Transcript
This is proxy countdown. Welcome to the Big Show alongside my tag team partner. Matt mascardi I'm Damian roles on today's countdown. Three big proxy cage matches at three of America's most famous Brands a one-day CEO at a Solar Company. Yes, one day surprise, shareholder victory, at Lions Gate entertainment the same old chicken noodle, at America's iconic, soup can. And on the big boat, we take a deep dive at Auto Zone. The company that makes its directors all wear the same blue shirt. Let's get to our trade wire, Matt. Start with some sad news. A direct your death at Morgan Stanley. Alistair, darling passed away on November 30th, Alistair had been a member of Morgan Stanley's board since 2016. Here's his full name ellisor, McClain, darling, Baron darling of rule in his privy Council. That's a lot of he was a British politician who served as Chancellor of the exchequer under prime minister, Gordon Brown. Staying with Morgan Stanley, in director moves. Disney is playing defense appointing Morgan Stanley, CEO, James Gorman, and former Sky CEO. Jeremy dock to their board. Meanwhile, director, Francis D'Souza is stepping down from the board at the 2024 AGM. We'll get more into this later. Matt, we're gonna talk about the proxy contest. The proxy cage Max going on between Nelson and Disney. Quick Point here, though. James Gorman. And Jeremy Dara appointed to the board. Of course, is not going to vote obviously, and to Suza will be around until 2024. So we've got a nice packed room for the remainder of this year. Just so the audience knows, I very diligently delete, the word elected from these press releases, and change it to the word appointed because there's no election going on when they make these announcements. They're pointing directors of the board. Egg. Appointed, Jimmy, Dunn, the third to the board Mr. Dunn She's called Jimmy the third enters. With compromised Independence, as he is vice chairman at Piper Sandler, which received nearly 10 million dollars in service fees related to the IPO of eggs life and retirement business called core Bridge. Financial so Jimmy Dunn, Coming in with some related party transactions, their egg three feeling like an Insider before you even start and busy, busy busy at Arista networks. First of all, Shinto Bright House is the new CFO fresh with a 12 million dollar package for just starting a job at Arista networks in addition an opening what a signing bonus in addition. Founder and board chair, Andy Bechtel shine and stepping down from the board and we'll transition to the role of Chief Architect and CTO, Kenneth Duda Will take his board seat and CEO J Street ul's power rule. Increase as she becomes board chair. So there's a lot going on over there, Arista networks. That's a lot of changing influence and all so big question of what Chief Architect even is. And before we get on to our proxy cage matches, there are a few tidbits from smaller cap companies that I wanted to highlight first at Eagle Pharmaceuticals. Start Scott tariff is out at CEO at Eagle Pharmaceuticals from the filing quote after consideration of various Alternatives including termination with or termination, without cause the board accepted Mr. Tariffs resignation. Wow. So despite nearly almost couldn't terminating him for cause Scott, walks away with a golden parachute worth of parks and Lee 10 million dollars and will receive 20,000 dollar monthly Consulting fees for only 20 hours of work. Look, when they put in the filing that they had the ability to terminate with Paul's with cause and somehow they still get 10 million dollars in 20000 a month. It's seems like something's got a rye there's a shit show happening at generation bio where the board just approved Mass layoffs affecting 40% of the company. Two notable terminations include chief medical officer, Douglas Kerr and chief development officer. Tracy's Zimmerman Matt, despite the term oil and the fact that generation bio share price has fallen from 47 dollars to one dollar. Zero directors have been terminated since the company was founded in 2016. These directors. Wow, on Matt, it's incredible. Wow, they are holding on tight, baby. I mean, think about that. Feeling of 40 percent of the company. Two are the biggest Executives, the share price is tanked and they're still got their jobs. I mean, you can't even you should at a bare minimum. Get rid of 40% of the board, shouldn't we? I mean, exactly bare minimum last but not least, this is a good one. Tanner. Oh, chilik was appointed CEO at Solar Company, complete salario on November 20th. One day later, he stepped down for personal reasons. Wow, personal like that cause what was going on in his personhood, the day before? He was. He was, he was okay. The day before I, this is to spend more time with this family. He had been working hard by the way. Before we get on to our proxy cage matches, I want to give a shout out to my co-host, Matt McCarty. I love this. Sexy, husky voice. You're rocking today. Is this an affect for the show? I wish I wish it was an act. Fact, it's just my voice leaving me as I speak. Let's get to the proxy cage matches versus Starbucks. A coalition of North American labor unions, called the Strategic organizing Center. You probably might have known of them as change to wind Federation that's what their formerly called has nominated. Three directors to the Starbucks board. That is Maria esche veste, a former senior White House official ESG Pro, Joshua got bone, nice and the former chair of the National Labor Relations Board, Wilma liban. So a good proxy cage match a Starbucks coming from the unions. Look, this actually points out the fact that you can slate directors at where you have proxy access, the whole point of proxy ass assess. If you're investor, you have the ability to nominate directors. That's exactly what's happening here and now we get to see how investors will choose We talked about the two new directors of Walt Disney. The same day activist investor Nelson Peltz announced. He was launching a proxy campaign to get seats on Disney's board. The company adopted by laws covering nominations of directors by outside parties. And meanwhile, in a bid to win. Shareholder favor. Disney announced a cash dividend of 30 cents per share. So they're trying to buy shareholders to stick with their board. Nelson Peltz. Unfortunately, for us is keeping his nominees a mystery. According to NBC to CNBC pelvis is asking for more than two directors, which, I guess means, three. I don't know what that means, more than two directions, but Nelson Who are they? Come on. You could you couldn't figure The proxy Conte. Look, Pelt has a point here. He wrote this in his letter to Disney shareholders quote, Disney, share prices, underperformed proxy peers and broader Market over every relevant period during the last decade and over the 10-year of each incumbent director. Now, that's the important Point. These people have not overseen value creation. I'm not sure that 30 cents per, you know, as a dividend Palm greasing their investors will do enough to modify the fact that not everyone named Fink or Mortimer hates his just about everyone hates them right now. Everyone hates them. So look, the boardroom was picked by Igor chafing. Never got a chance, almost all of them, stink the top TSR performers. Cal McDonald at 597. He's just above average and he hasn't been there very long. The team bets 4:38, controversies on everyone, the team that's 150 on controversies, that's in the bottom, 15% of all directors and 96% of the influence is held by directors. Who are directly connected to one. Another forget, indirect connections at Marvel movie After parties, since Susan Arnold left, the female influences dropped under 50%, this is an aristocracy according to our data, I think this is inevitable and Paltz actually has a point here break up the aristocracy. Finally a proxy cage match Blackwell's versus Wendy's and Tryon actually, I'll get I'll explain that black. Black Wells Capital is preparing to challenge, Wendy's board in a push for improvements to the fast food. Chains financial performance Blackwells run by Jason in Tabby plans to nominate several directors to Wendy's 12-member board. The challenge pits Blackwell's against activists fund tree and fund which we just talked about run by Nelson Peltz. Tree in already owns 16% of Wendy's and in fact they have three Wendy's board members including Nelson, Peltz himself. Nelson's, son, Matthew Peltz, right? And tree and president Peter May so In a kind of a Disney movie twist of fate here. Blackwell's also antagonized Tree in this week over its fight at Disney first by supporting CEO buyers in supporting his board appointments. And then, by calling out Nelson, peltz's General strategy quote, In an act of nepotism, Mr. Pelt, installed, his son, Matthew, pelts as the non-executive, vice chairman impact, the board with business partners and friends, or presiding over a period of disappointing results for Wendy's shareholders. So, Matt, this is like an exciting three-way Battle Royale, right. Look, I'm gonna go out on a limb here and say Blackwell's has a point. Imagine if I mean, imagine if Bob Iger put Katie Eiger, his credits include field producer for Roker on the road on the Disney board. Nepo, directorships shouldn't exist. Not a good luck, nothing against Matthew. But what only one we only need one, pelts member on the Wendy's board That's it for the proxy cage matches. It's time for. Or vote results. Table, nobody knows why we call it a table. But here, the vote results over the past week, we covered in depth, Campbell Soup company. Here are the results, Matt. All directors received at least 97% support unbelievable. In fact, only two directors were even below the 99% support threshold and that's two of the family members. Mary Alice, Dorrance Malone and Archibald Dorrance Van Buren, dorance being the founding family of the Campbell's Soup company. Not that, that 3% against them matters. I just wanted to point that out, I mean, but we do need to say here that Uncle Archie and Aunt Mary had their shot, it's not exactly like Campbell's is bringing in shareholder returns at some point it's a one share one vote company or investors gonna say you know, having the door in his family, run the nomination. Committee might be a step too far. Let him keep their shares. They don't need to be on every committee. And as we covered Uncle Archie's, a highest paid Direct on the entire board. We're paying him to be a shareholder. Get out 95% support for sale on a surprise. Here's an interesting little wrinkle. They asked companies, they asked shareholders to vote on a sea on pay frequency. It's normally an annual vote runs away with the contest, right? But it Campbell's it looks like there's a subset of shareholders that really don't give a kid. They really don't care. They're really willing to mail it in 1500 at Campbell's Soup company voted to vote on sampay. Every three years they're saying we don't even care about this annual vote. Let we'll do it every three years. You know what, the crazy part about that is I believe 32% of the share's are held by the Dorrance family and various factions, which means not even the doran's family could coalesce around three years. So I that's that sounds, like Uncle Archie saying. All right, let's stop this. There were two shareholder. Proposals at Campbell Soup company, one calling for cage-free eggs from the Humane Society. Only seven percent of Chevrolet said, yes, I don't really Yeah, I don't get this one at all mostly because this doesn't have to do with cage free eggs. It has to do with the fact that Campbell's Soup said, they would they made a commitment to get to cage-free eggs by a certain date. They have fallen behind on that commitment and they've are not reporting on that commitment. This is about holding them accountable for something. They said they would do forget the eggs. It's about doing what you say you do. I think, what you mean is forget the chickens, ah, either way And finally, a proposal brought to the Shirley's by as you sew. Only received 8% support a similar proposal last year, received 9% support, so that no surprise on that one. No surprise there. Let's jump over to a few other crazy votes, Provident Financial Holdings. Matt shareholders rejected, CEO and chair Craig blunden. You don't see this very often 51% of shareholders said, a big fat no to the company's CEO and chairs. So I want to apply the Cheryl's Providence Financial Holdings. Yeah, I mean like, that, it didn't even feel like a game time upset, I think this is, this is actually a long time coming, but it's great to see Cheryl's actually say no to something. Else. Let's jump over to Lions Gate entertainment shareholders, a little while up there too. 34% said no one saying hey, which is respectable number. But here's the big one. Here's a crazy one, crazy little wrinkle. There is a shareholder proposal brought by neuberger Berman investment, advisors asking the company to eliminate the Dual Clash share structure, right? It's pretty simple. Sure, Harold proposal, Unusually. The board didn't have an opinion on this proposal. Here's a statement of the board from the proxy. It said the company appreciates the proposal and will continue to evaluate whether single or dual-class stock is the most appropriate share structure for executing its strategic initiatives. It didn't say either way vote support it or or vote against it which is highly unusual I've ever seen before strange. Yeah, it's strange and here's what happened. 62% of shareholders at Lionsgate entertainment, voted to eliminate the Dual class share structure at Lions. That's incredible Victory. This is, I mean, these gotta be our favorite people in the world, right? The shareholders at Lions game. I mean, hypothetically but the fact is that dual class still exist at companies that actually matter like meta and Google, right? So we're talking about Lions Gate, which is, you know, a mid-tier player when it comes to, you know, entertainment where most of the companies are one share one vote. I'm not sure that we should be celebrating this so much as saying why can it exist at companies where we should be making a change? And finally, in our vote table lamentum, Holdings, a failed say on Pavo win. That's a win for ISS. That's all I got to say. Oh, I wanted to mention this about lamentum Holdings, so say on pay vote fails shareholders, say no to pay, but The compensation committee, the directors received an average support of 82%. Yes. So somehow they're not willing to punish The Architects. Architects of the pay that they hate. We see this time and time again. It makes absolutely no sense people. These compensation plans they don't come from chat. Gbt or or Gemini, Google's new AI, they come from the compensation committee. Those are the that's those are protects of these plans and we should get, we'll get into that when we get to the big vote for sure. Let's let's move on to the big vote. Then there's another very nice segue. Thank you, Matt. Today's big vote, we are looking at S&P 500 company, Believe It or Not Auto Zone. AutoZone AutoZone will be holding their annual meeting. December 20th. That's a unusual date for an annual meeting know. Five days before Christmas. It's kind of folksy know. Yeah, but look, here's the thing, I think if history is any guide, they know that they're going to get 98% support and go home for Christmas and high five, one another. Well, maybe for good reason, I want to point this out. I want to just a few General observations before we get into our recommendations. First of all, Matt, When CEO? Bill Rhodes. The third, when he took over in 2005, the share price. At AutoZone was around 90 dollars, respectable 90 dollars flashforward to 2023 the share price at AutoZone is 2600 2000 600 dollars. The third is taking over that share price just goes up. Steadily goes up I don't think I've ever seen anything like it. Honestly I've never there was no dips. No dips just keeps going up. Other General observations. The board of directors are forced to wear uniforms, they're all where that is, true blue shirts in the proxy. So I'm I applaud Auto Zone for that detail. Ownership is diffuse, it's institutionally held. I suppose Vanguard has 10% of shares, BlackRock 8% of shares Fidelity and JPMorgan 5%. So no single person controls this company. This is not dictatorship that that's that represents. Almost a quarter of all share vote, they voted in the past two years, 100% for management with no exceptions. 100% for management. Some key. Takeaways to consider two, there is a big CEO succession coming up in January. It's next month. So again, the guy we talked about Bill Rhodes, the third, the architect of the greatest share price rise in the history of the world is actually he's stepping down from CEO but remaining as executive chair, so he's not really going anywhere. He's probably still gonna have the most influence and control the company. So, if you're in AutoZone shareholder, you can you have at least a few more years to feel, okay, about life. The new CEO is an internal hire. It's no surprise, right? When, when we analyze this company will see why that's probably true. His name is Philip Danielle. He will be the new CEO. The only other things I wanted to point out before I before hearing your perspective, Matt is that there are four directors on the board with considerable related party transactions, according to msci so that they, you know, they have some other little dealings that they do little little, you know, little under the table, dealings there. And finally Of the directors, wearing the 10 blue shirt. One director is actually wearing a red sweater over her blue shirt. This is true. She was cold that day. I think that the air conditioning was on her name is Linda. Good speed. Yeah, which is which is a great name. If you're a director at AutoZone right, am I wrong? So this is a great name but I want to start with Bill Rhodes because you're singing some phrases. Let's get right to it. Let's get to the first proposal. The election of the director's go ahead. So there are ten elect 10 directors up for election. The whole, the whole board comes up for election every single year. But I want to say about Road stepping into the executive chair role and out of the CEO role it does feel. And this this has to do with my view of the future for this company. It does feel Irish while there's not a pandemic on the horizon that he sees coming that he stepping out of the way of the version of a pandemic, I think is an electric vehicle transition. That is a very real and happening right now, this is a hugely successful stock run by a highly parochial board of directors. That is in an industry. That is steadily pivoting away from combustion engines that need a lot of parts. Where EVS don't which means All the sudden your whole retail model, which is selling a million Auto Parts stops being as relevant over time and it's a board run company. The influence of Insiders on the board is less than 40%. The CEO has less than 25% of the influence of the company. The lead independent director and I use independent in air quotes here has been on the board for 21 years. 21, Earl Greys Junior. And the head of the comp committee has a 17 year tenure, this is actually run by board members, who are all effectively local. Here's the thing that stood out to me. There is no EV expertise on this board. There's no software technology expertise on this board. There's no Security Experts on this board. There is one almost 100% retail expertise and not online. Retail you have board members from Ulta beauty. You have Brinker International which is restaurants. You have Dollar General, you have JB Hunt Transport Services. You have the banker for AutoZone on the board. Does it get any more parochial than hiring your own Banker for your board? It doesn't. Maybe this is why. Again, the annual meeting is December 20th, right? It's, it's a chance to have a not only an annual meeting, but a little get together, a little party for your friends. That's exactly right, right? It's the holiday. Party Auto Zone in Tennessee at. You're right. It's a Christmas party you. Yeah, come on. Yeah. Stop being a socialist. There are two pairs of directors who sit on concurrent boards. And as you said four, others have material transactions with the company. That is auto Zone's Bank, auto Zone's insurance provider, Auto Zone's, Airline and AutoZone's, break room snack. Vendor, that's not a joke. Those are all real. Is nice, but 42% of the board influence is through connected directors. I did an analysis of where these directors sit on boards, and where they have jobs effectively where their headquarters are 50%. Of the board is based in the Dallas, Texas area, despite the fact that this company is in Tennessee and 40% are in Tennessee. You have two states represented in the room. Effectively, this is a super local. Yeah, it's a very middle of America type of company. Yes. What which is funny that when you mentioned the EV vs gas car battle, right? This is where that battle is really gonna be fought. The most is the middle of the country. Exactly. Right. And when we look at the ideological divide on this board, in fact, going Direct by director, 69% of the influence on the board is conservative there. Either part of lobbyists, you know, or donated to lobbyists for conservative causes they donated an entirely themselves to one? Party. Mostly the Republicans in fact, Mike George isn't, one of an ultra conservative who sits on like the national Constitution Center. With other Ultra conservatives, this is a very conservative room in conservative parts of the country who are actively fighting against electric vehicles. Running a company that sells can combustion engine parts and is not pivoting as the rest of the world is pivoting. So here is what my takeaway is. Go ahead. This is a ticking time bomb and you don't need you. The idea isn't you pivot? 10 years from now? When all of the sudden it's too late, you need the Strategic thinking in the room. Now to be ready for 10 years from now and the board's job is to be that strategic thinking I say that the free floats game time picks vote against Linda good speed vote against a mechanic Junior who's been there for 17 years. Years and I don't know how he has any business being there in the first place. Given that his actual experience is at Kmart, when it was failing, then borders group, the bookstore. When it was failing, then, as a consultant for failing companies, after his two companies fail, I don't understand how he gets in the room and debris and Jordan, you shouldn't have your your your bank CEO be on your board either and make space for the following. Go. You just breathe, like, you had something to say. No, I was just gonna say, I mean, it speaks to the idea of not just about voting out directors. But really, you're creating board, vacancies, because you're really looking at the long term, right? And I think this is an important time for AutoZone marked by this CEO succession, is that something is going to have to change this. This good ride is gonna come to an end eventually. And I think you're right, I think creating board vacancies, That open up spots for different expertise as an, absolute must here. And and I did some of the work even though we're not a board placement agent, I did some of the work for investors there. You can get a software expert on auto software expert like Dmitri dolgoff. He's the co-ceo of waymo he's from Google X and their self, doing their self-driving. These are people who you absolutely 100% want on a company. That's going to have to Pivot to service. A totally different type of vehicle. How about EV repair expert, Chris Sullivan. He's the head of Tesla's collision repair for North America. That's exactly who you want you. If you want to deal with EVS replacing Parts, after collisions should be part of the business model of Auto Zone, or what about someone who actually knows something about Auto Repair. The fact that we talk about Exxon and Chevron and we were upset, they didn't have oil experts on the board. When Engine Number One, slated oil. Experts to put on their boards. We're talking about a car, an auto part company that has no one who's ever fixed a car on it professionally. What about LaShawn English? She's the director of UAW region. Number one, she's a pipefitter for stellantis, that's exactly the kind of person you want somebody, who knows how these cars are built, and knows how to work with the employees and Union and unions, especially as Union movements coming up that's a cursory search. The point is, you can replace some of the limited expertise and parochial and this with an expanded set of expertise in make these slots available for people that you actually want for the future. All right, moving on. So just to wrap up vote against Linda Goodspeed, George macaron, Junior, and D Brian Jordan, but I think in general, the idea I'm getting is just create some board. Vacancies. Yes, we need the space moving on quickly. A proposal to on the independent auditor as an out. Fire. Last year Ernst & Young got 7% votes against. It's not a big story, not a big deal, but it's pretty high for the companies that we look at Matt. You have a perspective here? Yeah, I think you vote against and I don't think you're voting against the auditor. I think until the members of the audit committee aren't all connected including Mercon Junior who's been there for 17 years. Until those members have been rubbing elbows with the actual auditor for two decades, you're you vote against the auditor and they replace the audit committee. Moving on, Sam pave. Vo at Auto Zone. 12% of shareholders said, no last year, the PayPal package for CEO. William road is pretty simple matte. It is options. That's it. It's, they're not tied to Performance. It's this is not about an annual bonus. This is about, they just give him a crap ton of stock options. Last year. Pay was roughly 19 million dollars, 16 million dollars of that came in options again, not tied to any kind of performance. So that's the pay plan. I mean, call out a plan. I don't know. But that's what's going on over there. AutoZone, are you pointed this out with momentum? It is there is an 88% vote. Yes, in 2022 which isn't actually surprisingly that high as it's a little bit low and yet every single directors getting 96.97 98 99% for votes, you don't vote for the pay, you vote for the team that sets the pay. And this case, the team is MCC Junior. Who's the Compares who's been there for 17 years. Good speed, he's been there 10 years and Hanish who's a CEO himself? Is there anything worse than having a CEO set? Another CEO's, pay, they know all the tricks, they know exactly how to pay themselves. So I think you vote against pay until the pay committee changes as well. You need to put a team in place that you can trust and then you just let them do their jobs. All right, that's it. That's AutoZone quick and simple. No shareholder proposals. That's what's going on there. I want to point out once again. That that is a board that wears a uniform, they all wear blue shirts in their board pictures on their proxy statement. And one woman who might suggest that we vote out was wearing a red sweater that's compensation Committee. Member Linda Goodspeed let's call it, the red sweater, vote, vote out red sweaters, that is proxy countdown for the week of December, 4th 2023. Join us. Next week, when we jump back into the alternative democracy pool Forever on the lookout for shark holder for shareholder sharks, floating Band-Aids and Wayward director's To be a new term there shark holder. Yeah. This shark holders.