Transcript
This is proxy countdown. Welcome to the Big Show for the week of January, 8th 2024. Alongside my tag team partner, Matt mascardi. Woo. I'm Damien rolas on today's Countdown, the Starbucks board is playing defense. A new nepo baby director at carrier Global. Yeah. And update at the Disney proxy cage match on our vote results table a bunch of confused shareholders at ring central and finally on the big boat at beckton Dickinson where the board like to ignore shareholder votes. Let's go to the trade wire our top story from our largest cap companies on Tuesday. Starbucks increased its board size from 8 to 11 and appointed three new dude. Directors to its board. That's the that's Neil Moen. The CEO of YouTube. Daniel cerveza the CEO of Grupo bimbo which is the international food. Brand responsible for Latin Wonder Bread called bimbo Blanco and Mike Seaver. The CEO of T-Mobile, remember back in, October Wei, Zhang previously of Alibaba, pictures, group, joined the board. So Matt we reported last month at a coalition of North American labor unions. Called the Strategic organization organization Center had nominated three directors at the Starbucks board. That's a former senior White House, official Mariachi Vesta, ESG Pro Joshua got bomb and a former chair of the National Labor Relations Board Willmar liebmann. This just an extension of Union quashing. I mean, absolutely, you have effectively expanded the size of the board because you can buy Charter, but they had already announced the slate and they have to announce the Slate months in advance of the proxy. They announced three directors and at the time, Starbucks had 11 directors. So you're effectively announcing just under a third of the board between a third and a quarter of the board. And now since then Starbucks is somehow managed to increase the board such that you've diluted the value of the Slate. Now, if you're an investor voting on this board, you're incentive is to vote out the Slate who is not been appointed. Does not have access is not on the board and vote for the directors that were appointed and then get ready there. They're already there. They get, they've signed contracts. This is just like it's like a backdoor quash. Yeah, and it looks rushed in as well as if you look at who they selected the CEO of T-Mobile, CEO of YouTube for Starbucks. I mean, the CEO of YouTube makes some sense in that you can draw circles between existing board members like Sachin Adela and the the YouTube. No benefits shareholder connected. It does feel a little bit like we Need to get somebody who looks qualified in here who No One's Gonna argue with and, and who we can find in less than a month. And we can find and less than a month, a point, right? Get them on the board and run them immediately on the board. So can you imagine being the placement agent for that? That you just got paid a ton of money, probably, within six weeks to play board members just to quash and incoming slate, Intel Corporation. Sandra Rivera has assumed the role of CEO of programmable solutions group, that's PSG and Intel Standalone business. If PSG eventually IPO is, which is a they're saying, it might, Sandra has the potential to be the third ever Latina CEO of a Fortune 500 company so that's four forward wishful thinking. Wow okay. So early anticipatory wishful thinking, carrier Global added, Maximilian, Vice, man, to its board. Max is a nepo, baby. He is CEO of Iceman group, a German heating company, founded by his great grandfather, how many? So a nepo baby. But how many Max Millions do you think there are outside of Germany on boards? I looked at our platform, people analytics, think about six or seven. Wow, that's more than I would have expected. At McKesson Corporation is appointed former McDonald's CFO. Kevin ozone. As a director at the connection between McDonald's and a Healthcare Company. Should be obvious. And at Simon Property Group Nina, Jones appointed to the board, CEO and chair. David Simon said quote. She brings a unique perspective. As a former institutional, real estate investment professional according to the company's latest proxy. This unique perspective is shared by nine other board members. 77% of the Simon Property boards controlled by Simon family members. So her other unique perspective is likely to be the back of the driver's seat headrest that sound comfortable though. Let's move over to our proxy cage matches. Start with Disney where there is nothing new. Oh, there are already three heavy-hitting activists involved with the Disney proxy cage match. We are still waiting for Bill. Ackman to swoop in and scream Dei in a crowded theater while accusing the cast of Hamilton of being a bunch of towels, inclusion hires. Well, the one thing that is worth saying about Disney is Disney diluted their board before Starbucks did. So the dilution space race is on and they increase the dividend that that's another way to grease The Palms and investor. Also, in the news, the financial times is reporting the activist investors mount a record number of attacks against companies last year. There are 252 new campaigns globally. That's up 7% from last year, more than 40% of activists launching campaigns did so for the first time. Universal proxy rules introduced in 2022, which guaranteed that all board nominees will appear on the company's. Ball have had little effect on the number of board seats won by activists. Also, 37% of campaigns that ended with a winning board seat lasted more than 90 days and 34% settled within one week. And finally, there has been a Resurgence in multiple hedge funds. Swarming does the words of the Ft swarming around the same Target at one point sales force had seven activists on its shareholder register, including value act Elliott. In third Point, first of all, how dare you leave strive off of that list. They also considered themselves an activist and famously Marc benioff laughed about it. So didn't even consider them serious. But I will say this, this is sort of a good news, bad news. Because if you're a company, this is bad, the the sort of board crony, you know, handshake economy is at risk. If you are a company, you've traditionally done a certain way or a pointing your friends onto the board or people, you know, knowing quantities at the worst, right? And you mostly Consolidated power with management of the CEO. This is a threat to that. That's the bad news. The good news, is, if you're a free flow analytics client for the first time ever, you actually can Measure the effectiveness of the board members. Using the performance metrics is performance attribution for board members. Let's move on to our vote results. Table RingCentral nomination committee chair, Kenneth Goldman, lead director, Robert theis compensation committee chair Allen tygesen all received roughly 20% against their re-election at the same time, co-founder CEO chair Vlad shmunis, who controls 30% of the voting power received only 2% votes against his reelection. So, is that 20%? The adjusted number? Is that the minority of the whole, the whole number there? What means it's more than that? It's, yeah, it's much. More shmu is boomeranged back into his role as CEO last month. After his replacement Varick robotic. Gave up after only three months, After robotis disastrous stint, which saw him leaving his role at CFO at Hilo Hewlett-Packard Enterprise. RingCentral said that robotis resignation was not a result of any disagreement with the company or any matter relating to the company's operations policies or practices. Which they're basically just saying he didn't grow up to secretary, right? That's what they're saying. What they left out was that because their ants in the pants. Founders chair. Former CEO couldn't handle giving up total complete power. That's something that was not in the filing, correct? Yeah. At the same time. Shareholders that ring central all. So nearly voted down, say on with 30% saying, no, they're irritation. Might be focused on that. Co-founder, CEO of ledge moose who received nearly 20 million dollars in stock to spite his already considerable shareholding. So in summary, doesn't it feel like the shareholders in central are just confused in different directions so that 36% voting against his pay. But but 98% voting for him to stay after he after he Blew up a new CEO Higher by boomeranging, back in it for three months. Look this feels a lot like policy voting, right. Look at the people that got the most votes against, it was the Nam chair, the lead director the comp chair. Those are typical roles that by policy, you vote against the comp chair, if you don't like comp, but you don't vote against anybody else on the comp committee or the CEO. You don't ever. You don't ever pay attention to the cofar or the CEO or the chair. Yeah, exactly. You don't, you never pay attention to those, the Nom chairs, the succession plan, my guess is that the diversity on this board, or some other element of this board bothers investors. So they vote against the Nom chair without recognizing the fact that this is just the CEO with a 30% of the voting power picking whoever he wants for the board, just like he picks the CEO, and then kicks him out the same, you know, quarter? So the the confusion here is policy based voting. I don't think it has anything to do with investors actually wanting a thing. Or not understanding. I think it's investors just checking the Box because I assess their glass sluice said, this contravene to policy vote this way. And that's exactly how they voted. Because if they thought about it, they would have voted against the boomerang founder and they would have just voted. Them off the board period because you we shouldn't be blowing up a CEO after three months when they found that. There's no wrongdoing. There's no disagreement. So what are you voting? Why is he leaving? If there's no disagreement, it's not spending more time with his family and these next two stories, the same pattern holds true at a sure Holdings 27% of shareholders voted against Christopher, Romana Steven summer and John flood but like it rings sensual, the CEO chair. John farlander was completely spared from his negative investor sentiment so you might be right again. There there targeting because of Pauly but they're completely ignoring the true leader of the board. Yeah. I think if you look at the patterns of how vote, where the negative votes are, in fact, we've looked through the historical votes and what we see is and the difference is they're not major, right? The average vote for directors, 96% for the average vote for chairs of committees is more like 92 or 91% and the average vote for chairs of companies goes sometimes below 90% to 8. Ish percent. The only reason why that would be the case is, if your policy voting So same story at Eastside drilling where bunch of directors received about 25% against and notably spared was CEO Jeffrey Quinn. Finally, at United States and intimidate Corporation, Blaise Aguirre, nearly fails with 49% against his re-election, why nobody seems to know sorry to leave you on a question. Mark, I tried, I just couldn't figure out why poor Blaze got 49% against. I am happy that shareholders are doing something but we again we don't understand. I'm gonna look the fact is this was only four members of the board up for election, right? I believe this is a classified board. Is this is that true? I think it's actually just a small cap on which case we're talking about four directors and you just pick one that you don't like maybe. Yeah. All right, let's move on to the big vote. Today's focus is on beckton Dickinson company which has its annual meeting coming up in about two weeks time on January 23rd. They have no shareholder proposals up for a vote this year, but we do have one that they held last that we'll talk about a little bit later. Matt, I'll just give you the overall highlights here. I backed in Dickinson and you can weigh in overall The team is hitting 401, according to our data, pure mediocrity. Institutionally held Vanguard holds 9% of shares BlackRock at 8%. No other important individual shareholders. And I struggling with becton Dickinson, I know you were struggling to. There's a considerable female power Gap. 33% of the board is, are women but control only 18% of influence which is just noticeable. It's a notable Gap there. And again, the only thing I think worth pointing out is that a shareable proposal from last year, put up by Kenneth Steiner. Asking for the approval of so they wanted, he wanted to shareholder approval of any new Severance packages for executives. He wanted that to that sum to be less than three times, the sum of salary and short term bonus. So he wanted to cap. Severance pay for executives, right, Justice and pay right. Not all just a severance pay. Severance pay is out of control a publicly traded companies. So this is yet another shareholder proposal asking for they usually fail. Uh but I backed in Dickinson, this one passed quite handily. 62% supported this shareholder proposal which I kind of find quite remarkable honestly, but the becton Dickinson board with a bunch of word salad. We have a CPA in office here. Jesse the money Whisperer, we discussed this as well. They use a bunch of weird word solid and they basically said no, Despite it passing it, despite it passing by a considerable amount. And again, their point of view, which is often the point of view with boards who don't want to limit, pay for their Executives, is that it was severely limit, their ability to attract and retain ketones. There's no proof of that. Of course, look, half of this board is a CEO or chair somewhere else, right? So when you're talking about removing executive Severance packages, they probably have a natural allergy to that giving that they were born CEOs. I think the story of Dickinson is interesting to me. Yeah, let's get right into us, get into the election of the 11 directories. 500 for the last five years, much less their history barely like matched, the S&P 500 for the history of the company since it ipo'd and I was in like 1974 or something like that. I want to introduce a concept, okay? All right, this is we need a concept because this is a pretty boring border. Otherwise, this is a fairly boring board but the concept is something that free flow analytics has. It's called Network Power of directors. And I, I'm gonna have to walk you through it. It's gonna take a second. Take a hot second, so it's second. You know. Have a coffee, sit back, relax. Listen to this. This is the way this works. The key measurable for people analytics is the idea of influence, we measure every directors influence on the board that they're on, in the year that they're on it, right? If you take a directors influence, they have on the company and you multiply it by the market cap of the company. At the time what you have is sort of in effect, a power that director has that directors sort of has X percent of influence over a x billion. Dollar market cap company. They owned a small bit of that market cap. You can affectively think of it that way. Okay? So we can do that at becton Dickinson. You could take someone like Claire Fraser who's on the board, she seven percent of the board influence of beckton. They have a 69 billion dollar market cap, her rough power, then at globally. If you look at her from the outside is she has control about 4.8 billion dollars in market cap. That's a lot that's a lot first, single person to sort of have influence over when you think of it in these terms, what we do that for is that so we can rank all the directors in the entire world by effectively how much power they wield over the market. When you're on multiple boards, you can wield, a lot of power. But more importantly, is the idea of not just how much power an individual direct or has Zuckerberg would have outside power, Elon Musk would have outside power. Bezos would be the most powerful person in the world. Those are obvious things. What we wanted to know is how much power is in your network of friends, not just yours, but the people that you sit on boards, with outside of, just this company. Okay? So we can do the same process. We know how much power everyone has. We can do the same process by adding everyone who's in your first or second degree who sits on Multiple boards and saying, here's the power of your network. Sure. And the reason why we do that and we'll go back to Dickinson, we come up with names of professional directors. All of the sudden who are the most powerful directors in the world are top director for years was Ron sugar, who's on the board of uber, and Chevron and a number of massive companies. If you look at his Network, he knows everybody. He has access to 100 more than 100 trillion dollars. Yeah. And I will say that we're back in Dickinson, has its version of Ron and name a man named Bertram Scott, who was the second most powerful, man? The board. He's a lead director, he's 16% of influence. Matt, he sits at on the boards of Dollar Tree. Equitable Holdings, Lowe's previously sat on Alliance Bernstein. He's been there since 2002. This, this guy basically is almost as powerful as their CEO and chair Thomas pollen. That's exactly right. And that's the reason why I want to introduce this concept, because beckton Dickinson all of their board members ranked in the top 10% of All large cap companies for their Network Power. Oh, really? These are some of the most networked and Powerful directors on Earth, okay? For a large cap companies and led by Bertram, Scott who you just mentioned. In fact, Scott's network is 43 trillion dollars worth of global market cap that they control. That's a trillion with a t. That's a big number on average. He's connected to 30% 38% of the boards that he's on. Which is saying something since he's only connected to like one other board member on beckton and he's on four other boards. Actively now. And despite not being the CEO at any company, he averages 10% influence on. All of those companies, Scott is a player. Yeah, he is powerful. He has powerful friends, he's a lot of influence at the companies, he says on a Dollar Tree, he has 100% connected to the board, every member of the board, he knows either from another board or from a friend. I will say that this is a important to consider because they have a mandatory Retirement policy that that works Marshall, step down, stepping down this year, 75 years old, Burcham Scott is 72. He's going to be gone from the board soon which means All of this power is going to be Consolidated with one man, and that's the CEO and chair, Thomas Poland. So, I think it's important to know what's coming wind. Bertram, Scott leaves this board, so it brings me to my recommendation. Let's go write your recommendation. What do you think? I look through every single board member, there's not a lot to say about most of them. There's I agree. You could vote against some you could make cases against others, some of them, you know, underperform you know, Global directors day. They're TSR they're pretty average though. But everybody's basically in this average Zone and what I think is actually interesting here is Scott is powerful and he's the lead director at this company where the CEO actually has no first or second degree board, connections to this board despite all being chair. This board is an aristocratic board. It's run by smart people and CEOs and X CEOs. But they do not seem beholden to the current CEO, unlike the CEO, who stepped down in 2019 for lensa, the prior CEO and chair, he'd been to the company for 40 years. He was he hand-picked this board, right? So he's off the board, currently he's off the board currently which means Paul is a little bit of a lame duck here, not so much lame as he has less power than you'd expect for a company for a person in his position at the company. Chairs, CEO separation is not on the ballot, so voting out, my suggestion would be you, what you need is a board run company at a company where the one of the highest stockholders is actually Scott, he has 25,000 shares, which is more than any other board member was been there since 2002. He's been there for a long time. He has a vested interest in this company going well, the chair CEO roles are not separated. But I'm not sure that this CEO who has delivered subpar stock performance earnings basically across the board. They've been part of subpar. Yeah, he's also it's funny you mention that because he's also sits on a board that we refer to constantly the subpar, which we covered recently on the show which Walgreens, yes, where he basically is no power because Stefano pessina runs that board. We talked about this and it's a bore this consent that is constantly been struggling with earnings and TSR. I'm guessing pollen is effectively a week, thin ice CEO, and Scott is the most powerful counterbalance to him my suggestion. All right? You vote for everybody, including Bertram Scott and you vote against Paulin, you can't separate CEO chairs not on the Slate, but this could be the company where you test the theory. What happens when you remove the CEO from the board? And turn the board into professionals, doing the professional work of representing the shareholders, particularly when one or two of the directors have significant shareholdings in the company and not because they bought them but because they have a vested interest in their sitting on those options. So my wreck here for the board slate is for everyone against CEO pollen. That's right. And remember, this isn't remove pollen from the CEO role. It just removes him from his board row, exactly, which might be all so important for a board like this. Because as I mentioned, Bertram Scott will be stepping down soon. So this might also add to the succession planning of future board power, and I think that's correct. All right. So that's the that's the election. Directors over there, beckton Dixon. The there's also an auditor and a stamp on Pavo. I, you know, look, I don't know. There's a much here to say as well. Shareholder supported Sam page 903 percent last year. I could give you a few highlights of CEO. Pay ratio is certainly quite High 48 to 1. They one thing that they have to always irks me, is that they have a TSR modifier. You were talking about TSR. So if they are their performance at equal or less than 25% tile compared to the peers, It only modifies their pay to a factor of 0.8 X. So it only, it's only a 20% ding. Even if they're at the bottom, the worst TSR performer in with their peers, it basically does not affect their bones, so I don't understand. And this is a more like philosophical problem, I have, but there's so much emphasis right now on Dei diversity and how it factors into compensation almost. There's a lot of conversation about it and how it's like distorting pay, which it absolutely 100% is not doing that. We know that and yet the most basic thing like you are in the worst quartile of the entire Market of your peers. Not only worth quartile map. Beckton Dixon takes a step further. You can actually be last, you could be dead last. I mean look like extrapolate. Those numbers and say that this is a professional athlete. Let's say that you are, you know? Know, Steph Curry, this is like saying Steph Curry. We will give you 20 million dollars but for your bonus for or we'll give you five million dollars for your bonus. Where if you perform like a bench player or Julie, the worst player at your position, we will give you only 80% of what we agreed. Exactly. The same that is bananas. I don't know why investors allow these modifiers to exist at anything. Less than 0, you get zero. If you're in the bottom quartile is in that performance alignment. Yeah, I'll tell you, I don't think investors spend the time they should in these compensation discussion analysis sections and I think that the only the companies know that but they all so sort of make them intentionally hard to understand. They also select their own peer groups, right? So if you track peer groups from year to year, There are rules about how they have to select the peer groups. But they're loose rules and they're vague rules, and it generally is somebody else has to select it for you, but if you're paying a consultant to select your peer group, Your paying the consultant to select your pure group? That's like there's an immediate conflict. There's so many ways you can juice this. You just need to make the stat. If you are in the bottom quartile for TSR You get zero, you get zero extra dollars that that is how you should wear this, of course. So you got a vote on sound, pay with all the vote on Sam Pay. Here is no, I think, actually, in this show, we are, it's going to be hard to differentiate because a lot of the say, on page, just feels like, no, it just feels like no one reads the details and we just say yes and that's a problem. That's it. That's beckton Dickinson. They don't have anything else. No, share of proposals this year after after shareholder supported one last year. I don't know. This is like the beauty, the company, the target, maybe next year, we can get some more upper vote. That's the proxy content for the week of January 8th 2024. Join us next week when we jump back into the alternative democracy pool Forever on the lookout. Shareholder sharks floating Band-Aids and Wayward directly these have to be Band-Aids.