he's a shareholder rep. He's one of the worst performers and he has a history of anti-Semitic actions at a company in Germany. He might not be anti-semitic but he definitely tolerated. Some of it until Kanye did it openly I don't know how much more you need, if you're a shareholder, if you're a shareholder elected, supervisory board member. If you haven't delivered to shareholders on actual performance. And there's a controversial things that are kind of lingering, I think that might be the only one worth no confidence. Okay gratification. No confidence, vote on Casper. Worst and remember, share. Those are not actually able to vote on the election of the directors. This year only to ratify their performance last year. So, moving on to two pay votes, do you just is this something that you have a recommendation on? I only have I have a bunch a couple of thoughts. Okay, go ahead on the pay and it's really about the structure of the pay. First of all, the structure of the pay is highly organized. You're not used to this looking at front of us and I'm gonna say a lot of urinalysis, or I could also weigh in a analysis would be from an American perspective, which is to say holy crap. There are other jurisdictions that that very that sensibly create plans to pay their Executives all though, you know. It's still might be a little bit much but compared to America, it's yeah, it's pretty sensible. I mean, I I did need like an abacus and to take an advanced degree to still understand everything going on. But I spent a lot of time and it turns out a lot of this tends to be measurable. And like, I could understand it after I got into it. You could see where all the money came from and it's very fixed, right? Total pay for the CEO was 7.6. Million last year Euros, which compare that to a us, you know, executive at a company, this size, right? You, I mean, it's not even comparable, it's not even close. You'd be talking 30, 40 50, if not a billion dollars for some for executives now. Yeah, this is a, this is a large company, this is a market cap of 140 billion dollars. Yes it's a it's a gigantic company there was only one thing. One thing that I thought was great and one thing that I thought was fishy, the one thing I thought was great, was the TSR metric that they use, they actually you can get a 0% pay. If you underperform your peers by 20% or more, she makes sense. That not only does that make sense but there's a straight line like up to, you know, your you you equally your peers, you get 100%. So it goes from 100% of your. Your target pay down to zero between like 0 and negative 20% of your peers. It's very, very it's not like in the US where it's like you won't get 95% if you are, you know, below the 15th percentile, right? Like, it's not like that. Like, you can get none for for sucking at your job, which I loved, I loved that. I thought that was great, right? The thing I thought was fishy was actually the ESG component here. Okay. It turns out ESG on average equals about 7% of total pay for Siemens CEO. It's represents 20% of annual bonus. It's a long-term annual bonus. Yeah. Okay then there's short term and long term bonuses. The that's a low number. It's not as low as the 1%. We see in the US where people are freaking out about it but it's still pretty low but it's high enough to pay attention but the three metrics that they've chosen for ESG include carbon net promoter score which is how much your your customers like you. And digital learning hours per employee. Now, digital learning our, we sat through plenty of pointless, digital learning, right? And our time at corporations, that is not only totally fungible, but totally ridiculous. It doesn't accomplish really anything. Which means you could arguably, if you're not, you're you're just falling short, throw out a learning, module to your employees, get get those hours up and bang. You hit your, you know, your, your numbers for your ESG which is 7% of your overall pay that's a come up with the better metric than digital learning Hours. Come on we can do better. But you know there's nothing much else other otherwise to see here. It's really hard to argue against the way they structure these packages. I will say this to wrap up that compared to us companies. They they do kind of drown you in a world of documents, not only the in the US here, we are very lucky to have the SEC. It's a very organized system. We have one proxy statement that is filed within a certain time. Every year, everything is filed to the SEC in most European companies, including Germany, there is a absolute sea of PDFs and there is no Rhyme or Reason to wear they exist. Where they don't exist. Where the information is some of it is redundant, some of it is not. It's very difficult from an animal from an analyst perspective, and I'm guessing of even more. So, for an Investor's perspective to begin to analyze this, it's, it's extremely time consuming. Well, in this, in this Entering the US. It does seem like they value the share pricing and the and money over people. And in Europe, it seems like they value process and bureaucracy over people, it. But in neither, the one unifying Factor as if you want to know something about the people who are running these companies, it's really hard to get to that information. And it's really hard to come to conclusions about it until you dig, deep anything else on Siemens before we wrap up, that's it. That's all that's funny. If listeners have other requests for other jurisdictions or companies, please reach out to us. That's it. That's the proxy countdown for the week of January. 29th, 2024, Join us next week when we jump back into the alternative democracy pool Forever on the lookout for shareholder, sharks floating Band-Aids in Wayward directors.